Perkins v. State ex rel. Roberson

• Decision Date: 04 December 1922
• Docket Number: 22557
• Citation: 94 So. 460,130 Miss. 512
• Court: Mississippi Supreme Court
• Parties: PERKINS et al. v. STATE ex rel. ROBERSON, Atty. Gen

94 So. 460

130 Miss. 512

PERKINS et al. v. STATE ex rel. ROBERSON, Atty. Gen

No. 22557

Supreme Court of Mississippi

December 4, 1922

APPEAL from chancery court of Harrison county, HON. CLAYTON D POTTER, Special Chancellor.

1 DEPOSITARIES. Municipal corporations. City's contract though ultra vires, not illegal if not prohibited by charter city, but not other party, may plead ultra vires; city not estopped by acceptance of depository's bond from claiming it to be ultra vires because not signed by surety company where bank received benefit of depository's bond, neither bank nor sureties could avoid liability on bond because not executed by surety company. Although a contract with a municipal corporation may be ultra vires, still it is not illegal if not prohibited by its charter. While the municipality may successfully interpose a plea of ultra vires when sued on such a contract, the other party thereto cannot set up such a plea to escape liability. Therefore, where a municipality has selected a depository for its public funds in accordance with the statute, except the depository bond accepted by it from the bank as such depository is made by individuals as sureties instead of by a surety company, as required by the statute, although the municipality is not estopped by the act of its municipal officers in accepting such bond, the principal and sureties thereon cannot escape liability on such bond on that ground, provided the bank which is selected as such depository gets the benefit of such bond by acting as the actual depository for such municipality.

2. DEPOSITARIES. Sureties on municipal depository's bond held estopped from claiming want of consideration, because bond unauthorized by law.

The bank selected as such depository having received the consideration for the execution of such bond, namely, the municipal deposits for the period covered thereby, the sureties thereon are estopped to claim that such bond was unauthorized by law, and that therefore there was no consideration moving to them for its execution, because the consideration moving to the bank as such depository was sufficient consideration for the execution of the bond by the sureties; therefore, so far as such principal and sureties are concerned, said bond is to be treated in all respects as if the municipal depository statute had been complied with.

3. SUBROGATION. State Banking Department making payments to city after failure of municipal depository held subrogated to rights of city against depository bond and sureties.

Where a bank as a municipal depository fails, and its assets are being administered by the State Banking Department as provided by law, and such municipality proceeds under section 3485, Code 1906 (section 2823, Hemingway's Code), against such bank as municipal depository and the State Banking Department to establish, and does establish, a trust in the assets of such depository for the payment of the amount of deposits due by such depository to the municipality, which thereby results in the State Banking Department being forced to pay out of the State Bank Guaranty Fund a portion of the amount of deposits due by such depository to the municipality, the State Banking Department under the provisions of section 36, chapter 124, Laws 1914 (section 3594, Hemingway's Code), is subrogated to all the rights and claims which the municipality had against such depository, and by virtue of such subrogation succeeds to the rights of the municipality as against the depository bond and the sureties thereon.

4. DEPOSITARIES. Sureties on depository's bond not liable on depository's failure to pay deposits subsequent to period for which it was appointed depository; on depository's failure to pay city deposits on demand, the sureties become liable therefor.

Where a municipal depository is selected for a period of two years, and executes a bond as such in favor of the municipality, and at the end of said period is again selected for a period of one year, and executes a bond as such covering that period, and during the latter period the bank as depository becomes insolvent, and the municipality demands of it the repayment of its deposits, which the bank is unable to make, the sureties on the first bond so executed are not liable for such deposits, because the life of that bond had expired, but the sureties on the second bond are, because under the depository law the depository becomes a mere debtor to the municiplity, and breaches its bond when payment is demanded and refused.

HON. CLAYTON D. POTTER, Special Chancellor.

APPEAL from chancery court of Harrison county, HON. CLAYTON D. POTTER, Special Chancellor.

