Summary
stating that the state's banking laws were established "for the benefit of the depositors, creditors, and stockholders of the banks"
Summary of this case from Renasant Bank v. St. Paul Mercury Ins. Co.Opinion
No. 33378.
November 7, 1938. Suggestion of Error Overruled November 21, 1938.
1. BANKS AND BANKING.
The superintendent of banks had such incidental powers, although not expressly granted, as were necessary to properly and efficiently carry out powers expressly granted.
2. BANKS AND BANKING.
In suit by Bank of Indianola Liquidating Corporation against former liquidating agent of insolvent Bank of Indianola and against surety on bond which agent had furnished in compliance with demand of the superintendent of banks to recover amount of alleged misappropriation, recovery for benefit of depositors, creditors, and stockholders of Bank of Indianola was authorized, although banking law did not expressly provide for giving of such a bond, and bond which was payable to the state banking department did not expressly provide for the security of the creditors and stockholders (Code 1930, secs. 758, 3755 et seq., 3816; Laws 1934, ch. 146, secs. 97-106).
3. BANKS AND BANKING.
In suit by the Bank of Indianola Liquidating Corporation against the former liquidating agent of the insolvent Bank of Indianola and against surety on bond which agent had furnished in compliance with demand of the superintendent of banks, to recover amount of alleged misappropriation, testimony to show that misappropriation was made by direction of the superintendent of banks and that liability, if any, was hence on his bond, and not on agent's bond, was properly excluded (Code 1930, secs. 758, 3755 et seq., 3816; Laws 1934, ch. 146, secs. 97-106).
APPEAL from the chancery court of Sunflower county; HON. J.L. WILLIAMS, Chancellor.
Osborn Lott, of Greenwood, for appellants.
The bill of complaint states no cause of action against appellant and appellant's demurrer should have been sustained. By virtue of the statutes of Mississippi, J.S. Love, Superintendent of Banks of the State of Mississippi, was the person charged with the duty of liquidating the Bank of Indianola, and appellant Moore under said statutes was the mere employee of said Love, with the duty of assisting said Love in the liquidation. J.S. Love was in fact in charge of the liquidation of said bank, and appellant Moore was in fact merely the employee and assistant of said Love in the liquidation.
Sections 3755 and 3757, Code of 1930.
It is to be noted that the statutes provide that the Superintendent of Banks shall take possession of the bank and that the superintendent shall proceed to liquidate it. There is no mention of its being liquidated by any other person. It is clearly the legal duty of the superintendent alone.
Sections 3781, 3782, 3792, 3816 and 3817, Code of 1930.
That J.S. Love, Superintendent of Banks, was the man actually in charge of the liquidation of Bank of Indianola, there can from this record be no doubt.
If the two propositions are true, then it follows that the bill of complaint states a good cause of action against J.S. Love, but that it does not state one against either of the appellants. As to Love's liability, personally and upon his $50,000.00 bond, there can be no doubt. The statutes make him liable. But the appellee, for reasons best known to itself, ignores the master and seeks to hold the servant.
We submit that the appellee has misconceived the person against whom its cause of action lies, and that for the reasons above stated, the general demurrer of both appellants to the bill of complaint should have been sustained.
Moore v. Livingston, 7 S. M. 641.
The court erred in not permitting appellant to offer evidence to show that the $1500 was paid at the order of the superintendent of banks.
Amis, Liquidation of Insolvent Banks, page 56, sec. 65.
Appellee has no right of action by the bond executed by appellants.
At the time that Moore was appointed agent and the bond in question executed, the depositors and other creditors of the liquidation were not in need of any protection. They were already fully protected by the $50,000 bond of the Superintendent of Banks, which bond was by statute made liable for any failure to account for the assets of the bank. There was no sound reason for requiring Moore to execute any bond for the protection of depositors and creditors who were already fully protected.
It is elementary law that the liability and rights of a surety on a bond not required by law are governed by the express terms of the bond itself and are not to be extended by implication or construction.
Nichols v. G. S.I.R.R., 83 Miss. 126, 36 So. 192; National Union Fire Ins. Co. v. Currie, 178 So. 104; 31 C.J. 457, sec. 57; Cannon Ball Motor Freight Lines v. Grasso, 59 S.W.2d 337; Parker v. Jeffry, 26 Or. 186, 87 P. 712.
Section 2889, Mississippi Code of 1930, reads as follows: "The bonds of all public officers shall be made payable to the state, and shall be put in suit in the name of the state for the use and benefit of any person injured by the breach thereof; and such bonds shall not be void on the first recovery, but may be put in suit from time to time by any party injured by the breach thereof, until the whole penalty shall be recovered." We think that a careful consideration of this statute and of the statutes immediately preceding and following it in the code will convince the court that this statute was also intended to apply only to bonds required by law. However that may be, it is certainly limited to the bonds of public officers; and it can scarcely be contended that Moore was a public officer.
