Huntsville Trust Co. v. Noel

• Decision Date: 31 December 1928
• Docket Number: 28771
• Parties: Huntsville Trust Company, by S. C. Cantley, State Commissioner of Finance, in Charge, v. W. P. Noel, Frank Lyons, the County of Randolph, George G. Halliburton, B. H. Shiflet and W. P. Sparrow, Appellants
• Court: Missouri Supreme Court

12 S.W.2d 751

321 Mo. 749

Huntsville Trust Company, by S. C. Cantley, State Commissioner of Finance, in Charge, v. W. P. Noel, Frank Lyons, the County of Randolph, George G. Halliburton, B. H. Shiflet and W. P. Sparrow, Appellants

No. 28771

Supreme Court of Missouri

December 31, 1928

Appeal from Randolph Circuit Court; Hon. Allen W. Walker Judge.

Reversed.

J Austin Walden and Willard P. Cave for appellants.

(1) The board of directors of plaintiff trust company had power and authority to act as a county depository and pledge any of its assets to secure such deposits of public funds. Ward v Johnston, 95 Ill. 215; Richards v. Osceola Bank, 79 Iowa 707; Andrews v. Bank, 214 N.W. 559; McPherson v. Nat. Security Co., 72 Colo. 482; Williams v. Hall, 249 P. 489; Page Trust Co. v. Rose, 192 N.C. 673; Citizens State Bank v. First Nat. Bank, 98 Kan. 109; Cameron v. Christy, 133 A. 551; Ahl v. Rhoads, 84 Pa. 319; Tiffany, Banks & Banking, sec. 74; 1 Morse, Banks and Banking (3 Ed.) sec. 48, p. 125; Bowles, Modern Laws of Banking, p. 479; Cantley v. Little River Drain. Dist., 2 S.W.2d 607; French v. School District, 7 S.W.2d 415; City of Williston v. Ludowese, 53 N.D. 797; Merrill v. Bank, 173 U.S. 131; Morse, Banks & Banking (5 Ed.) 143. (2) The contract between Randolph County and the Huntsville Trust Company, was at the date of the failure of the trust company, a completed and executed contract on the part of the county, and the Trust Company and Cantley, Commissioner of Finance, in charge thereof, are estopped and may not plead ultra vires. Cantley v. Little River Drain. Dist., 2 S.W.2d 607; French v. School District, 7 S.W.2d 415; McCormick v. Bank, 304 Mo. 288; Schlitz Brewing Co. v. Poultry-Game Co., 287 Mo. 407; Millinery Co. v. Trust Co., 251 Mo. 579; Nat. Bank of Comm. v. Francis, 296 Mo. 195; Winscott v. Inv. Co., 63 Mo.App. 369; First Nat. Bank v. Guardian Trust Co., 187 Mo. 522; Cass County v. Ins. Co., 188 Mo. 13; St. Louis v. Railway, 248 Mo. 27; Kellogg-McCay Co. v. Havre Hotel Co., 199 F. 733; Fletcher, Ency. Corp., sec. 1543, p. 2609; Gilbert v. Citizens Nat Bank, 61 Okla. 112; 14 C. J. 319, sec. 2169; Erb v. Yoerg, 64 Minn. 465; Re Assignment of Pendelton Hdwr. Co., 24 Ore. 332; Whitehead v. Am. L. & B. Co., 70 N.J.Eq. 585; Iowa Drug Co. v. Souers, 139 Iowa 79; Albin Co. v. Commonwealth, 123 Ky. 305; Osmer v. Brokerage Co., 155 Mo.App. 211; Vermont Co. v. Desota Co., 145 Iowa 494; Watts Merc. Co. v. Buchanan, 92 Miss. 543; Wrightsville Co. v. McElroy, 254 Pa. 429; Lemmon v. Rubber Co., 260 Pa. 32; Eastern Building Assn. v. Williamson, 189 U.S. 122; Logan Co. Nat. Bank v. Townsend, 139 U.S. 67; Hitchcock v. Galveston, 96 U.S. 341; Union Goldmining Co. v. Bank, 96 U.S. 640; Daniels v. Tearney, 102 U.S. 415.

Philip J. Fowler and Hunter & Chamier for respondents.

