Bank of Commerce v. City of Gulfport

| Miss. | Mar 15, 1918

Sykes, J.,

delivered the opinion of the court.

The appellee, the city of Gulfport, filed a bill in the chancery court against the appellants, defendants in the court below, alleging, in substance, that since the 14th day of December, 1916, the bank has been in process of liquidation, being in charge of appellant J. S. Love, one of the members "of the board of state bank examiners; that on the day Mr. Love took' charge of the affairs of the bank the city of Gulfport had on deposit in said bank about fifty thousand dollars of the public-funds of the city; that under sectiop. 3485, Code of 1906 (section 2823, Hemingway’s Code), these public moneys deposited in the bank are a trust fund in the hands of the bank and the bank examiner, J. S. Love, and that the city is entitled to have this amount paid over to it, and that it is entitled to a preference and priority to the amount of its claim against all general creditors of the bank; that it is entitled to be paid in full, not only out of any funds in the hands of the bank or J. S. Love, the liquidator, but is entitled to have a charge or lien fixed upon all the assets of the bank for the payment of this deposit. The bill further alleges that the bank was not the legal depository of the city, as provided by law. The answer admits that the city had on deposit in the bank at the time it went into the hands of the liquidator a certain sum of money, bnt denies that the city is entitled to the benefit of section 3485, Code of 1906,. because this section has been repealed by chapter 124, Laws of 1914, as amended by chapter 207, Laws of 1916. It is alleged in the answer that the appellant bank was. duly selected as the depository of the municipal funds, and qualified under the law as such depository, and that, for this reason, the above section of the Code cannot be invoked by the city. The defendant further alleges in its ansAver that when the bank qualified as the municipal depository it furnished the city a bond signed by individual sureties, in the sum of fifty thousand dollars; that a few months thereafter another bond in the same amount, signed by individual sureties, was given the city by the bank, and the first bond withdrawn; that the city has not sued upon these individual bonds, or made any effort to recover from these .bondsmen this money that the city is not entitled to maintain this suit against the state banking department and the assets of the defunct bank until it shall' have first exhausted its remedy against these several bondsmen; that the city is not entitled to proceed further with this action until its said security on said bonds shall have first been exhausted; that in any event it should not be allowed to proceed with this action until it shall first make the sureties on these bonds parties to this suit. It is further alleged, in effect, that these bondsmen should be made parties to this suit, and that the defendant should be allowed to proceed against them and recover from them, any funds required to be paid to the city out of the assets of the bank; that the defendants are entitled to be subrogated to the rights of the city of Gulfport against these bonds and the sureties thereon; that the-court should not proceed further with this cause unless the complainant shall make the sureties on these bonds parties to the suit, so that all the parties shall be before the court. The answer does not in express terms ask that any part of it be considered a cross-bill.

A decree was rendered in favor of the city, in accordance ' with the prayer of its hill, and an appeal is-prosecuted therefrom to this, court.

The testimony in the case shows that the appellant Bank of Commerce in the year 1913 was the successor of a bank called the Bank of Gulfport; that during the existence of the Bank of Gulfport, and before the-transfer of its assets to the appellant bank, the city had deposited its money in the Bank of Gulfport. The latter part of the year 1913 the city of Gulfport notified the banks of its intention to select a depository for the-municipal funds, under chapter 138, Laws of 1910. One of the officers of the appellant bank wrote the city .authorities that, in case this bank was selected as the municipal depository, it would furnish a bond of a duly authorized surety company for the protection of the city. An order was then duly adopted by the municipal authorities making this bank its depository. The bank failed to furnish the bond of the surety company, but about twenty-one months after it was selected as a municipal depository it filed with the city a personal bond in the sum of fifty thousand dollars, signed, of course, by individual sureties. This bond was attempted to be approved by the city by an order duly passed. A few months thereafter another personal bond in the same amount was substituted by the bank, and the former bond withdrawn. This was done by giving the second bond to the assistant city clerk, and getting her to deliver to the bank the first bond. This bond was never accepted or approved by the municipal authorities,, or by an order of the municipal board. In fact, the substitution of the bond was not even known by the mayor and one of the commissioners, at least until after the bank went into the hands of the liquidator. Interest was paid oh the city deposits, and monthly reports rendered to it by the bank as a municipal depository. The testimony in the case shows that both the city and the bank treated the bank as being the municipal depository of the city. It is contended by the appellant that, since both the bank and the city acted as though the bank was the legal depository of the city, the city cannot now claim that it is not, or, in other words, that the city is estopped from doing so now; that, while there may have been irregularities in.the manner of selecting the depository, and while the bond may not have been given and approved as required by law, at the same time it was a substantial compliance with chapter 138, Laws of 1910; and that for this reason the city cannot invoke section 3485, Code of 1906 (section 2823, Hemingway’s Code).

