Maryland Cas. Co. v. Grays Harbor County, 22645.

• Decision Date: 25 November 1930
• Docket Number: 22645.
• Citation: 159 Wash. 356,293 P. 441
• Parties: MARYLAND CASUALTY CO. et al. v. GRAYS HARBOR COUNTY et al.
• Court: Washington Supreme Court

293 P. 441

159 Wash. 356

MARYLAND CASUALTY CO. et al. v. GRAYS HARBOR COUNTY et al.

No. 22645.

Supreme Court of Washington

November 25, 1930

Department 1.

Appeal from Superior Court, Grays Harbor County; Wm. E. Campbell Judge.

Action by the Maryland Casualty Company and another against Grays Harbor County and others. From an unsatisfactory decree, the plaintiffs and defendants appeal.

Remanded with directions.

Roberts Skeel & Holman, of Seattle, for plaintiffs.

Eggerman & Rosling and Arthur G. Cohen, all of Seattle, and Austin M Wade and John C. Graham, both of Aberdeen, for defendants.

PARKER J.

The plaintiffs, casualty company and insurance company, jointly commenced this action in the superior court for Grays Harbor county seeking a decree establishing and limiting the liability of each of them upon its separate depositary bond executed as surety with Hayes & Hayes, Bankers, a banking corporation of this state, now insolvent, as principal, to secure payment of its deposit indebtedness to the defendant county. For the purpose of our present inquiry, we may regard the controversy as being between three parties: (1) The plaintiffs, casualty company and insurance company, whose interests are in common except as to the respective proportion of the surety liability of each, as to which there is no controversy between them; (2) the defendants, county and its treasurer, whose interests are in common; and (3) the state supervisor of banking in charge of the liquidation of the affairs of the insolvent bank.

The sureties seek to have their liability limited principally by the amount of certain warrants payable out of public funds, of which the county treasure is custodian, which warrants were held by the bank at the time it passed into the hands of the supervisor; this, by way of set-off, to the extent that the amount of such warrants may lessen the amount of the county's deposit claim against the bank for which the sureties are liable. The sureties also seek to be subrogated to the rights of the county as against the assets of the bank, claiming that the county should be regarded as having been fully paid by the cash tender made and kept good by the sureties to the county and the unpaid warrants in the hands of the bank at the time it passed into the hands of the supervisor.

The supervisor resists the allowance of the claim of set-off, upon the ground of it being a claim independent of the deposit obligation and not presented or sued upon within the time limited by law following the giving of notice by the supervisor to the creditors of the bank to present their claims, and it is therefore barred; leaving the whole of the county's deposit claim payable only as a general claim by dividends as other claims are paid, partially or wholly as the assets of the bank may render possible.

The county, by cross-complaint, seeks judgment against the sureties for the whole amount of its deposit claim, and resists subrogation of the sureties to any of its rights as against the assets of the bank until after it has been paid the whole amount of such judgment.

The trial resulted in a decree directing the cash tender of the sureties to be paid to the county from the registry of the court, directing the surrender of the unpaid warrants by the supervisor to the county, and directing certain unpaid dividends, declared by the supervisor, to be paid by him to the county. This the court apparently regarded as making the county whole and declined to render a personal judgment against the sureties in favor of the county for the whole of its deposit claim; so the county is left to the enforcement of the decree awards which, while likely to result in making it whole, might not do so by reason of some possible failure in the entire carrying out of those directions, which failure, if occurring, will leave no further recourse by the county against the sureties. The decree also denies the supervisor's plea and contention that the claim of set-off is barred for failure of the county or surety to present and sue upon it within the time limited by law. The decree also denies allowance to the sureties of a portion of the claim of set-off represented by warrants of the bank, amounting to approximately $14,000, paid by the county after the insolvency of the bank, which, it is claimed by the sureties, the county negligently paid after knowing of the insolvency of the bank and of the bank's ownership of such warrants. All of the parties have appealed from this disposition of the case in the superior court to this court.

