Storts v. George

• Decision Date: 23 May 1899
• Citation: 150 Mo. 1,51 S.W. 489
• Parties: STORTS v. GEORGE.
• Court: Missouri Supreme Court

51 S.W. 489

150 Mo. 1

STORTS v. GEORGE.

Supreme Court of Missouri, Division No. 2.

May 23, 1899.

BANKS — INSOLVENCY — RIGHT TO SET-OFF AGAINST NOTE — TRUST FUND.

1. The maker cannot set off against a note to a bank, due when the bank made an assignment for creditors, the amount of his part payment after the assignment as co-surety of an account due by the bank to a depositor.

2. Money obtained by a note made by an insolvent bank does not, where deposited as a part of its assets, become a trust fund for the benefit of guarantors of the note who were induced by the false representations of the cashier to guaranty the same.

3. A guarantor of a note by a bank cannot set off against his own note to it, due at the time of its assignment for creditors, money paid as guarantor after the assignment.

Appeal from circuit court, Saline county; Richard Field, Judge.

Action by Com. P. Storts, assignee of the Citizens' Stock Bank, against John C. George. A demurrer to the answer was sustained, and defendant appeals. Affirmed.

This is a suit by plaintiff assignee for the benefit of creditors of the Citizens' Stock Bank, a corporation duly organized under the laws of this state, against the defendant, on two notes executed by him to said bank, — one for $1,400, dated October 7, 1890, upon which there were several credits, and the other for $125, dated May 3, 1894; both payable on demand to Joseph Field, cashier of said bank. The assignment was made on the 17th day of December, 1894. Plaintiff instituted this suit on the 21st day of October, 1895. The petition is in the usual form. The execution of the notes is not denied, but defendant pleads what are denominated certain equitable set-offs, which are stated by him to have originated in the following manner: On the 4th of January, 1893, defendant, as surety for said bank, joined in a bond to one Winning, treasurer of Saline county, who kept some of the public funds on deposit therein, conditioned that said bank would duly pay over said money. It is alleged that at the time of the failure Winning had in the bank $2,396.78, and that this was due and payable at the time of the assignment; that defendant and his co-securities then and there became liable to pay the same; and that on the 4th of March, 1895, before the commencement of this suit, defendant paid his part of the liability due December 15, 1894, to wit, $299.68. It is further charged in the answer that defendant, as surety for the bank, also signed a bond to the collector of Saline county to indemnify him against loss on account of deposits of public funds that he might make therein; that at the time of the failure the collector had on deposit in the bank $2,186.42, which then and there became due, and defendant and his co-securities became then and there liable therefor; that defendant, before the commencement of this suit, to wit, on the 5th of March, 1895, paid to said collector $218.60, being his part of the sum due said collector at the time of the assignment. It is also charged that when each of said bonds was signed, the bank was insolvent, and that this was known to its cashier, who, notwithstanding, fraudulently induced defendant and his co-securities to execute the same. The answer, as to the third equitable set-off, alleges that on the 15th of November, 1894, said Citizens' Stock Bank was wholly insolvent, and that this fact was well known to its cashier, but that he concealed that fact from defendant; that said bank on that day executed its note for $25,000 to the National Bank of Commerce of Kansas City, due four months after date, bearing 8 per cent. interest, and that said cashier fraudulently represented said bank to defendant to be solvent, and abundantly able to pay said loan, and thereby induced defendant and others to make a guaranty on the back of the note as follows: "We personally guaranty the payment of the within note, and do hereby waive protest on same;" that the cashier procured the money on the faith of said guaranty, and used the same for the purposes of the Citizens' Stock Bank, when in fact the money, by reason of the insolvency of said bank, and fraudulent representations of said cashier in behalf of said bank, was held by it in trust for the defendant and his co-obligors, and that a trust attached to said fund on the 15th of November, 1894, and said fund was due to the defendant and his co-guarantors on the said 15th of November, 1894, the day it was received by said Citizens' Stock Bank; that before the institution of this suit defendant paid $2,500 to the National Bank of Commerce of Kansas City, and obtained a release from his liability upon said guaranty. The amounts paid to the collector and treasurer of Saline county by defendant, as above set out, and the sum paid by him to the National Bank of Commerce, are asked to be set off against the notes sued on, and there is the further prayer for such other and further relief as defendant may be entitled to receive. Plaintiff filed a general demurrer to the answer, which was sustained. Defendant declining to plead further, judgment was rendered for plaintiff for $873.93, the amount of the notes sued on, and the defendant appealed.

Thos. Shackelford and W. M. Williams, for appellant. John A. Rich, for respondent.

BURGESS, J. (after stating the facts).

Defendant insists that the answer states and the demurrer admits that the items of $299.68 and $218.60, sought to be set off against the demands sued on, were at the time of the assignment due and payable to the treasurer and collector of Saline county, respectively; that this money was on deposit in the bank, and at the date of the assignment constituted an existing indebtedness against it, which was then due, and could have been sued for and recovered at that time; and that, as defendant, by reason of his suretyship, was compelled to substitute his money for these deposits, he is therefore entitled in equity to be subrogated to all the rights, remedies, and securities of the creditors. No principle is better settled than that when a surety pays the debt of his principal, he, by reason thereof, becomes entitled in equity to be subrogated to all of his rights, remedies, securities, funds, liens, and equities which the creditor may have for the same debt. Miller v. Woodward, 8...