This court has held in the cases of Board of Levee Commissioners v. Powell, 109 Miss. 415" court="Miss." date_filed="1915-03-15" href="https://app.midpage.ai/document/board-of-levee-comrs-v-powell-7992088?utm_source=webapp" opinion_id="7992088">109 Miss. 415, 69 So. 215, Powell v. Board of Supervisors, 107 Miss. 410" court="Miss." date_filed="1914-03-15" href="https://app.midpage.ai/document/powell-v-board-of-supervisors-7991819?utm_source=webapp" opinion_id="7991819">107 Miss. 410, 65 So. 499, Ann. Cas. 1916B, 1262, and Bank v. Clark, 114 Miss. 850" court="Miss." date_filed="1917-03-15" href="https://app.midpage.ai/document/bank-of-commerce-v-clark-7992871?utm_source=webapp" opinion_id="7992871">114 Miss. 850, 75 So. 595, that the depository laws are mandatory, and must be strictly followed in selecting a depository for these public funds. It is contended by counsel for appellants that, under chapter 138, Laws of 1910, a personal or individual bond may be given in the case of a municipality. On the other hand, it is contended by counsel for the appellee that chapter 138, Laws, of 1910, relating to municipalities, requires the same character of bond or security as required by chapter 137, Laws of 1910, relating to county and drainage district depositories. A careful consideration of these two chapters of the Laws of 1910 has led us to the conclusion that the legal effect of chapter 138 is merely to extend to municipalities the'rights and privileges provided for in chapter 137. Section 1 of chapter 138 states that municipalities are required to select a depository in the manner provided for the selection of county depositories. Section 2 of the act reads as follows:

“Bach depository shall enter into bond, or deposit securities with the clerk as required of county depositories; such bond or securities to he approved by the board of mayor and aldermen.”

The bond referred to in this section is qualified and modified by the phrase “as required of county depositories, ’ ’ just as is the- phrase ‘ ‘ or deposit securities with the clerk.” Otherwise the act would be silent as to the amount of bond. In fact, there is no reason why the same character of bond should not be required of a depository in the case of a municipality as is required in the case of a county or drainage district.

It therefore follows that there was no bond as required by law given by the bank, and therefore the bank failed to qualify as a municipal depository. Since the bank did not become the legal municipal depository, then the city had the right to proceed under section 3485, Code of 1906 (section 2823, Hemingway’s Code). Having the right to proceed under this section of the Code, it was not necessary for the city to put in suit the bonds given it by the individual sureties. These sureties are not necessary parties to the suit. There could be no estoppel against the municipality in this case for the acts of its officers. City of Hazlehurst v. Mayes, 96 Miss. 656" court="Miss." date_filed="1910-03-15" href="https://app.midpage.ai/document/city-of-hazlehurst-v-mayes-7990596?utm_source=webapp" opinion_id="7990596">96 Miss. 656, 51 So. 890; City of Bay St. Louis v. Board of Supervisors, 80 Miss. 364" court="Miss." date_filed="1902-03-15" href="https://app.midpage.ai/document/bay-st-louis-v-hancock-county-7988751?utm_source=webapp" opinion_id="7988751">80 Miss. 364, 32 So. 54; Powell v. Board of Supervisors, 107 Miss. 410" court="Miss." date_filed="1914-03-15" href="https://app.midpage.ai/document/powell-v-board-of-supervisors-7991819?utm_source=webapp" opinion_id="7991819">107 Miss. 410, 65 So. 499, supra, Ann. Cas. 1916B, 1262; Board of Supervisors, v. Arrighi, 54 Miss. 668" court="Miss." date_filed="1877-10-15" href="https://app.midpage.ai/document/board-of-supervisors-v-arrighi-7984988?utm_source=webapp" opinion_id="7984988">54 Miss. 668.

The question is not presented by this record as to whether or not the liquidator of the bank, acting for the creditors of the bank, has any cause of action upon these bonds against the signers of the same, and for this reason we do • not express any opinion upon this question.

The decree of the lower court is affirmed.

Affirmed.