Pearl River County v. Merchants Bank & Trust Co.

• Decision Date: 08 January 1934
• Docket Number: 30936
• Parties: PEARL RIVER COUNTY et al. v. MERCHANTS BANK & TRUST Co. et al
• Court: Mississippi Supreme Court

151 So. 756

168 Miss. 612

PEARL RIVER COUNTY et al. v. MERCHANTS BANK & TRUST Co. et al

No. 30936

Supreme Court of Mississippi

January 8, 1934

Division B

1. BANKS AND BANKING.

Under statute making public funds deposited in bank trust funds all assets of bank are liable for prior payment thereof, and it is unnecessary that the trust funds, either in original or transmuted form, be pointed out; it being necessary only to show that the funds went into bank (Code 1930, section 2914).

2. BANKS AND BANKING.

Where state depository had no security pledged as to certain state deposit, such deposit was trust fund for which state would be entitled to preference out of assets of bank upon its liquidation (Code 1930, section 2914).

3. BANKS AND BANKING.

Where county depository, receiving for collection school warrants belonging to county, forwarded warrants to state depository for collection, and state depository, on day before it closed for unrestricted business, received state's check for the warrants, charged amount to state's unsecured deposit, credited county depository therewith, and mailed notice of collection and credit to county depository too late for latter to obtain cash, county held entitled to preference out of state depository's assets (Code 1930, section 2914).

4. BANKS AND BANKING.

In Mississippi, Massachusetts rule, that each bank receiving paper in process of collection acts as agent for depositor obtains.

HON. V J. STRICKER, Chancellor.

APPEAL from chancery court of Hinds county HON. V. J. STRICKER Chancellor.

Suit by Pearl River county and another against the Merchants' Bank & Trust Company and others. Decree for defendants, and complainants appeal. Reversed and rendered.

Reversed, and judgment here for appellants.

Stevens & Heidelberg, of Hattiesburg, for appellants.

The funds in question are public funds, the property of Pearl River county, Mississippi, and under section 2914 are trust funds and entitled to preferential payment.

Sections 3077 and 3078, Code of 1892; Section 3485, Code of 1906; Chapter 177, Laws of 1922; Section 2914, Code of 1930; Commercial Bank v. Hardy, 97 Miss. 75, 53 So. 395; Fogg v. Bank of Friar's Point, 80 Miss. 750, 32 So. 285; Metcalf v. Bank, 89 Miss. 649, 41 So. 377; Green v. Cole, 54 So. 65; U. S. F. & G. Co. v. Village of Bassfield, 148 Miss. 109, 114 So. 26; Potter v. Fidelity & Deposit Company, 101 Miss. 823, 58 So. 713; Commercial Bank v. Hammer, 8 Miss. 448; Tiernan v. Commercial Bank, 8 Miss. 648; Agricultural Bank v. Commercial Bank, 15 Miss. 592; Bowling v. Arthur, 34 Miss. 41; Third National Bank v. Vicksburg Bank, 61 Miss. 112; People's Gin Co. v. Canal Bank & Trust Co. et al., 144 So. 858; Campbell v. Pettengill, 7 Me. 126, 20 Am. Dec. 349; Galena Ins. Co. v. Kupfer, 28 Ill. 332, 81. Am. Dec. 284; Hatch v. First Nat. Bank, 80 Am. St. Rep. 401; Chapter 189, Laws of 1932; Section 299, Code of 1930.

Under the Massachusetts rule in force in Mississippi, when the Bank of Commerce sent the warrants to Bank of Picayune for collection, Bank of Picayune likewise became the agent, not of Bank of Commerce, but of Pearl River county.

Immediately preceding the bookkeeping entries the funds in question were public funds of the state of Mississippi, constituting trust funds and entitled to preferential payment, and by reason of the bookkeeping entries appellants have become subrogated to the rights of the state, and are, therefore, entitled to preferential payment.

Powell v. Board of Supervisors of Tunica county, 107 Miss. 574, 65 So. 499; Fogg v. Bank, 80 Miss. 750, 32 So. 285.

Appellants are entitled to have the entire transaction rescinded, because the state treasurer in giving his check violated the provisions of chapter 177, Laws of 1932, and upon such rescission appellants are entitled to have the warrants delivered up and all marks of payment and cancellation erased therefrom.

Section 4326, Mississippi Code of 1930; Chapter 177, Laws of Mississippi of 1932; Section 7177, Mississippi Code of 1930; Sections 34 and 101, Mississippi Chancery Practice, by Griffith; Section 142, Mississippi Chancery Practice, by Griffith; Fidelity & Deposit Company of Maryland et al. v. Wilkinson County, 106 Miss. 654, 64 So. 457; Brown, Land Commissioner et al. v. H. B. and Eugene Ford, 112 Miss. 678, 73 So. 722; Love, Superintendent of Banks et al. v. Sunflower County, 144 So. 856.

If delivery of the warrants with all marks of payment and cancellation erased therefrom is now impossible, the status quo should be restored as near as possible, and, therefore, Pearl River county should be subrogated to the rights of the state of Mississippi.

The Merchants Bank & Trust Company at the time of the transaction in question was insolvent to the knowledge of the officers of the bank, and, therefore, the funds in question are trust funds, regardless of whether they constitute public funds or not.

Love v. Federal Land Bank, 127 So. 720; City of Philadelphia v. Eckels, 98 F. 495; St. Louis, etc. v. Johnson, 133 U.S. 576, 33 L.Ed. 686.

Green, Green & Jackson, of Jackson, amicus curiae.

Pearl River county is entitled to preference.

