United States Fidelity & Guaranty Co. v. McCain

• Decision Date: 16 June 1924
• Docket Number: 23834
• Citation: 101 So. 197,136 Miss. 30
• Parties: UNITED STATES FIDELITY & GUARANTY CO. v. MCCAIN et al. [*]
• Court: Mississippi Supreme Court

101 So. 197

136 Miss. 30

UNITED STATES FIDELITY & GUARANTY CO. v. MCCAIN et al. ^[*]

No. 23834

Supreme Court of Mississippi

June 16, 1924

Division A

Suggestion of Error Overruled Aug. 28, 1924.

APPEAL from chancery court of Lauderdale county, HON. G. C. TANN Chancellor.

Suit by the United States Fidelity & Guaranty Company against J. A McCain and others. From an order dismissing the bill, plaintiff appeals. Affirmed.

Affirmed.

W. M. Hall and Jacobson & Brooks, for appellant.

The bill charged the mismanagement of the estate by the receivers, and an unauthorized and unlawful dealing by the receivers with the assets of the Union Bank & Trust Company which caused the complainant to suffer loss. An order of the court provided that the notes and bonds held by the bank should be sold to the highest bidder at not less than par value and accrued interest, and that the depositors should receive notice of the terms and conditions of the sale at least five days before the date of the sale.

Certain deposits were exchanged in which the depositors received payment in full and said exchanges were made at private sale without notice to other depositors, and the orders confirming same were ex parte orders. It thus clearly shows that depositors and creditors of the bank who stood in no better attitude than the complainant were thereby preferred and paid in full for their claims without notice to the complainant.

There is no reason given why this should have been done, and it was a risk assumed by the receivers at their peril. If they thought that they had enough assets to pay all depositors in full, when they paid some in full they assumed this risk, and dealt with this money, or assets of the bank at their peril, and impliedly guaranteed that all depositors and creditors in like situation would be paid in full.

Receivers attempted to justify their conduct in the payment of some creditors in full by the order of the court having been obtained, which we submit cannot be relied upon to justify their conduct, for the reason that the agreement that the receivers made with the directors whether they were mistaken or not in the outcome of same, cannot justify their action, because they undertook upon their part to present unto the court that complainant would be paid in full, and if they were mistaken in this, they cannot hide behind an order of the court made upon their solicitation, and without notice to the complainant, which resulted in the detriment of complainant. It was the duty of the receivers to take the assets of this corporation and sell them at public sale to the highest bidder, for cash, with notice according to the decree of April 1, 1913, and when they deviated from that decree and attempted to distribute the assets of the bank in full to some creditors in preference to others, they did so at their peril, and the defendants should be held liable for any loss that the complainant suffered on account thereof.

McBeath & Peebles and C. C. Miller, for appellees.

When counsel for appellant admit that before the receivers exchanged any of the assets for deposits, they procured an order from the chancellor, authorizing same, they admitted themselves out of court.

The only way that a surety on a receiver's bond can keep tract of what is going on, is by the decrees granted by the chancellor. And we do not believe that the court would hold a receiver or surety liable where they act upon the decree of the chancellor. The surety could not intervene and prevent the receivers from acting upon the decree, and certainly it is that they cannot be held liable. These decrees were final decrees, and not having been appealed from, cannot now be attacked collaterally ten years after they were rendered. 34 Cyc. 374, par. 7.

The record does not show that the receivers used the bank's assets in making arbitrary and preferential settlements with the creditors, nor does it show any favoritism shown to any of the creditors of said bank, but on the contrary, shows that the receivers from the very first depended on the court for instructions and every move by the receivers was authorized and directed by order from the chancery court or chancellor. Every dollar paid out by the receivers was authorized and approved by the court and chancellor.

The liabilities incurred by receivers are the liabilities of the court appointing him and not the liabilities of the parties. They have no authority over him and cannot control his acts; 23 R. C. L., 79-80, section 85; 34 Cyc. 250, par. "C;" 34 Cyc. 294, par. 11; 23 American-English Encyclopedia, 1127, sec. 4; Schmidt v. Gayner, 59 Minn. 303, 61 N.W. 333, 62 N.W. 265; American Annotated Cases 1913D, page 1117, and note.

W. M. Hall and Jacobson & Brooks, for appellant in reply.

This proceeding is not a collateral proceeding because this suit was filed by permission of the chancery court of Lauderdale county against the receivers before they had filed their final account, and service of process was had on them before they had filed their final account, and it was a direct attack upon illegal handling of the assets of the bank and was pending when another dividend was made to the creditors of the bank.

Our position is that these trades were void acts of the receivers and were void ab initio, and were never binding on anybody, and that we had a right to attack them as we did. 2 Words and Phrases, 1249, 1250; McKinney v. Adams, 95 Miss. 832.

In fact there was no ex parte order which would have authorized the trading of these assets in private with depositors, the effect of which, would be to enable depositors of the same class to receive an illegal preference over the complainant. Luckett v. Brickell, 115 Miss. 457; Sharpley v. Plant, 79 Miss. 175.

OPINION

SMITH, C. J.

The appellees are the receivers of a defunct bank and their sureties, and this suit was brought against them by the appellant, a creditor of the bank, for an alleged loss sustained by it because of the mismanagement by the receivers of the bank's funds.

According to the allegations of the bill, in 1912 the Union Bank &amp Trust Company, a banking corporation, was placed in the hands of the appellee receivers for the purpose of winding up its affairs and the distribution of its assets. The bank was a depository for Lauderdale county, the surety on its bond therefor being the appellant herein. When the bank was placed in the hands of the receivers the county had on deposit with it the sum of eighteen thousand three hundred thirty-two dollars and seventy-four cents, which the appellant paid the county in compliance with the obligation assumed by it as surety for the bank, and filed a claim therefor with the receivers. The appellant is also the assignee of another deposit of one hundred twenty-eight dollars and seventy-four cents for which it also filed a claim with the receivers. Dividends up to and including May 24, 1917, have been paid on the county deposit amounting to sixteen thousand five hundred twenty-seven dollars and seventy-nine cents, leaving a balance due thereon of one thousand eight hundred four dollars...