Richards v. Osceola Bank

79 Iowa 707 | Iowa | 1890

Beck, J.

I. The petition shows that the Osceola Bank, under Code, section 912, was selected by the supervisors of the county as a depository for county moneys, and executed a bond, as required by the statute, with Cowles and Cowles as sureties; that there is due from the bank on plaintiff’s deposit account $4,839.65, which it has failed to pay; and that in proceedings instituted upon the relation of the attorney general a receiver was appointed, who holds all the assets of the bank. The bank made default, but the defendants Cowles and Cowles answered, admitting the execution of the bond, and, in effect, all the allegations of the petition. They allege that the fact of their relation to the' case as sureties was well known to plaintiff from the beginning, and as such they are entitled to have all the property of the principal, the bank, which is solvent, first exhausted. They further allege that, before the proceedings were instituted resulting in the appointment of the receiver, the bank gave plaintiff further security, consisting of certain notes, stocks and other securities, amounting to more than nine thousand dollars, a part of which plaintiff had collected, to the benefit of which they are entitled by the application of the avails of these securities upon the bond. The receiver filed his petition of intervention, alleging that he is entitled to the possession of the notes and securities given to plaintiff; that the transfer thereof was illegal and void, and plaintiff acquired thereby no interest therein; and he prays that the plaintiff be ordered to transfer the securities to him. The bank made default, and judgment thereon was entered; and judgment was also rendered against Cowles and Cowles upon the admissions made in their answer. The judgment contained an order in the following language: “This cause is continued as to the collateral notes mentioned, the answer of defendants and the petition of intervention of B. F. Nex, receiver.” The court in the same judgment made this further order: “The plaintiff is ordered to turn over the col-laterals to the clerk of this court for collection; and he, the clerk aforesaid, is hereby ordered to collect the same, to-wit [describing each note by name of maker, date, amount, interest and date of maturity; the total amount of notes being $9,551], and to hold the proceeds thereof subject to the orders of this court hereafter to be made.” The defendants, in their answer, allege that the notes were transferred by the bank prior to the appointment of the receiver, and were not the property of the receiver when he took possession of the bank assets; that the referee held the notes until they were turned over to the clerk, and that officer has, since they have been in his hands, collected two thousand dollars thereon. It is further averred that an execution has been issued upon the judgment and levied upon lands of one of the defendants. Defendants ask that the proceeds of the notes be applied on the judgment, and that no execution thereon be enforced until the notes be collected and applied on the judgment. The original receiver resigned, and Findley was appointed in his place. The plaintiff answered the petition of the intervenor, alleging, among other things, that the notes were indorsed to plaintiff by the bank, and turned over in good faith. Other allegations of the answer need not be recited. By agreement the case was transferred to the equity docket, and tried as a chancery case. C. W. Cowles filed a separate answer and cross-bill alleging, after stating matters set up in the prior pleadings of the defendants, that the bank holds the title of certain real estate, and that the judgment in this case is a lien thereon, and praying that, until the judgment be enforced against such real estate, and the notes held by the clerk be collected and applied on the judgment, it be not enforced against him.

The notes were delivered to the county treasurer as security for deposits made by the county in the bank by Gf. H. Cowles, the vice-president, who appears to have transacted the business of the bank. He executed the bond sued upon in the name of the bank, by himself, as vice-president. The notes were given as security to plaintiff upon his request and the request of the county attorney. The court, upon the issues between the intervenor Findley, the receiver, and the plaintiff and defendants, found that the bond in suit is “ample security to the county, and that the county treasurer had no right, authority or power to take the promissory notes turned over as additional security,” and there was no consideration therefor, and the transfer was, therefore, illegal and void. The court further held that the judgment upon the bond is not a lien upon the real estate owned by the bank, for the reason that it was then in the hands of the receiver, and that defendants had no equities or right which require property of the bank to be exhausted before the judgment can be enforced against defendants’ property.

i Appeal• from mterveentio°n: waiver. II. It is first insisted by the intervenor and plaintiff that, as defendants did not appeal from the judgment upon the bond, and their appeal *s from the judgment upon the proceedings 0f intervention, they cannot in this appea insist that the orders and judgment -in the proceedings of intervention are erroneous; for the reason that they could have raised the same issues and had them determined upon the trial in the main case. Let it be assumed that this could have been done. Yet the record of the judgment shows that the issues raised in the intervention proceeding were, in express language, reserved for decision' in subsequent proceedings, and the cause was continued for the purpose of trying and determining these issues. The correctness of the judgment in that regard is brought in question by some of the parties.

banking-. cure deposit fundsTsurevice president andoounty treasurer. III. The points made by the intérvenor in support of Ills claim to the notes m question, and his objections to the relief prayed for by defendants, are presented in the ar&ument ox his counsel m three points, which we shall proceed to consider. The , . . .... first is m this language :

