Sunflower County v. Bank of Drew

• Decision Date: 09 June 1924
• Docket Number: 24171
• Citation: 101 So. 192,136 Miss. 191
• Court: Mississippi Supreme Court
• Parties: SUNFLOWER COUNTY v. BANK OF DREW et al. [*]

101 So. 192

136 Miss. 191

SUNFLOWER COUNTY v. BANK OF DREW et al. ^[*]

No. 24171

Supreme Court of Mississippi

June 9, 1924

Division A

Suggestion of Error Overruled Aug. 28, 1924.

APPEAL from chancery court of Sunflower county, HON. E. N. THOMAS Chancellor.

Suit by Sunflower County against the Bank of Drew and others. Decree for defendants, and plaintiff appeals.

Affirmed.

Judgment affirmed.

Moody & Williams, for appellant.

The Bank of Drew is, of course, liable for the amount due of thirteen thousand six hundred thirty-nine dollars and twenty-two cents when its commission as a depository expired and also the further amount of two thousand three hundred thirty dollars and forty-nine cents, when it was closed, or the aggregate amount of fifteen thousand three hundred sixty-nine dollars and seventy-one cents. This we all admit.

But whether, for the first amount, the bank is only liable as a depository, and, as a consequence, the guaranty company, as its surety, is also liable is in dispute. Therefore, to determine the nature of the liability, as to the first amount, it was necessary that this bill be filed.

Again, if the bank was not liable as a depository, for the first amount, but only as a bank, then there can be no doubt but that, as a bank, it is liable for both amounts or the aggregate sum of fifteen thousand three hundred sixty-nine dollars and seventy-one cents. If so, has the county the right, by suit in equity to establish that liability, notwithstanding the bank was closed by the banking department and a liquidator appointed to take charge of, and administer, its assets? As to that we direct attention to chapter 177, Laws of 1922.

While the remedy provided in this statute is more or less summary, yet, we insist, that the statute may be enforced by suit in equity, if desired; and that, when the amount thus secured by the statute is fixed, a decree should be entered requiring the payment, by the liquidator, "out of the first money coming into his hands."

II. The liability of the bank, as depository, and the consequent liability of the guaranty company as a surety on its bond.

For the amount due by the bank, as a depository, when its commission expired, we contend that the bond was breached when it failed to pay the amount due to the treasurer, entitled to receive it, in the absence of a depository, who had qualified as such.

If there was no depository to whom the bank, when its commission expired, could pay the amount due by it to the county, then certainly it must be, as it has been conceded, that the amount thus due could be paid to the county treasurer.

Therefore, the sole question, as to this point is, was the guaranty company released from its liability, as a surety, because the county treasurer did not demand that the bank of Drew as a depository, pay to him, as such, the amount due when its commission expires, or because a new depository had not qualified. Certainly it will be conceded that, as between the county and the bank of Drew, as a depository, the relation of creditor and debtor existed, and that for the payment of such debt the guaranty company was liable only as a surety. Therefore, in making this contention, counsel failed to note that it is not inaction, but positive action, that releases a surety.

It is unnecessary to refer the court to authority to the effect that it is only affirmative action, and not inaction by a creditor that releases a surety from liability. Fidelity & Deposit Co. v. Wilkinson, 109 Miss. 879-89, bottom of page; G. W. Marlar, et al. v. State, 62 Miss. 677, syllabus.

As to the contention, that the bond became functus offico and discharged January 5, 1921, we have pointed out, no neglect on the part of the board of supervisors and the treasurer could release a surety. If, however, by the condition of the bond, if the bond was conditioned as the statute prescribed, the liability thereon ceased on the 5th day of January, 1921, then we, of course, admit the surety was discharged. However our contention is that the bond is not so conditioned. Sections 742 and 2801, Hemingway's Code. In addition to the statute we direct special attention to U. S. F. & G. Co. v. Pensacola, 68 Fla. 357, 67 So. 87; State v. Smith, 87 Miss. 551; Bank of Gulfport v. Gulfport City, 117 Miss 591-600-601.