46 C.J. 922, sec. 2; 22 R.C.L. 372, sec. 2.
We submit, however, that there has been no breach of the bond. We think that we have shown that the bond was executed for the protection of the obligee named therein, the banking department and superintendent of banks. It follows that no act of Moore has breached the bond unless the act was contrary to the instructions of the obligee in the bond. It would be a strange situation indeed if the appellee, a stranger to the bond, could recover on that bond for an act performed by the principal on the bond at the order of the obligee in the bond. Moody Johnson, of Indianola, for appellee.
The appellants do not contend that the money of the Bank of Indianola, in Liquidation, was not misappropriated when this $1500.00 was paid to the Merchants Bank Trust Company, in Liquidation. The appellants do not attempt to justify the act whereby the money of the Bank of Indianola, in Liquidation, was thus misappropriated, but, to the contrary, the attempt is made to charge J.S. Love, Superintendent of Banks, with the wrongful act and thereby excuse C.C. Moore, as liquidating agent.
By virtue of the appointment of C.C. Moore, as Liquidating Agent, pursuant to the provisions of Section 3816 of the Code, he became a sub-agent, acting for and in behalf of the State of Mississippi, in the liquidation of the Bank of Indianola, in Liquidation. But he did not become, nor was he, as liquidating agent, the agent of the State Banking Department or J.S. Love, Superintendent of Banks.
Sections 3781, 3782, 3816 and 3817, Code of 1930; 2 Am. Juris. page 162, sec. 204, and page 159, sec. 201.
The duty of C.C. Moore, by virtue of his appointment as liquidating agent, is to the State of Mississippi which, by virtue of its sovereignty, assumed the obligation of liquidating insolvent banks by agencies created by it. And his duty is not to the superintendent of banks, as such.
1 Am. Eng. Enc. of Law (2 Ed.), 982; 31 Cyc. 1429; Wilson v. Smith, 3 How. (U.S.) 763, 11 L.Ed. 820; 2 C.J. 687; 3 C.J., sec. 43, sec. 161 (4), and sec. 137 c. (1); Tiernan v. Commercial Bank, 7 How. (Miss.) 648; Milton v. Johnson, 47 L.R.A. 529.
Inasmuch as the misappropriation of the money was by Dr. Moore, as liquidating agent, he became primarily liable and if the misappropriation was directed by Mr. Love, he became secondarily liable. But the question of primary and secondary liability is one between Dr. Moore and Mr. Love and is not one between the complainant and Dr. Moore, for, as to the complainant, Dr. Moore is liable, whether primarily or secondarily.
Love v. Roebuck, 169 So. 827.
The appointment of Dr. Moore, as liquidating agent of the Bank of Indianola, was conditioned that he enter into bond in the penal sum of $7500.00. Therefore, pursuant to and in consideration of the appointment, the bond sued on was executed and filed with the Mississippi State Banking Department, therein named as obligee. The purpose of this bond, and it was so conditioned, was that the principal obligor, Moore, shall fairly and honestly account for all money, etc., now in his hands, or that may hereafter come into his possession as such agent in liquidation.
The obligee in this bond is the Mississippi State Banking Department and its obvious purpose was to protect the obligee from the defalcation of Dr. Moore as liquidating agent. Hence insofar as the rights of the obligee are concerned, pursuant to the terms of this bond, it is immaterial whether it is a statutory bond or a common law bond. As a common law bond it is, to say the least of it, supported by a sufficient consideration.
In conclusion, we submit that the case made by the record is to the effect, as to which there is no doubt, that C.C. Moore, as liquidating agent, and not J.S. Love, misappropriated the money, in his possession, of the Bank of Indianola, in Liquidation; that such admitted misappropriation cannot be justified by proving, nor by attempting to prove, that J.S. Love, as superintendent of banks, in violation of his duty, directed C.C. Moore, as such agent, to misappropriate said money; that, as a consequence of such misappropriation of the money of the Bank of Indianola, in Liquidation, the bond sued on was breached, for which the right of action thereon for such breach accrued to the Mississippi State Banking Department, the obligee named in said bond; and that the right of action which thus accrued became vested in the Bank of Indianola Liquidating Corporation as the successor to, and vested with the rights of, the obligee named in said bond.
The appellee filed its bill in the Chancery Court of Sunflower County against appellants to recover the sum of $1,500 with interest alleged to have been misappropriated by appellant Moore, while in charge of the affairs of the insolvent Bank of Indianola as its liquidating agent. Moore had given bond for the faithful performance of his duties as such liquidating agent with appellant Maryland Casualty Company, as surety thereon. The case was heard on bill, answer, and proofs resulting in a decree in appellee's favor for the amount sued for. From that decree, appellants prosecute this appeal.