Twist v. Prairie Oil & Gas Co., 274 U.S. 684; McLeod v. Womack, 50 So. 66; Porterfield v. Butler, 47 Miss. 170; Steele v. Palmer, 41 Miss. 88; Insurance Company v. Keaton, 95 Miss. 713; Broadstreet v. Jackson, 81 Miss. 233; Railroad Co. v. Cathey, 70 Miss. 337.

Where the county was vested with a cause of action against the trust property in the possession of both (a) the Merchants Bank, and (b) the depository, the Merchants Bank being liable, may not compel the county to proceed against another party who may be otherwise liable to exculpation, but should permit judgment against itself and then seek, if its liability be secondary, exoneration therefrom.

Powers v. C. & O. Railroad, 169 U.S. 97; Osborn v. Noble, 46 Miss. 449; Section 2961, Code of 1930; Poole v. Doster, 59 Miss. 258; Clay v. Freeman, 74 Miss. 820; Weir v. Kelly, 80 Miss. 64; Montgomery v. Kellogg, 43 Miss. 497; 28 C. J. 979; 50 C. J. 232; Quitman County v. Miller, 117 So. 263, 150 Miss. 841; Miller v. Phipps, 137 So. 482; Watson v. Perkins, 88 Miss. 64, 40 So. 643; 20 C. J. 9, et seq.; 2 C. J. 874; Peoples Gin Co. v. Canal Bank, 144 So. 860, 146 So. 380; Jefferson County v. Bank, 142 So. 680; Metcalf v. Bank, 89 Miss. 649, 41 So. 379; Green v. Cole, 98 Miss. 67, 54 So. 65; U. S. F. & G. Co. v. Bassfield, 114 So. 29, 104 So. 357; Sunflower County v. Bank of Drew, 136 Miss. 191; Fidelity & Deposit Co. v. People's Bank, 44 F.2d 19.

There is no liability upon the Bank of Picayune.

A county warrant was never cash or its equivalent. It is not a negotiable instrument.

3 R. C. L. 25; 15 C. J. 602; Cleveland State Bank v. Cotton Exchange Bank, 81 So. 170, 173, 119 Miss. 868; Wall. v. Monroe County, 103 U.S. 74, 26 L.Ed. 430; Beckett v. McCaslin, 137 So. 520, 161 Miss. 557; Green v. Miss., 53 Miss. 148; Supervisors v. Klein, 51 Miss. 807; Whitney v. State, 52 Miss. 732.

Both parties to the transaction, Pearl River county and the Bank of Picayune, treated the fund as belonging to the county, and the Bank of Picayune is therefore not liable.

Ramsey v. Brown, 77 Miss. 124; State v. Industrial Com. (Wis.), 242 N.W. 321; Calihan v. Yellow Cab Co. (Cal.), 13 P.2d 931; Chandler v. Bay St. Louis, 57 Miss. 329; Pagaud v. State, 5 S. & M. 491.

Pearl River county appears in its own right in this cause and asserts that its property belongs to it, and that for it the Bank of Picayune was merely acting as agent, and that the Merchants Bank was likewise acting as agent, and that the state having set apart this amount as public funds, the paramount law requires that it be thus appropriated.

Norman v. Jackson Fertilizer Co., 79 Miss. 751; Swan v. Smith, 57 Miss. 553; Sections 2959, 2960, 2961, Code of 1930; Quinn v. Alexander, 125 Miss. 690, 88 So. 170; Merchants Bank & Trust Co. v. Scott County, 145 So. 908; Chap. 189, Miss. Code, 1933 Supplement, sec. 26-1; Section 211, Code of 1930; Bridges v. Clay County, 58 Miss. 817; Section 4350, Code of 1930.

The Bank of Picayune's obligation did not become consummate until final payment in cash or solvent credits.

The funds were never received in cash or solvent credits.

Section 4348, Code of 1930; 27 C. J. 927, note 36; Ayres v. Lawrence, 59 N.Y. 192, 198; Wildberger v. Insurance Co., 72 Miss. 338; Development Co. v. Fire Ins. Co., 105 Miss. 211; Scott County Milling Co. v. Powers, 112 Miss. 798, 73 So. 792; Hirsch Bros. v. Kennington, 124 So. 344, 155 Miss. 242.

Under section 2914, as amended, preference is created as to all public funds in banks.

Shields v. Thomas, 71. Miss. 260; Code of 1892, secs. 3077 and 3078; Potter v. Fidelity & Deposit Company, 101 Miss. 823, 58 So. 713; Board of Levee Com'rs v. Powell, 69 So. 215; U. S. F. & G. Co. v. Bassfield, 114 So. 30; Chapter 177, Laws of 1932; Section 2914, Code of 1930; State v. Edwards, 93 Miss. 709; U. S. F. & G. Co. v. Bank, 103 Miss. 91, 60 So. 47; Section 3485, Code of 1906; Sunflower County Bank v. Bank of Drew, 104 So. 355; Bank of Commerce v. Gulfport, 117 Miss. 591, 78 So. 519; Jordan v. Bennett, 119 Miss. 576, 81 So. 239; Powell v. Board of Supervisors, 107 Miss. 410, 65 So. 499; Bank v. Clark, 114 Miss. 850, 75 So. 595.

Flowers, Brown & Hester, of Jackson, for appellee.

If the fund involved ever passed from Pearl River county, to either of the banks, yhe public nature of the fund was lost and section 2944 of the Code of 1930 would have no application.

Wardlaw v. Planters Bank, 131 Miss. 93, 95 So. 135.

Petitioners ask the court to extend the scope of section 2914 of the Code of 1930 so as to cover a situation that never was intended by the Legislature. This statute was intended...