This is a mandamus proceeding against the former superintendent of banks and the former members of the depositors’ guaranty fund commission of the state of South Dakota. The defendant Hirning by resignation ceased to be superintendent of banks on January 5, 1925, and the other defendants ceased to occupy their respective positions as members of the commission on or about March 7, 1925. The action involved six certificates of deposit issued by the Garden City State Bank, of Garden City, S. D., and the three cashier’s checks issued by said bank. The 'Garden City State Bank suspended business on August 10, 1922, and went into the hands of the superintendent of banks for liquidation. The appellant bank presented claims for the said certificates of deposit and cashier’s checks to thе superintendent of banks, and that offijcer approved same as common claims against the assets of the bank, but did not approve same as claims against the depositors’ guaranty fund.
This mandamus proceeding was then brought to compel the superintendent of banks to recognize and certify the claims of the
A substitution of the new officers is resisted on the ground that a proceeding in mandamus is personal against officers, and when the officer resigns the action abates. There are respectable authorities, chiefly federal, holding to this effect, while there are equally respectable authoritiеs holding to the contrary. Section 2317, R. C., provides:
“No action shall abate by the death, marriage, or other disability of a party, or by the transfer of any interest therein, if the cause of action survive or continue.”
The Supreme Court of California, in the case of Ott Hardware Co. v. Holmberg,
“The inherent difficulty in all these cases is not in the liability and suability of the successor in a new suit. It is in the shifting from the personal liability of the first officer for threatened wrong
This action was not against the individuals holding the office personally, except as a means to work out the redress to which plaintiff claimed it was entitled. Plaintiff’s cause of action survived the' change in office, and where the office involved, as here, is a continuing one, the obligation to the plaintiff is one continuing against the оffice.
But it is contended by the respondents that the theory upon which a substitution may be made is that the action is not personal, but against the municipality or corporate body represented by the officer, and, as the officers in this case are state officers, that upon that theory the action is against the state, and cannot be maintained against the sovereign, except by its consent, and that there is no' statute permitting such action against the state. The depositors’ guaranty fund is not a fund belonging to the state. It is a fund created by statute, derived from assessments of the banks operating under the law, to insure the depositors of such banks against loss. The statute specifically prescribes the use to which this fundi shall be applied, and that is the payment of “depositors and holders of exchange in good faith” of insolvent banks. The application of the fund as prescribed by statute and the duties of the officers charged with enforcement of the law are purely ministerial; they have no discretion in paying out the funds, but must pay out in the manner and under the circumstances prescribed. The substitution .of the new officers is allowed.
The contention of respondents that mandamus is not the proper remedy is, we think, without merit. In the case of Farmers’ Loan and Trust Bank v. Hirning, 42 S. D. 52,
“When the law requires a public officer to do a specified act in a specified way, upon a conceded state of facts, without regard to his own judgment as to the propriety of the act, and with no power to exercise discrеtion, the duty is ministerial, and may be controlled by mandamus.”
“When any bank doing business under the provisions of this chapter suspends or becomes insolvent, the superintendent of banks shall ‘ forthwith proceed to determine the amount necessary to pay the unsecured depositors and holders of exchange in good faith, in full, and causе the same to be certified to the depositors’ guaranty fund commission, which shall thereupon draw against the depositors’ guaranty fund on deposit in the several banks in the amount thus certified. * * * ”
Under this statute there is no discretion vested in the superintendent of banks. His duty is to determine the amount necessary to pay the “depositors and holders of exchange in good faith,” and the amount is determined by computation. It is true that ha may incidently have to. determine who are good faith depositors but he cannot act arbitrarily in doing so. This court quoted with approval a statement of the Illinois Supreme Court in the case of People v. Brady,
“He may not arbitrarily withhоld the certificate, alleging such a reason where it does not ,in fact, exist. Such a withholding would be an act of the will only, and not of judgment, and would be such a palpable abuse of discretion as could be controlled by mandamus.”
In this case it is contended by the plaintiff that it is a “depositor in good faith” under the facts admitted, and it is denied by the respondents that under the same faсts plaintiff is a depositor in good faith. Thus it is seen that the question is not the "exercise of discretion, but a mere difference of opinion as to what a depositor in good faith is. If, under the facts before the superintendent of banks, plaintiff is a “depositor in good faith,” then to deny that depositor his rights in the guaranty fund is an arbitrary act, and the superintendent may be controlled by mandаmus. If the plaintiff is not a depositor in good - faith under those facts, then the said superintendent is not denying the plaintiff its legal rights, and the action must fail. It is not a question of discretion, but a question of construction of the law.
One of the certificates, No. 5244, for $446.70, issued to George D. Hedding, had its origin in a transaction wherein the Garden City State Bank insured the lives of L. A. Pope and L. E. Pope, officers of said bank. A note was given in satisfaction of the premium for $481.10, but, inasmuch as the officers of the bank were assisting the said Hedding in writing insurance, there was an allowance for a commission which reducedfthe amount due on this note to $428.91. When the note became due Hedding presented it for payment and the plaintiff offered in settlement the said certificate of deрosit drawing interest at 5 per cent. Hedding refused to take such certificate unless the amount was increased, so that, at the maturity of the certificate, the certificate would net him xo per cent on the amount due on the note at the time it matured. Consequently the certificate was issued in the amount of $476.77.
