135 S.W.2d 349 | Mo. | 1939
Lead Opinion
This is an appeal by the sureties on the depositary bond of The Citizens Bank of Senath, Senath, Missouri, to the School Consolidated District No. 10 of Arbyrd from a judgment for the penalty of the bond, $15,000, to be satisfied upon the payment of $7,856.45, balance of principal, plus interest, due after crediting forty per centum preferential payments received from the. Bank's estate. They question the effectiveness of the obligation, contending plaintiff should have been cast nisi on demurrer.
The Citizens Bank of Senath closed its doors January 28, 1933, with $9,678.38 of respondent's funds in its possession and credited to respondent's account. The parties are agreed said Bank was not the legally constituted depositary of the funds of plaintiff School District but held the same as trust funds payable as a preferred claim, and that the assets are insufficient to discharge the preferred claims in full.
Section 9362, Revised Statutes 1929 (Mo. Stat. Ann., p. 7211), provides that the board of education of consolidated school districts "shall select depositaries for the funds of such school district in the same manner as is provided by law for the selection of county depositaries . . ." Article 9 of Chapter 85 (Secs. 12184-12198), Revised Statutes 1929 (Mo. Stat. Ann., pp. 6455-6465), relates to county funds and the selection of the depositaries thereof. Briefly, said article, among other things, provides: The county court shall select depositaries every two years at the May Term; shall divide the county funds into not less than two nor more than ten equal parts for that purpose; cause due notice to be published (Sec. 12184); receive sealed bids, accompanied by certified checks, etc. (Sec. 12185); publicly open said bids, enter each upon its records and select the depositaries or depositary (Sec. 12186) and approve the bond required to be filed within ten days by the selected depositaries or depositary (Sec. 12187).
The records of the School District recite that, under date of August 2, 1927, the Citizens Bank of Senath was selected as depositary and required to furnish surety bond for $4000; that, under date of April 11, 1929, action on a suggestion to change the depositary was deferred; that, under date of April 23, 1929, the "question" of changing the depositary, upon vote, was lost; and that, under date of *603 January 21, 1931, a motion to change the depositary again failed to carry. The record before us does not disclose any compliance or attempt to comply with the statutory requirements for the selection of a lawfully constituted depositary. However, sometime in January, 1931, the treasurer of the School District received from the cashier of the Citizens Bank of Senath a bond, reading:
"Know all men by these presents, That, we the Citizens Bank of Senath, Missouri, as principal and G.W. Krone, Thos. G. Wilson, H.S. Jones, A.S. McDaniel, W.J. Wilson, H.J. Hardin and J.F. Droke as sureties, are held and firmly bound unto the School Consolidated District No. 10 of Arbyrd, Missouri, in the sum of fifteen thousand dollars ($15,000.00), to the payment of which, well and truly to be made, we bind ourselves, our heirs, legal representatives and assigns firmly by these presents.
"The condition of the above bond is that if the above bounden Citizens Bank of Senath, Missouri, shall faithfully perform all the duties and obligations devolving by law upon it as the Depositary of funds of the said School Consolidated District No. 10 of Arbyrd, Missouri, and shall pay upon presentation all checks drawn upon it by the Treasurer of said District when ever any funds shall be in said Depositary applicable to the payment of said checks and shall faithfully keep and account for, according to law, all funds of said District, including funds belonging to said District, then this obligation to be void; otherwise to remain in full force and virtue.
"[Here follow the execution clause, dated January 27, 1931, and the signatures of the Citizens Bank of Senath and the sureties.]"
We group certain of the sureties' points for discussion.
[1] I. The sureties contend that since the Citizens Bank of Senath was not a legal depositary for the funds of the School District and never obtained title to any funds placed in its custody by said District, there was no consideration for the bond sued on and since the School District filed, had allowed and accepted payments on its claim as a preferred creditor, it made an election of remedies and may not prevail in this action.
The contention proceeds upon the theory: 1st. The ordinary relation existing between a depositor and a bank is that of creditor and debtor. [Henry County v. Salmon (Banc),
The sureties quote certain preliminary observations madearguendo in Marion County v. First Savings Bank,
On the other hand we have said ". . . a rigid compliance with all the minutiae of the statute is not indispensable to the validity of a depositary bond." [Henry County v. Salmon (Banc),
The Henry County case, supra, was an action on a county depositary bond, which was not timely approved of record. Thereafter, a nunc pro tunc order of approval was entered. The court held the nunc pro tunc entry proper, and, consequently, that the depositary was legally selected, qualified and acting as such. But, the court went farther, saying: "By signing and delivering the bond in suit the sureties intended Salmon Salmon should be county depositary. That act enabled them to get hold of the county moneys. Under such conditions it becomes immaterial whether there was any formal order designating Salmon Salmon County depositary. . . . The engagement of these sureties was to stand sponsor for Salmon Salmon — to answer for their default. Now, that default could arise as well on an irregular, as regular, designation of them as depositary — whether they were a depositary de facto, or de jure. Moreover, the bond was for the benefit of the public (not of the sureties); and the welfare of the public is the touchstone we must seek . . ."
In School District v. Security Bank,
State v. Pederson,
Consult, also: Wright County v. Farmers Mer. Bank. (Mo.), 30 S.W.2d 32, 34[8, 9]; State ex rel. v. McKay,
In Mitchell v. Bank of Ava, supra, the bank was selected as a depositary on May 10, 1929, and the bond was not filed until August 7, 1929. We considered (l.c. 966[3] and 102[3], respectively) that prior to the filing of the bond the depositary had custody of the county funds as trust funds but upon the depositary filing the statutory bond said funds were transformed into general deposits and the relation of trustee and cestui quetrust terminated and that of debtor and creditor arose.