IV. “1. The defendant George H. Cowles had no right or authority, under the circumstances, to turn over the notes in question to the treasurer (plaintiff herein) as collateral security to secure the county for said deposits, and that his act in so doing was illegal and void, and did not bind the bank, and which the bank or the receiver had the right to repudiate, and recover back the notes.” This position by counsel is disposed of, briefly, by these considerations : George H. Cowles was the vice-president of the bank, and authorized to do business for it. It cannot be denied that he was authorized to execute the bond, and it is not claimed that his authority to do business for the bank was in any manner or degree restricted. He was authorized to pay debts of the bank, and to give security for the payment of the bank debts, when such security is authorized by law; for he did execute and give, in the name of the bank, the bond in suit, and it is not shown that he was thereto empowered by the bank, by any act, consent, or any authority, iii any form, expressed or implied. If he had authority to give the bond as security he surely was authorized to give the collaterals, if the treasurer had the right to receive them. This brings us to the consideration of the second point made by intervenor’s counsel.

■V. The second point is as follows: “2. The county treasurer (plaintiff) had no legal right to accept the same as security for the funds deposited in said bank, either as a protection to himself and bondsmen, or as additional security to the county.” It is quite as readily disposed of as the first. It cannot be doubted that, in the absence of any statutory prohibition, the county treasurer was authorized to demand and recover from the bank the money due the county. Surely, if he had such authority, he could accept security from the bank for its indebtedness. It would be strange, indeed, if any law existed prohibiting the county treasurer, the financial officer of the county charged with the duty of collecting the debt owed by the bank, from accepting security where, in his judgment, it is demanded. It would be an absurd rule forbidding the county treasurer, in the discharge of his duty, to do an act for the protection of the county when his judgment, as a faithful officer, directed it. The statute (Code, sec. 912) providing for security by bond to be given by a bank before deposits of county money are made therein does not forbid the county treasurer to take other security if, in his judgment, it is demanded. Other creditors of the bank cannot complain, for the notes were taken in the exercise of the undoubted right of a creditor, in the exercise of diligence, to secure his claim by taking collateral security of this character.

YI. The last position of counsel is expressed in this language: “3. Incase it should beheld by this court that the plaintiff, for the benefit of the county, had the right to hold said notes as additional security for the judgment in question, then we contend that they can only be held for the payment of any balance, if any, remaining after exhausting all property belonging to defendants George H. and 0.. W. Cowles subject to execution.” The consideration of this point requires us to keep distinctly in mind the character of the transaction. Defendants are the sureties of the bank. The notes were given as further security. It must -be remembered that these notes are the property of the bank. The case, then, is this: Property of the bank is given by the bank, as security, in addition to the bond of defendants. Now, defendants, as sureties,must be protected, and not held liable to execution, as long as the debt may be realized from the principal, or, rather, the property of the principal must be first exhausted before the claim may be enforced against the surety. Of course, this rule is to be so enforced that unreasonable delay and expense shall not be imposed upon the creditors. Surely, we will not be expected to cite authorities to support these familiar doctrines. Under these rules the notes given to plaintiffs as collateral security, and now held by‘the clerk of the court, must be used in the payment of the judgment against defendants.

3- lights ofeaeers: ttesuiensS.ure’ YII. Defendants, as to other assets of the bank, have no priority over the other creditors. They hold no lien or equity which requires the appropriation of the proceeds of other assets to ^le payment of the debt for which they are sureties. The assets of the bank went into the hands of the receiver before the action on the bond had been commenced. The assets of the bank were subject to the jurisdiction of the court, and in its custody, before this action was brought. Of course the lien and equities arising before this jurisdiction was acquired were not prejudiced or affected thereby. The notes before pledged to the treasurer, therefore, remained subject to the pledge. But the action on the bond created no lien which defeated the distribution of the assets of the bank as provided by law. If it did, thus would the law be subject to be defeated at the option of creditors. The statute providing for the appointment of a receiver and winding up banks, under which the receiver was appointed in this case, requires that the assets should be , “ratably distributed among the creditors, * * * giving preference in payment to depositors.” Code, sec. 1572. Now if, áíter the court, in the receiver proceedings, obtains jurisdiction of the assets of the bank, a creditor may commence an action and obtain a judgment which would be a lien, and interfere with the ratable distribution of the assets to all the creditors, it is plain that the statute would be defeated at the option of the creditor. This cannot be permitted. The judgment obtained by the plaintiff against the bank cannot be enforced against the real estate of the bank so as to protect defendants and defeat the application of the avails thereof to the payment of all deposits ratably.

We reach the conclusion that the notes given to the county treasurer as security for the county deposits must be first applied upon the judgment against defendants Greorge H. and C. W. Cowles. Any balance remaining after the payment of the judgment shall be applied to pay the depositors ratably. The proceeds of the real estate belonging to the bank shall not be subject to the lien of plaintiff’s judgment, so as to defeat the application of the proceeds to the depositors ratably, but they shall be so applied. The decree of the district court shall be reversed and remanded for a decree in harmony with this opinion, or, at defendants’ option, such a decree may be entered in this court. The intervenor (Findley, the receiver) shall pay the costs of this appeal. Revebsed.