Melaven v. Hunker

• Decision Date: 20 May 1931
• Docket Number: No. 3602.,3602.
• Citation: 35 N.M. 408,299 P. 1075
• Parties: MELAVENv.HUNKER et al.
• Court: New Mexico Supreme Court

35 N.M. 408

299 P. 1075

MELAVEN

v.HUNKER et al.

No. 3602.

Supreme Court of New Mexico.

May 20, 1931.

Syllabus by Editorial Staff.

Receiver of bank which secured benefit of deposit of public funds held estopped to assert bank's pledging of assets to secure sureties on depository bond was ultra vires (Laws 1923, c. 76, as amended by Laws 1925, c. 123; Comp. St. 1929, § 13-156).

Sureties on bond securing deposit of county funds, at time no funds of county were on deposit, notified bank that, unless they were indemnified, they would withdraw as sureties and notify county officials not to make deposit. Bank agreed to indemnify sureties, and pursuant to resolution of its board of directors certain assets of bank were indorsed and delivered to a trustee for the sureties to indemnify them and save them harmless.

Solvent bank may pledge its securities to indemnify surety on bond securing deposit of public funds (Laws 1923, c. 76, as amended by Laws 1925, c. 123; Comp. St. 1929, § 13-156).

Appeal from District Court, San Miguel County; Holloman, Judge.

Suit by John W. Melaven, as receiver of the People's Bank & Trust Company, against George H. Hunker, trustee for himself and others, and others. Judgment for the plaintiff, and the defendants appeal.

Reversed, and cause remanded, with directions.

A solvent bank may pledge its assets to sureties on a depository bond in order that a deposit of public funds may be secured.

Hunker & Noble, of East Las Vegas, for appellants.

Charles W. G. Ward, of East Las Vegas, for appellee.

HUDSPETH, J.

The appellee was appointed receiver of the insolvent People's Bank & Trust Company in the year 1925. He brought this suit against the appellants and sought to recover certain bills receivable pledged by said bank to appellants, sureties on a depository bond for $12,000, given to secure deposits of public funds of Mora county. At a time when there was no money of Mora county on deposit in said bank appellants learned that the treasurer of Mora county intended to deposit $8,000. The bank was notified by appellants that, unless they were indemnified, they would withdraw as sureties and notify the treasurer and board of finance of Mora county not to make said deposit. The bank agreed that, if appellants would not take the threatened action, the bank would indemnify them, and pursuant to a resolution of the board of directors the assets of said bank involved in this suit were indorsed and delivered to appellant Hunker, as trustee for all the sureties, to be held by him to indemnify and save harmless the sureties. Thereafter the $8,000 of Mora county funds were deposited and remained on deposit in the People's Bank & Trust Company until it closed its doors and ceased to do business.

The trial court made findings of fact based on a stipulation, including findings that appellants were accommodation sureties, and that the directors and officers of said People's Bank & Trust Company believed they were acting within their powers and for the best interest of the said bank in pledging the assets involved in this suit to appellants. As a conclusion of law the court stated that the pledging of the assets to indemnify the sureties was an ultra vires act on the part of said bank and its directors. Judgment was rendered for the appellee, and appellants appeal.

[1][2] Counsel for appellee, in his able brief, states: “The sole point in the case is: May the pledging of assets to secure a general deposit, whether made for the protection of bondsmen, so they will not withdraw, and a deposit be thus secured, or the pledging of assets to secure bondsmen be sustained as the exercise of an incidental power necessary to carry on the business of banking?”

In its narrowest terms, the question is whether a state bank can pledge its assets to sureties on a depository bond in order that a deposit of public funds may be secured.

Appellee cites, among other cases, to sustain his position that the action of the board of directors in assigning assets to indemnify the sureties on the bond was an ultra vires act, Commercial Bank. & Trust Co. v. Citizens' Trust & Guaranty Co., 153 Ky. 566, 156 S. W. 160, 45 L. R. A. (N. S.) 950, Ann. Cas. 1915C, 166; and Divide County v. Baird, 55 N. D. 45, 212 N. W. 236, 51 A. L. R. 296.

Appellee maintains that there is a material difference between a loan and a deposit; that, while our statute authorizes a bank to borrow money and pledge its assets as collateral security for its payment, yet there is no authority, express or implied, for it to secure deposits by the pledge of assets (except the deposit of the securities listed in the statute, the pledging of which in lieu of a depository bond is explicitly authorized), either directly to the depositor or to sureties on a depository bond, to indemnify such sureties.

Appellants contend that, unless the statute forbids it, a bank is authorized to pledge its assets to secure deposits of public funds; that the statutes of New Mexico discriminate in favor of public deposits and expressly authorize the pledging of certain assets directly to secure the deposit of public funds; that the limitation on the class of security which can be pledged directly with a public official is for the protection of the public monies only; that, even though the bank was not authorized to pledge the assets involved in this suit, it could not demand and recover back the securities pledged without returning the funds or deposits received by it as a consequence of making such pledge, and that the receiver stands in the shoes of the bank in winding up its affairs. Appellants cite: Mothersead v. U. S. F. & G. Co. (C. C. A.) 22 F.(2d) 644; Ward v. Johnson, 95 Ill. 215; Ahl v. Rhoads, 84 Pa. 319; First Natl. Bank v. Natl. Exchange Bank, 92 U. S. 122, 23 L. Ed. 679; Natl. Bank of Commerce v. Natl. Bank of Mo., Fed Cas. No. 18,310; McFerson v. National Surety Co., 72 Colo. 482, 212 P. 489; Page Trust Co. v. Rose, 192 N. C. 673, 135 S. E. 795; Andrew v. Odebolt Savings Bank, 203 Iowa, 1335, 214 N. W. 559; U. S. F. & G. Co. v. Bassfield, 148 Miss. 109, 114 So. 26; Board of County Com'rs v. People's Bank & Trust Co., 34 N. M. 166, 279 P. 60; Richards v. Osceola Bank, 79 Iowa, 707, 45 N. W. 294; Pixton v. Perry, 72 Utah, 129, 269 P. 144; Cameron v. Christy, 286 Pa. 405, 133 A. 551; Ainsworth v. Kruger, 80 Mont. 468, 260 P. 1055; Morse on Banking (6th Ed.) § 63.

There are marked differences in the statutes of the several...