Section 9014, as amended by chapter 32, Laws Sp. Sess. 1920, limits the rate оf interest that may be paid upon deposits to 6 per cent, and the payment of interest in excess of that rate, either directly or indirectly, is made unlawful. There are several Nebraska authorities cited, holding that certificates of deposit drawing a greater rate of interest than that allowed by law upon a certificate of deposit are mere loаns to the bank, and not such deposits as are protected by the guaranty fund. We think that the reasoning and holding in those cases is a correct view of the law, and that the holder of such a certificate, being a party to an illegal transaction, cannot claim that he is a holder in good faith as a depositor. Iams v. Farmers’ State Bank,
The three cashier’s checks in dispute, one for $1,500, one for $2,00, and one for $1,000, were purchased by L. A. Pope on the* 21 st day of November, 1921, and for each he gave his personal check on the plaintiff bank, and tire cashier’s checks were deposited in plaintiff bank by Pope to the credit of his personal account, and the checks which he gave were paid. The trial court denied relief to the appellant bank, and from the order denying relief appeal has been taken to this court.
By the provisions of section 9020, R. C., the “unsecured de
“Such guaranty shall not apply to a bank’s obligations as indorser upon bills rediscounted, nor to bills payable, nor to money borrowed from its correspondents or others.”
Section 9010, R. C., defines the purpose of the act to be that “of providing a depositors’ guaranty fund for the protection of depositors in banks and holders of exchange.” L. A. Pope while an officer of the plaintiff bank, was also interested in the Garden City State Bank; the record disclosing that he attempted to sell his interest in the bank to one Prawl, but that the deal failed 'of consummation, and Pope was afterwards re-elected an officer of the Garden City State Bank. The Garden City State Bank suspended business on August 10, 1922. It is apparent that said bank was in straitened circumstances at the time of the transactions and that Pope’s оbject in dealing as he did was to aid and assist the bank, and not because he had) money to deposit for safe-keeping or for his interest and convenience. In defining a deposit the Kansas court in the case of Fourth National Bank v. Bank Commissioner,
“It is necessary, in order to creat a deposit, that money or the equivalent of money shall in. intention and effect be рlaced in or at the command of the bank, under circumstances which do not transgress specific limitations of the law.”
In the body of the opinion it is said:
“Whether or not a deposit has been made depends on the nature of the transaction. * * * There is no all-inclusive and all-exclusive definition of the term ‘deposit,’ but the essentials are Well understood.”
The definition given by the Kansas court has been adopted by the Nebraska court in- a number of cases. State ex rel Davis, Atty. Gen., v. Farmers’ State Bank of Halsey,
Under our statutes depositors and holders of exchange “in good faith” only are protected. Neither the Nebraska nor Kansas statutes contain these words. Banks are organized as financial institutions, with power to receive deposits of money. Money so received may be loaned by the bank at interest. To a very large extent deposited money forms the fund out of which loans are made and capital furnished to business. The system.is a great aid to the financial operations of the сountry, and, although conducted by private persons or corporations, is of public importance. Checking accounts in large numbers owned by private individuals greatly increase the circulating medium through the use of checks. The size of the fund' on deposit is important to a .bank, because from this fund it is enabled to supply its customers with capital and derive its chief revenuе. Officers in their zeal to increase this fund may solicit deposits, and the fact that a deposit was solicited does not alone determine its character as a loan. On the other hand, a depositor is not interested in the size of a bank’s fund on deposit. His- interest lies in the safety of his money so deposited, and the convenience to him in having an account with a solvent bank. He may prefer to do business with some men rather than others, but his chief concern is the safety of his money. The success or failure of a bank depends largely upon the integrity and business ability of the officers in charge. Sometimes a bank fails through the dishonesty of its officials; probably more often through poor business methods. Although banks are required to publish periodical statemеnts, the statement may show resources composed of much worthless paper, and consequently the failure of a bank often resulted in the loss of the money belonging to others who were in no manner at fault. This resulted in a lack of confidence on the part of the public in general, and in many instances the loss of the lifetime savings of poor people who could ill afford to lose the money. To remedy this evil the banks were required to provide an insurance fund to protect the depositors.
In this case it is apparent from the entire record that Pope’s object was to aid the failing Garden City Stаte Bank; that he had no money to deposit in that bank for safe-keeping or convenience to him, the condition of which he was familiar with; and that the deposits made under such circumstances were loans to the bank, and not such deposits as are intended to be protected by the guaranty fund. It follows that the action of the superintendent of banks in refusing to allow the plaintiff’s claims against the fund, and that of the circuit court in denying relief to plaintiff, was right.
The judgment of the lower court is affirmed.