Montgomery v. Wadsworth

• Decision Date: 25 May 1933
• Docket Number: 3 Div. 50.
• Citation: 226 Ala. 667,148 So. 419
• Parties: MONTGOMERY, Superintendent of Banks, v. WADSWORTH.
• Court: Alabama Supreme Court

148 So. 419

226 Ala. 667

MONTGOMERY, Superintendent of Banks, v. WADSWORTH.

3 Div. 50.

Supreme Court of Alabama

May 25, 1933

Appeal from Circuit Court, Autauga County; F. L. Tate, Judge.

Bill by C. D. Wadsworth against H. H. Montgomery, as State Superintendent of Banks, for preference of payment out of assets of Autauga Banking & Trust Company, in liquidation. From a decree overruling a demurrer to the bill, respondent appeals.

Reversed and remanded.

H. E Gipson, of Prattville, for appellant.

Ball &amp Ball, of Montgomery, for appellee.

THOMAS Justice.

The sufficiency of the bill was challenged by demurrer which was overruled.

C. D Wadsworth, as tax collector, deposited the funds of the state and county in the bank to his credit as such official. It is averred, as to this, that as such tax collector he collected, and deposited in said bank, "taxes belonging to the State of Alabama and taxes belonging to Autauga County, Alabama, and at the time of the closing of said bank there was on deposit of said funds the sum of $1592.50 deposited to the credit of C. D. Wadsworth as tax collector * * * and of said deposit $612.50 was for the State, $245.00 soldier tax, $735.00 school tax, and that said sums so deposited were entirely separate and apart from any deposit said Wadsworth had in the bank in his individual name; that although said bank was not a designated State depository as provided by law claimant did before making said deposit take a bond from said bank with two individuals as sureties guaranteeing the repayment of said deposit and yet said deposit was unauthorized. That said deposits were made by claimant in accordance with the general custom prevailing and without intention of exceeding his authority. * * * and that said bank received said deposits knowing that said deposits were made for the safekeeping of said money until such time as said tax collector was due to pay the same over to the State and County respectively, and knew or should have known that said deposits were unauthorized."

The prayer of the bill was that complainant was entitled to a preferred claim on the assets of the bank being liquidated by the superintendent of banks of the state; that "complainant is entitled to be paid out of the assets of said bank its said claim of $1911.50 or such part thereof as the court may find complainant entitled to and that said sum be paid by said Superintendent of Banks out of the assets of the said bank before any further distribution is made to the common creditors of said Bank and if complainant is mistaken in the method it has employed to secure this end, then it prays a writ of mandamus," etc.; that "prior to the closing of said bank and on February 17, 1930, he issued a check on said bank payable to the State Treasurer of Alabama in the sum of $1592.50, and that although said check was received by the State Treasurer and deposited in the First National Bank of Montgomery and by it sent for collection to said Autauga Banking & Trust Company which forwarded it New York Exchange to the First National Bank of Montgomery, that said New York Exchange was never paid due to the failure of said Autauga Banking & Trust Company and that the State of Alabama made demand on complainant for the payment of said sum of $1592.50 and did sue complainant for said sum and recovered judgment in the Circuit Court of Montgomery County, Alabama, on June 26, 1931, in the sum of $1592.50 and that on appeal said judgment was affirmed and a penalty and interest added and that said judgment was made final; that on June 19, 1932, complainant paid or caused it to be so paid or same was paid for him said judgment rendered in favor of the State of Alabama to the clerk of the Circuit Court of Montgomery County, Alabama, and paid or caused to be paid or same was paid for him to said clerk the total sum of $1911.50 and paid to the clerk of the Supreme Court the sum of $14.25 in all a total of $1926.25 and that by virtue of said payments claimant is entitled to be subrogated to the rights of the State of Alabama and to the rights of Autauga County in said deposit and that it is entitled to have whatever preferred claim the State of Alabama or Autauga County would have had against the assets of said bank."

The report of the suit for breach of Wadsworth's official bond as tax collector is reported as Wadsworth et al. v. State, 225 Ala. 118, 142 So. 529. Wadsworth then filed the instant bill in equity against the superintendent of banks to establish the right or claim of priority against the bank or its assets by way of subrogation. Green, Supt. of Banks, v. City of Homewood, 222 Ala. 225, 131 So. 897; Montgomery, Supt. of Banks, v. Sparks, Tax Collector, 225 Ala. 343, 142 So. 769; section 3047, Code.

It is declared that, where public funds are deposited in a bank lawfully designated as a depository, and the bank becomes insolvent, there is no prerogative right or preference in the payment of its claims, over the general depositors and creditors of the bank (Limestone County v. Montgomery, Supt. of Banks [Ala. Sup.] 146 So. 607; Green, Supt. of Banks, v. City of Homewood, 222 Ala. 225, 131 So. 897; County Court of Calhoun County v. Mathews, Receiver, etc., 99 W.Va. 483, 129 S.E. 399, 52 A. L. R. 751, and notes); that unauthorized or unlawful deposit of public funds in a bank subsequently becoming insolvent creates a trust relationship in funds between the bank and the community, and the prerogative right and lien were enforced in Montgomery, Supt. of Banks, v. Sparks, Tax Collector, 225 Ala. 343, 142 So. 769; Green, Supt. of Banks, v. Homewood, supra, and declined in Limestone County v. Montgomery, Supt. of Banks, supra.

It is provided by section 3973 of the Code of 1928: "* * * But none of the officers herein named shall be criminally liable under the provisions herein contained for depositing the revenue of the state or county, or any money paid into his office or received by him in his official capacity, in a bank if the officer making the deposit in good faith requires, and takes from the bank, at or before making the deposit, good and sufficient security to secure the payment of the funds deposited."

Of this statute it was observed in National Surety Co. v. State, 219 Ala. 609, 612, 123 So. 202, 205, that: "The provisions of section 3973, Code of 1923, as indicated, were under the subject of embezzlement by public officers, and exempt said officers from criminal liability, for depositing the revenues of the state or county in a bank in 'good faith' who require and take from the bank 'good and sufficient security.' It will be noted that this provision of the statute does not exempt from civil liability."

The statement of that statute in Montgomery, Supt. of Banks, v. Sparks, Tax Collector, 225 Ala. 343, 345, 142 So. 769, 771, is: "It is uncontroverted that Sparks, as tax collector, deposited state and county funds in the Farmers' State Bank; that said bank was not a designated depository, and had given no bond for the safe return of the funds as provided by section 3973 of the Code. It is also undisputed that the officers of the bank knew that said deposits consisted of tax money due the state and county. This was a violation of law on the part of Sparks." (Italics supplied.) The deposits in this case were held illegal in Wadsworth et al. v. State, 225 Ala. 118, 142 So. 529.

The...