As we view this controversy, the controlling facts are not seriously in dispute, and we think they may, for present purposes, be sufficiently summarized as follows: On February 7, 1927, the bank was an officially designated depositary of public funds of which the county treasurer is custodian. On that day there was in full force and effect a depositary bond which had been executed and delivered to the county by the casualty company as surety and the bank as principal to secure to the county all deposit obligations owing by the bank to the county, to the extent of $75,000. There was also on that day in full force and effect a depositary bond of the same import which had been executed and delivered to the county by the insurance company as surety and the bank as principal, securing to the county all deposit obligations owing by the bank to the county, to the extent of $50,000. On that day the bank was closed because of its insolvency, and its affairs then passed into the hands of the state supervisor of banking for liquidation. The bank them owed the county upon its general deposit account $87,298.13. Thereupon the county immediately notified the sureties of the closing of the bank and demanded of them the payment to it of their respective depositary surety obligations. On that day the bank held and owned warrants drawn against public funds of which the county treasurer was custodian; that is, funds of the same character as were represented by its deposit in the bank; which warrants aggregated the sum of $64,559.79, and apparently some interest in addition. This ownership of warrants by the bank was then unknown to the county or any of its officers. The supervisor, immediately after taking charge of the affairs of the bank, gave notice to its creditors, as prescribed by section 3270, Rem. Comp. Stat., requiring all persons having claims against the bank to present the same to him within ninety days following the first publication of such notice. On April 11, 1927, the county received notice from the sureties of the bank's ownership of the warrants above mentioned, and the sureties' demand that the amount of those warrants be set off against the sureties' liability upon their bonds. Thereafter on April 11, 1927, the county notified the supervisor that the sureties had so notified the county, and that the sureties were asserting their right to have the amount of those warrants set off against the claim of the county against the sureties upon their bonds. After the closing of the bank, at times not made certain by the record before us, some $14,000 of the bank's warrants were presented to the county treasurer for payment in response to calls duly made by the treasurer therefor, and were accordingly paid by the treasurer. None of these paid warrants was, upon its face, payable to the bank, so they did not in that respect indicate their ownership by the bank. Each did, however, bear, upon its back, in turn, the blank indorsement of the payee, the stamp of the supervisor as liquidator of the bank, and the stamp of a Montesano bank; which latter named bank presented them to the treasurer and received payment of them. The treasurer was not otherwise advised as to the ownership of those paid warrants. The sureties claim this to have been a negligent payment of those warrants by the county, in that the county should have refused to pay them and thus reduced its deposit claim against the assets of the bank in the hands of the supervisor, to the end that the sureties' obligation to the county would be accordingly reduced. On May 13, 1927, the county duly presented to the supervisor its deposit claim for $87,298.13, which was by him allowed as a general claim against the assets of the bank entitling the county to dividends thereon as other general creditors became so entitled. On May 16, 1927, the supervisor notified the county as follows:

'You are hereby notified that your claim for an off-set against Hayes & Hayes bankers, an insolvent corporation of the state of Washington, in the amount of $64,559.79, is rejected in full.'

This evidently was in response to the treasurer's notification to the supervisor of April 11, 1927, above noticed, wherein the supervisor was notified of the sureties' assertion of their right to have the full amount of the warrants held by the county at the time the bank became insolvent set off as against the sureties' liability to the county, which the supervisor seemed to have treated as a claim in that behalf made by the county and the sureties. On May 21, 1927, the sureties tendered to the county $23,350, which, it will be noticed, added to the amount of the whole amount of warrants held by the bank and the supervisor at the time the bank became insolvent, is somewhat in excess of the whole of the bank's deposit claim. This tender was made by the sureties in full satisfaction of their surety liability upon the bonds, and has been kept good by the sureties' depositing the $23,350 with the clerk of the court. The supervisor has declared dividends payable to the general creditors of the bank, as follows: June 4, 1927, 30 per cent.; December 15, 1927, 15 per cent.; October 8, 1928, 10 per cent.; October 28, 1929...