[2] The School District argues the observations quoted supra dispose of the sureties' contentions; that if the Bank was a defacto depositary and the sureties may not question its status as such, then there was a sufficient consideration for the obligation of the sureties and the asserted inconsistency between the School District's claim for preference and receipt of payments thereunder and the instant action disappears. But, without questioning the results reached in the cases cited or the applicability of the quoted observations in proper instances, do not the quoted remarks beg the issue in a case wherein the public has elected to repudiate the de facto depositary status, has participated in the distribution of preferred payments and the litigants are agreed that a debtor-creditor relation never did but the relation of trustee and cestui que trust did exist with respect to the public funds received by the surety's principal? In these circumstances should not a surety's obligation, even on a bond securing the deposit of public funds, pivot, as do the obligations of other parties to a contract, on written undertaking? And should courts, simply because some, not necessarily all, public officials misconstrue the obligations a surety assumes, penalize the surety and extend his undertaking to embrace liabilities not within the written obligation? As the writer views the issue it pierces beyond the bond. The surety does not question the status of his principal as depositary dejure or de facto. He contends the condition breathing life into his obligation to make good the default of his principal as depositary de jure or de facto stands confessed and adjudged as never having come into existence by reason of the School District's action treating his principal, not as a depositary dejure or de facto but, as a trustee of its funds. We perceive no reason why a surety may not limit his obligation to those public funds received by a depositary under circumstances causing the title to pass from the public to the depositary. The term "depositary de facto" contemplates the depositary's acquiring title. The relation of trustee and cestui que trust is not that of creditor and debtor or depositary and depositor in the law of banking. Banks exist through deposits. They would wither and perish of dry rot without deposits. The creditor-debtor relation between a bank and an ordinary depositor is but one of several creditor-debtor relations; and *607 general depositors are given priority of payment over other general creditors of an insolvent bank in a number of states. Equality is equity and creditors having equal rights should share equally in an insolvent's assets. As between creditors some specific recognized superior right or equity over others should be established to entitle one to preferential payment. This is not the situation in the instant case. Here, the School District did not assert a superior creditor's right to obtain priority but merely sought the recovery of its own property; that is, funds to which it held title and to which the Bank never acquired title but held only in trust for the School District. Properly speaking, the School District had no claim as a creditor against the general assets of the Bank, its funds never having become assets of the Bank; and the creditors of the Bank had no right to appropriate funds held in trust by the Bank for the School District to the satisfaction of their debts. Under such circumstances it would appear that the necessary consideration to support the statutory depositary bond would fail; and the sureties' argument that to permit recovery in such circumstances would encourage laxity in the discharge of the involved statutory duties and place a premium on negligence and, possibly, dishonesty is not devoid of merit. Upon insolvency the Bank's interest in the distribution of its assets ceases. Not only the public, but some of the officials charged with duties in respect to public funds, and the sureties on a depositary's bond become the beneficiaries of a nonobservance of sufficient formalities to constitute the Bank a legal statutory depositary upon its insolvency and the allowance of the public's claim as preferred on the theory of a trust relation. All this works to the detriment of the general depositors, the innocent and helpless losers, who have had no voice in the transaction but whose funds theretofore have maintained the depositary as a going concern.
However, we are of opinion the foregoing remarks will not avail the sureties on the instant bond. Section 12187, Revised Statutes 1929 (Mo. Stat. Ann., p. 6459), provides "said bond shall be conditioned for the faithful performance of all the duties and obligations devolving by law upon said depositary and for the payment upon presentation of all checks drawn upon said depositary by the proper officers . . . whenever any funds shall be in said depositary, . . . and that all said funds shall be faithfully kept and accounted for according to law. . . ." The words "said funds" unquestionably refer to funds on deposit, i.e., funds creating the legal relation of debtor and creditor. The covenants of the instant bond are not restricted to the quoted statutory conditions. They embrace the condition that the principal "shall faithfully keep and account for, according to law, all funds of said District, including funds belonging to said District." Funds of the School District in the custody of the Citizens Bank of Senath as trustee were "funds *608
of said District" and were also within the phrase "including funds of said District." So, even though the bond did not impose the statutory obligation, the sureties nevertheless assumed a common law obligation to make good the default of their principal which occurred in the instant case; and the action of the School District in securing a preference is not inconsistent with the instant action against the sureties. [Consult Buhrer v. Baldwin,
[3] II. Appellants say if the Bank, the principal, were not bound, they, the sureties, were not bound; and that the Bank was not bound because (a) the Bank was not a legal entity when the bond was signed, and (b), assuming the Bank to be a legal entity, the record fails to disclose any authority granted by its board of directors by resolution to sign the bond sued upon.
a. The Citizens Bank of Senath was incorporated for a period of twenty-five years. It was organized in 1904. The parties concede its charter expired in 1929 and was not extended. The bond was executed January 27, 1931. The sureties cite such cases as Bradley v. Reppell (Banc),
b. White v. Greenlee,
The mere receipt of the School District's funds made the Citizens Bank of Senath liable and the bond imposed no additional obligation on the Bank. [Re Peoples Bank of Butler,
[4] III. The sureties' last point is that there was no execution or delivery or acceptance of the bond. They refer us to certain provisions of Article 9 of Chapter 85, supra, stressing Section 12188. What we have heretofore said rules the contention against the sureties.
The foregoing disposes of all assignments of error. Mention is made arguendo that the Treasurer of a School District is required to give bond, citing Section 9335, Revised Statutes 1929 (Mo. Stat. Ann., p. 7175). If the School District had double security for this *610 money, it is a circumstance of no legal importance in the instant action.
The judgment is affirmed. Cooley and Westhues, CC., concur.
Addendum
The foregoing opinion by BOHLING, C., is adopted as the opinion of the court. All the judges concur.