(1) Banks are quasi-public corporations and occupy a fiduciary position to the public, and limitations on their powers are applied more strictly to them than to other corporations. 7 R. C. L. 526-527; 2 Fletcher, Corporations, 1814. (2) The powers conferred on a trust company are enumerated in detail in Sec. 11799, R. S. 1919, and no power to pledge assets to secure a general deposit of county funds is therein given; therefore no such power exists, because the express enumeration of the powers therein, under the law, implies the exclusion of such power to pledge. State ex inf. v. Lincoln Trust Co., 144 Mo. 587; 2 Lewis-Sutherland on Stat. Const., 1034; 2 Fletcher, Corporations, 1747. (3) The rights of the receiver, the respondent Finance Commissioner, representing creditors whose rights are being prejudiced, are much more extensive than those of the Huntsville Trust Company, whose rights alone are involved. He is a trustee of the assets, and it is his duty to assert and guard the claims of depositors, and he may repudiate illegal contracts which the corporation is estopped to repudiate. Chicago Trust Co. v. Brady, 165 Mo. 210; Alexander v. Reife, 74 Mo. 516; 1 Magee, Banks & Banking, sec. 77; 7 C. J. 735; 34 Cyc. 239; 23 R. C. L. 116; Lyons v. Benney, 79 A. 250; Franklin Nat. Bank v. Whitehead, 149 Ind. 560. (4) A banking corporation comes severely within the rule that acts not authorized by its charter are ultra vires; the very nature of its business requires a strict enforcement of the law; and parties dealing with it must take notice of its powers and limitations at their peril. Magee, Banks & Banking, p. 21; Pearce v. Ind. Ry. Co., 21 How. 441; Andrews v. Ins. Co., 37 Me. 256; Franklin Co. v. Bank, 68 Me. 43. (5) The grant of authority to trust companies contained in Sec. 11799, R. S. 1919, "to receive money on deposit, with or without allowing interest," does not give express or implied authority to pledge their assets to secure a general deposit of the county; and such a pledge is not only ultra vires, but contrary to public policy, and therefore illegal and void. Comm. Trust Co. v. Trust Co., 153 Ky. 566; Divide County v. Baird, 212 N.W. 236; Carter v. Brock, 162 La. 12. (6) Our county depository law provides a complete, separate and adequate scheme for securing and protecting county deposits, which is by personal or surety bond, and not by a pledge of assets; and the pledge agreement was not only beyond the power of the county and the trust company, but contrary to public policy and therefore void. R. S. 1919, secs. 9582-9596; Divide County v. Baird, 212 N.W. 236; In re Holland Banking Co., 313 Mo. 307. (7) The doctrine of estoppel does not apply to contracts which are contrary to public policy; therefore appellants cannot invoke that doctrine here, because the pledge agreement was against public policy. 14a C. J. 309; 13 C. J. 411, 506; 10 R. C. L. 729; State v. Bankers Trust Co., 157 Mo.App. 577. (8) The county has no right to foreclose the pledge, nor to retain the bonds pledged, because the contending parties are not in pari delicto. The depositors (the real parties in interest) represented by the receiver and the State of Missouri are innocent of any wrong, and the appellants are wrongdoers; therefore, appellants cannot invoke the doctrine of estoppel against respondents. Divide County v. Baird, 212 N.W. 236.

OPINION

Ragland, J.

This seems to be a suit in equity. It was instituted by the Commissioner of Finance of the State of Missouri, having in possession and charge, for the purpose of liquidation, the assets and property of the Huntsville Trust Company of Huntsville, Missouri (hereinafter called the Trust Company), against Randolph County, the Judges of the County Court, the Clerk of the County Court and the County Treasurer of that county. The petition alleges that in May, 1927, the Trust Company, having been designated a county depository by the County Court of Randolph County, entered into an agreement with that court whereby it pledged to the county Liberty Bonds of the United States of the face value of $ 22,500, to secure the performance of its obligations as county depository; and that pursuant to such agreement the Trust Company did deliver to the county clerk for the county said bonds, which were a part of its general assets. The relief sought is: that said county officers be enjoined and restrained from selling or disposing of said bonds; that the contract entered into between the Trust Company and the county court be vacated and annulled; and that the bonds be declared the property of the Trust Company, discharged from the purported pledge lien, and ordered restored to the Trust Company.

The facts are not complicated. On May 27, during its regular May term, 1927, the County Court of Randolph County proceeded to open the bids of banking corporations who desired to be selected as depositories of the funds of the county, the funds having previously been divided by order of record into two equal parts. There were two bids. The Trust Company offered, for the deposit of $ 30,000 of the county's funds, to pay interest monthly at the rate of four per cent computed on daily balances, the deposit to be secured by United States bonds of the par value of $ 22,500 and a surety bond for $ 7500.

The second bid was that of the Farmers & Merchants Bank of Huntsville. It made application for half of the county's funds and offered to pay interest on daily balances at the rate of two per cent per annum payable on the first of each month. This bid was accepted, and subsequently, according to the recitals of the records of the county court, the Farmers & Merchants Bank delivered to the county clerk $ 40,000 in bonds of the United States and executed in connection therewith an agreement pledging said bonds to Randolph County as security for the faithful performance of its duty as a depository; thereupon such security was duly approved and the said Farmers & Merchants Bank constituted a county depository for one-half of the county's funds.

The bid of the Trust Company was rejected, on the ground that it did not "conform to the statutes in such cases made and provided;" and the clerk was directed to ascertain what terms could be obtained for half of the county's funds as provided by Section 9587, Revised Statutes 1919. The proceedings had thereafter with respect to the selection of a depository for such half of the funds are disclosed by the record of the county court of date, June 27, 1927, as follows:

"It further appearing before the court that in response to the solicitations of the Clerk of Randolph County, Missouri, for bids for the remaining half of county funds, the highest and best bid so received, which said bid is now opened and laid before the court, is that of the Huntsville Trust Company, of Huntsville, Missouri, which has been heretofore filed with the Clerk of County Court on this the 27th day of June, 1927 which said bid is for...