But it is stated that thereafter there was deposited in the bank of Drew, as a bank and not as a depository, to the credit of the General County Bond Interest Fund nineteen thousand thirty-four dollars and fifty-nine cents, and that it thereafter paid warrants drawn against said fund aggregating eighteen thousand four hundred sixty-two dollars and twenty-seven cents; that there was thereafter deposited to the credit of the District No. 2 Bond Interest Fund, thirteen thousand eight hundred three dollars and nine cents, and that subsequently warrants, against said fund aggregating twelve thousand forty-four dollars and ninety-two cents, were paid.

As to these subsequent transactions, the rights of the complainant against the bank of Drew is stated by the supreme court in Powell v. Board of Supervisors of Tunica Co., 65 So. 491-501.

If the principle quoted be true as to amounts received in excess of what it was authorized to receive, then certainly such principle applies with greater force when there was no authority at all to receive such amounts. Yet, it is insisted that the warrants thus paid, after the commission of the bank, as a depository, had expired, should be, by the court, applied in payment of the amount due by the bank as a depository, as of the date its commission expired. Therefore, the question presented is, has the court at the instance of a surety, not the principal debtor, the right to apply payments, made by the latter to the creditor, on a debt for which the surety was liable, in utter disregard of the interest of the creditor, as well as that of the debtor, or rather the creditors of an insolvent debtor, entitled to priority of payment out of the latter's assets.

The contention is that the warrants, paid by the bank of Drew after it ceased to be a depository, should be applied in payment of the amount due the county, at the time the commission expired. In making this contention, the interest of everyone other than the guaranty company is disregarded. This is obvious when it is considered that there are others who, as to the money which is said to be on hand, have rights which must be considered.

If the trust funds, deposited in the Bank of Drew, after it ceased to be a depository, have not been paid, then the amount thus due the county is entitled to priority of payment out of the funds now on hand. If the amount due the county, for these trust funds, has been paid, or if the warrants paid are, by the court, applied in payment of these trust funds, then the depositors of the bank have a prior claim to said money which is stated to be on hand. Therefore, if the warrants paid by the Bank of Drew, after it ceased to be a depository, is by the court, applied in payment of the amount due by the bank, as a depository, for which the guaranty company is liable, then the inevitable effect of such application would be to utterly disregard the rights of the depositors entitled, as against the guaranty company, to priority of payment. Yet the effort is made to subordinate the rights of the depositors, entitled to priority, in order to relieve a surety for a debt, for which it is liable. For the law as to this, see: 30 Cyc. 1251, sec. 2; Gordon v. Hobart, 2 Story 243, 264, 10 F. Cas. No. 5, 608; Wandotte Coal, ets., Co. v. Wyandotte Paving, etc., Co., Ann. Cas. 1917c. 580-582; United States v. Eckford, etc., 11 Law Ed. 120.

As to the amount due the county by the bank as a depository, the relation of debtor and creditor exists. As to the deposits made after the bank ceased to be a depository, the relation between the county and the bank was that of trustor and trustee. Therefore, the case is different from the Eckford case, cited above, in that in that case the relation of trustor and trustee existed as to both terms. For that reason this case is a much stronger case inasmuch as it is sought to apply funds paid by a trustee, not in discharge of a trust obligation, but in discharge of a personal obligation due as a debtor.

The effect of the distinction, as to the appropriation of payments, is correctly noted in Board of Commissioners v. Citizens Bank, 69 N.W. 912. In the instant case the Bank of Drew, as a depository, was indebted to the county for a fixed amount, then due, for which the guaranty company was liable. Thereafter the sheriff and tax collector, without lawful authority, deposited in the Bank of Drew, as a bank and not as a depository, money belonging to the county. The monies thus deposited were trust funds, and, as between the county and the bank, the relation of trustor and trustee, as to these funds, existed. Warrants drawn against those funds were paid by the bank, as a bank and not as a depository. When the bank paid and delivered these warrants to the board of supervisors it acted as a trustee, and neither the board nor the bank could use these warrants to discharge a debt due by the latter to the county. If not, then certainly the court will not do that which they could not do.

Therefore, there are two accounts; one against the bank, as a depository, when the relation of creditor and debtor existed, and one against the bank, as trustee, for funds intrusted to it. If the warrants paid be considered as a payment, then it is clear that the payment was made by the bank, as a trustee, and not as debtor, and should be credited on the trust account.

William M. Hall, for appellee.

There is no question about the correctness of the county's...