Early in the year 1932 when the banks all over the country were closing, among which were the Bank of Indianola and the Merchants Bank Trust Company of Indianola, Moore was, by J.S. Love, State Superintendent of Banks under the authority of Chapter 85 on Banks and Banking, of the Code of 1930, appointed liquidating agent of both of those banks. The affairs of those banks were being liquidated through proceedings in the Chancery Court of Sunflower County, and under supervision of that Court as provided in that chapter. Moore's appointment as liquidating agent of the Bank of Indianola was in writing under the hand and seal of the State Superintendent of Banks, and provided that before entering upon his duties he "shall make a bond in some surety company authorized to do business in the State of Mississippi in the penal sum of $7500.00." The appointment was approved by the Chancery Court in the liquidation proceedings. He thereupon gave the bond required with the Maryland Casualty Company as surety, payable to the State Banking Department conditioned that he "shall fairly and honestly account for all money, notes, and other property now in his hands or that may hereafter come into his possession as such agent in liquidation."
During the progress of his administration of the affairs of the two banks, Moore misappropriated the sum of $1,500 belonging to the Bank of Indianola in that he took that amount of its funds, and, without authority of law, appropriated it to the payment of obligations of the Merchants Bank Trust Company. That was done shortly before Chapter 146 of the Laws of 1934 went into effect. The Court held that it was done without authority of law in Bank of Indianola Liquidating Corporation v. Moore, 177 Miss. 572, 171 So. 693 (another branch of this same liquidation).
In June, 1934, the appellee, Bank of Indianola Liquidating Corporation, was created under the authority of Chapter 146 of the Laws of 1934, Secs. 97 to 106, inclusive, and soon thereafter filed the bill in this case. The banking laws require the State Superintendent of Banks to give a bond in the sum of $50,000, conditioned for the faithful performance of the duties of his office. That requirement was complied with.
Appellants' main contention appears to be that the stockholders and creditors of the Bank of Indianola have no rights protected by the bond of the liquidating agent — that the law did not provide for it for their benefit, but alone for the benefit of the banking department and the superintendent of banks. The liquidating agent was appointed under the authority of the banking laws, Section 3816, Code of 1930, which provides, among other things, that the superintendent of banks may, under his hand and official seal of the banking department, appoint an agent either to assist him in the liquidation of any bank or "perform such other duties connected with such liquidation and distribution as the superintendent himself could in person do and perform."
Viewing Moore's authority from the record of the proceedings, the only reasonable conclusion is that he was not a mere assistant to the superintendent of banks, but in full charge of the liquidation of the affairs of the bank of Indianola.
The banking business is largely affected with a public interest; it is not exclusively a private business. Upon that ground, state supervision and control were justified under the constitution. Our banking laws created the banking department as a branch of the state government to carry out those purposes. The superintendent of banks, under Chapter 85, of the Code of 1930, was a state officer. That is true as to his successor, the state comptroller of banks, as provided by Chapter 146 of the Laws of 1934.
Section 758 of the Code of 1930 provides, among other things, that when a bond or obligation of any kind shall be executed in any legal proceeding, or for the faithful performance of any duty, it shall inure to those to whom it is intended as a security, and be subject to judgment in their favor no matter to whom made payable. The fact that Moore's bond was made payable to the State Banking Department, and does not expressly provide for the security of the stockholders and creditors of the Bank of Indianola, is not controlling as to its obligation. The only interest the State Banking Department had in the affairs of the bank was the faithful and correct administration of its affairs under the law. Although the banking laws did not expressly provide for the giving of such a bond, nevertheless it was given in the progress of a legal proceeding — the administration of the affairs of the bank by the Chancery Court. The superintendent of banks, in the performance of his official duties, had the right to demand it and the Chancery Court the right to approve it when executed. The superintendent had such incidental powers, although not expressly granted, as were necessary to properly and efficiently carry out powers expressly granted. Moore was acting in the place and stead of a public officer, the superintended of banks. The bank supervision and control laws were enacted for the benefit of the depositors, creditors, and stockholders of the banks. It follows from those considerations the obligation of Moore's bond covered the misappropriation of the funds of the bank of which he was the liquidating agent. They belonged to the depositors, creditors, and stockholders. The suit in this case is in their behalf.
The appellants offered to prove that the misappropriation was made by direction of the superintendent of banks, and, for that reason, if there was any liability it was on his bond and not on Moore's. Such testimony was ruled out. Appellants argue that this action of the Court was error. We do not think so. It may be under the law that both the superintendent and Moore are jointly and severally liable for the misappropriation on their respective bonds. We cannot decide that question — the superintendent is not sued. The case of McNutt, for use, etc., v. Livingston, 7 Smedes M. 641, is not controlling here. What was said by the Court in that case with reference to the liability of Deputy Circuit Clerks was outside the case. The deputy was not sued in that case. We do not think there is sufficient merit in appellants' other contention to call for further discussion.
Affirmed.