Wardlaw v. Planters' Bank of Clarksdale

• Decision Date: 05 February 1923
• Docket Number: 22839
• Parties: WARDLAW, STATE BANK EXAMINER, v. PLANTERS' BANK OF CLARKSDALE et al
• Court: Mississippi Supreme Court

95 So. 135

131 Miss. 93

WARDLAW, STATE BANK EXAMINER, v. PLANTERS' BANK OF CLARKSDALE et al

No. 22839

Supreme Court of Mississippi

February 5, 1923

1. BANKS AND BANKING. Municipality entitled to guaranty certificate from state banking department for funds deposited in insolvent bank not qualified as a depository "secured."

Where public funds of a municipality are deposited in a bank which has not qualified as a depository, as provided in Chapter 98 of Hemingway's Code, this deposit is not "otherwise secured," as provided in section 3506, Hemingway's Code, and the municipality is entitled to a guaranty certificate from the state banking department, where the bank is being liquidated by this department.

2. MUNICIPAL CORPORATIONS. Has prior lien for deposit in defunct bank not qualified as depository.

The municipality is entitled to a priority of payment of its claim out of the assets of the bank, under section 2823 Hemingway's Code (section 3485, Code of 1906).

3. BANKS AND BANKING. Bank re-depositing county funds not entitled to priority of payment by insolvent bank in which funds deposited.

Where county officers deposits the money of the county in a bank which has not qualified as the county depository, and this bank, in accordance with an agreement with another bank deposits part of the county money in the second bank and takes, certificates of deposit therefor in its (the bank's) name, as between the two banks, the relation of bank and ordinary depositor exists, and the first bank is not entitled to priority of payment under section 2823 Hemingway's Code (Code 1906, section 3485), out of the assets of the second bank, which is being liquidated by the state banking department.

4. BANKS AND BANKING. Bank re-depositing county funds in defunct bank entitled to guaranty certificate from state banking department.

The depositing bank under these facts is entitled to receive from the state banking department its guaranty certificate.

HON. G E. WILLIAMS, Chancellor.

APPEAL from chancery court of Coahoma county, HON. G. E. WILLIAMS Chancellor.

Suits by the Planters' Bank of Clarksdale and the City of Clarksdale and others against S.W. Wardlaw, State Bank Examiner, in charge of the Delta Bank & Trust Company. From decrees for plaintiffs in each cause, defendant appeals. Affirmed in part, and modified and rendered in part.

Affirmed in part. Modified and rendered in part.

Watkins, Watkins & Eager, for appellant.

Point Number 1: The claims of appellees were "otherwise secured," and appellees were, therefore, not entitled to a guaranty certificate. Section 3596 of Hemingway's Mississippi Code, being section 38 of the Act. We now proceed to a discussion of the question as to what is meant by "otherwise secured." And it is at this point that the point of diversion is reached with opposing counsel. We contend that the act means just what it says: "that if the deposit is otherwise secured it is not entitled to the benefit of the guaranty act; that if the depositor has any other kind of security than that afforded by the act itself, the depositor is 'otherwise secured.'"

It is conceded in this case that the appellees are secured by section 3485 of Hemingway's Code. These deposits were made in violation of law. The officers and persons making them had no right or authority under the law to make any such contract of deposit. The funds were accepted by the depository in violation of law; the depository accepted these deposits at its peril, knowing that the officers making the same were violating the law in so doing, and that a lien would be impressed upon the assets thereof for the payment of these deposits, and the priority of payment would be directed as against other depositors. We respectfully submit that the term "otherwise secured" means just what it says. Columbia Bank & Trust Company v. United States Fidelity & Guaranty Company (Okla.), 126 P. 556.

The question was again presented to the supreme court of Oklahoma in the case of Lovett v. Langford, 145 P. 767. In that case, a state officer deposited money under the depository law in a state bank. The bank failed, and the officer filed a suit to have the deposit given the benefit of the guaranty act. The court held that the deposit was otherwise secured, and did not fall within the provision of the guaranty act.

The question was again examined by the supreme court of Oklahoma in the case of United States Fidelity & Guaranty Co. v. State et al., 168 P. 234. Fuller v. Ayleswoyth, 75 F. 694, 21 C. C. A. 504. The court was required to construe rule 29 (3 S.Ct. XVI). We refer the court to the case of Fuller v. Aylesworth (C. C. A.), 75 F. 694, where the term "otherwise secured" is discussed. The latest case on the subject is that of American State Bank v. Wilson, Bank Commissioner (Kan.), 204 P. 709.