Bill by the state, on the relation of Frank Roberson, attorney-general, against R. R. Perkins and others. From judgment overruling demurrers to bill, defendants appeal. Reversed in part, affirmed in part, and remanded.

See, also, Perkins v. State (Miss.), 91 So. 704.

Reversed in part, affirmed in part, and remanded.

Gex & Waller, White & Ford, Gardner & Brown, J. H. Leather, and J. J. Taylor, for appellant.

We contend that the bill in this cause cannot be maintained against the sureties on either bond, because:

(1) The obligation sued under was a contract with the city, by which the sureties under their bond agreed to indemnify the city against loss; the city having sustained no loss, the condition of the bond was never broken and therefore no action could be brought on the bond.

(2) Since the bond sued under was not one as provided for by law, and was held to be void by this court as an indemnifying bond to the extent of protecting the city deposits, the money of the city on deposit was secured as a preference fund to be paid as a preference fund to the city, and since the bank had abundant assets to pay this deposit as a preference fund, the city sustained no loss, and therefore there is no liability under the bond, the money being protected as a trust fund.

(3) The Bank of Commerce not having been selected as depository as by law required, there was no liability under the bond, because the bond guaranteed money of the city placed in the bank, as a city depository.

(4) The banking department has no right to file this suit, because the money was not paid out by virtue of the guarantee feature of the banking law for which the banking department was created, but by virtue of the trust feature acquired by the deposit and if any action could be maintained, it would have to be maintained through the liquidators as receiver, after all assets have been collected.

(5) The bill is filed prematurely, being filed before the affairs of said bank have been liquidated.

I. The obligation sued under was a contract with the city, by which the sureties under their bond agreed to indemnify the city against loss; the city having sustained no loss, the condition of the bond was never broken, and therefore no action could be brought on the bond. Chesire Bank v. Robinson, 2 N.H. 126; Jackson v. Hopkins, 24 S.E. 234; Corpus Juris, 9, pages 67, 75, 78, 79.

II. Since the bond sued under was not as provided for by law, and was held to be void by this court as an indemnifying bond, to the extent of protecting the city deposits, the money of the city on deposit was secured as a preference fund, to be paid as a preference fund to the city, and since the bank had abundant assets to pay this deposit as a preference fund, the city sustained no loss, money being protected as a trust fund.

The purpose of the act was primarily to provide that the public funds should draw interest from the successful bidder, who was selected depository of the county or the municipality as the case might be, the statute providing that the bank offering the largest return on the deposits should be selected the depository. A full scheme for the protection of public money was also provided for in these statutes, in substance as follows: 1. The county or the municipality as the case might be, must advertise for bids from banks to be selected as depository; 2. The bank offering the largest return for the use of the public money, who will give a bond as provided by law, is the bank which the statute provided must be selected; 3. The statute provides that the depository must be selected only from year to year, for the county, and for the city every two years; 4. The statute provides further that before a bank can become a county or city depository, a certificate to that effect must be issued either by the president of the board of supervisors, or the city commissioners; 5. The statute then provides a number of penalties for the improper use of public moneys, etc.; 6. When that law was enacted, section 3485 of the Code of 1906, which was brought forward by section 2823 of Hemingway's Code, was in full force and effect. That section provides in substance that all moneys deposited in banks in the name of the tax collectors, or other public officers are trust funds, and in the event of the failure of the bank, they must be paid first in preference to all others. The statute further provides that the moneys of the bank, or the assets of the bank, could not be taken out by the general creditors until the public funds were first paid. In other words, the statute especially created this fund a trust fund, primarily secured by all the assets of the bank.

So that certainly in 1916, and at all times, prior thereto, and since the enactment of section 3458 of the Code of 1906, section 2823, Hemingway's Code, all public funds were protected as a special trust fund under these statutes. In the case at bar, it must be remembered that it is only by virtue of this section that the city could recover its money at all. The money sued for in this case was money on deposit, not in the name of...