It is contended by appellees' counsel that section 3485 of Hemingway's Code of the state of Mississippi merely makes the claim a preference claim, and not a secured claim, but the court will look at the substance and not the shadow. The purpose of the statute, as construed by this court, was to impress a lien upon the assets of the bank for the payment of public funds. That is exactly what was done in the case of Fogg, Tax Collector, v. Hebdon, 32 So. 385, 80 Miss. 750. The same course was taken in Metcalf v. Bank, 41 So. 377, 89 Miss. 649; Commercial Bank v. Hardy, 53 So. 395, 97 Miss. 755; Green v. Cole, 54 So. 65, 98 Miss. 67; Potter v. F. & D. Co., 101, Miss. 823, 58 So. 713.

The trouble about the position of appellees is that they insist upon adding something to the statute. Section 3596 of Hemingway's Code is complete in itself, and is clear and unambiguous. We respectfully submit that an exception should not be grafted on an unambiguous statute. Box v. Stanford, 13 S. & M. 93; Mellen Lumber Co. v. Industrial Commission (Wis.), 36 A. & E. (Ann. Cas.) 997.

We further call the attention of the court to the fact that section 38 of the Guaranty Act, being section 3596 of Hemingway's Code, was adopted in practically the same language as the Kansas, Texas and Oklahoma acts, which act had been construed before the passage of the act in question by the Mississippi legislature. And it is generally held that where a statute is copied from another state, or from a foreign country, a construction of the statute prevailing therein will also be adopted. Ingram v. Reagan, 23 Miss. 213; Botanical Medical College v. Atchinson, 41 Miss. 188; Marqueze v. Caldwell, 48 Miss. 23; Henry v. Henderson, 103 Miss. 48; Hamner v. Yazoo Delta Lumber Co., 100 Miss. 349.

We respectfully submit that appellees' deposits, if such they may be termed, were "otherwise secured," and that the chancellor committed error in awarding a guaranty certificate to the appellees.

Point Number 2: Appellees' claim not a deposit within the meaning of the act. We direct the attention of the court to the case of Potter v. F. & D. Co., 101 Miss. 823, 58 So. 713, where this court held that the statute under consideration had no place and no functions to perform under circumstances where the public officers were authorized to make the deposit and the bank to receive it. We will not be willing to admit that appellees will not collect their full claim by reason of the priority allowed by the chancellor in the court below; but aside from that, the appellees were "otherwise secured." The relation of debtor and creditor never existed in the true sense between appellees and the Delta Bank & Trust Company. The Delta Bank & Trust Company was nothing in the world but a trustee under the law for the benefit of the holder of these public funds, and it would be inconsistent with the purpose of the guaranty system to hold it applicable to the facts and circumstances in this case.

C. L. Hester and Flowers & Brown, for appellant.

The question presented by these cases is: Does the state bank guaranty fund protect depositors of public funds?

As to the nature of public deposits and the relation created by the deposit between the bank and the owner of the funds. Section 3077 of the Code of 1892. The statute declares that public money is a trust fund when deposited in a bank, and is not liable to be taken by the general creditors of the officer or by the creditors of the depository. When the statute first appeared we had no selected public depositories.

The idea was to make of public money by whomsoever placed in a bank a trust fund which could be followed and taken in whatever form it might be found. The fund itself remained subject to recapture and any assets in which the money may have been invested could be taken by the beneficial owner of the trust funds. It could not be taken to pay claims of general creditors, whatever its form or however changed. Fogg, Tax Collector, v. Hebdon, 32 So. 385, 80 Miss. 750; Pom. Eq. Jr., sec. 420; Knatchbull v. Hallett, 13 Ch. Div. 696; Central National Bank v. Mutual Life Ins. Co., 104 U.S. 54, 26 L.Ed. 693.

Judge CALHOON in Metcalf v. Bank, 41 So. 377, 89 Miss. 649, followed Judge TERRALL'S lead in Fogg v. Hebdon, and said: "On the point of the deposit by the sheriff we decide that it was a trust fund, under Annotated Code 1892, section 3077, and entitled to priority of payment out of the assets of the bank." And both of the above cases were approved and used by Judge ANDERSON in Commercial Bank v. Hardy, 53 So. 395, 97 Miss. 755.

It will be noted that this is the first time the court said that the claim for trust funds deposited in a bank which has failed is a charge on all the assets of the bank. That decision gives additional meaning and a new meaning to the statute. Or at least it further develops the statute.

In Green v. Cole, 54 So. 65, 98 Miss. 67, Judge ANDERSON went a...