Opinion
No. 33721.
May 22, 1939. Suggestion of Error Overruled July 7, 1939.
1. BANKS AND BANKING.
The superintendent of banks in charge of liquidation of bank could not loan bank's funds to bank and trust company which subsequently became insolvent, and such funds were not "public funds" within statute giving preference to public funds (Code 1930, sec. 2914).
2. BANKS AND BANKING.
Where superintendent of banks in charge of liquidation of bank loaned bank's funds to bank and trust company which subsequently became insolvent, and part of loan was thereafter paid by trust company's liquidator to bank in liquidation as a preferred claim on ground that funds were public funds, and such payment was not approved by the chancery court, a judgment against superintendent and surety on his bond for recovery of that part of loan which was so repaid would be reversed and remanded to permit bank in liquidation to be made a party, to the end that all equities could be adjudicated in one hearing (Code 1930, sec. 2914).
3. SUBROGATION.
Where superintendent of banks in charge of liquidation of bank loaned bank's funds to bank and trust company which subsequently became insolvent, and part of loan was thereafter paid by trust company's liquidator to bank in liquidation as a preferred claim on ground that funds were public funds, and such payment was not approved by the chancery court, superintendent and surety, if liable for that part of loan which was so repaid, would be entitled to benefit of note signed by officers and directors of bank and trust company and given as security for loan (Code 1930, sec. 2914).
4. SUBROGATION.
If superintendent of banks in charge of liquidation of bank, and his surety, were liable for bank's funds deposited in trust company which subsequently became insolvent, superintendent and surety should be subrogated to rights of trust company, and all rights that company might have against bank in liquidation to which a portion of the deposit was repaid, and all rights which superintendent might have against bank in liquidation for selling note securing deposit without collecting amount of money represented by deposit.
APPEAL from the chancery court of Sunflower county; HON. J.L. WILLIAMS, Chancellor.
Robert Burns, Jr., F.W. Bradshaw, and Flowers, Brown Hester, all of Jackson, for appellants.
The entire record before the court shows that Love was not heard and was given no opportunity to be heard before the decree of May 20, 1937, was rendered. The hearing was had 2 1/2 years after the expiration of his term of office. No process was served on the exceptions and no notice was given of their filing. Love was not represented at the hearing, and his motion to set aside the decree of May 20, 1937, should have been sustained and opportunity given him to urge his defenses. There was no provision under the Banking Law, chapter 85 of the 1930 Code, requiring the Superintendent of Banks, or liquidating agent, to file a final account. Section 86 of the chapter 146 of the Laws of 1934 required an accounting to the receiver appointed to succeed him. And by section 100 of the 1934 Law, the same account was required to a liquidating corporation but if the receiver or liquidating corporation desired to except to any item of the accounting, he or it would have to do so by suit, after proper process, and the suit should be filed against the liquidating agent, or against both the liquidating agent and superintendent of banks in a proper case.
Indianola Liquidating Corp. v. Moore, 177 Miss. 572, 171 So. 693.
The first sentence of section 2914 is to the following effect: "All money deposited in a bank, or with any depository, by or for a tax collector, or other officer having the custody of public funds, state, county, municipal, levee board, road districts, drainage districts or school districts, whether the same be deposited in the name of the officer, as an individual or as an officer, or in the name of any other person, is prima facie public money and a trust fund, and is not liable to be taken by the general creditors of the officer or by the creditors of the depository." It is our position that Love, as Superintendent of Banks, was a state officer and that the funds in his hands as such were public funds of the state, and that they were a trust fund and given priority under this statute. The Superintendent of Banks was a state officer under the statutes creating the office.
Moore v. Bank of Indianola Liquidating Corp., 177 Miss. 572.
The prior right of the state as to funds of State Banking Department has always been recognized.
Perkins v. State, 130 Miss. 512, 94 So. 460; Bank of Commerce v. Clark, 114 Miss. 850, 75 So. 595; Commercial Bank v. Harding, 87 Miss. 75, 53 So. 395; Section 3817, Code of 1930.
The funds in question, being public funds of state, were protected by the statute because the proof shows that the bank at Indianola, in which deposited, was not a state depository.
10 Zollman, Banks and Banking, sec. 6603, page 26; Therrell v. Comr. of Internal Revenue, 88 F.2d 871.
Snider v. Fulton, 184 N.E. 839, 44 Ohio App. 238, is authority for the proposition that if the transaction between the Superintendent and the Bank of Indianola was unlawful that a trust was created giving rise to a preference in his favor for the benefit of Okolona Banking Company, in liquidation, and its depositors.
Bliss, Receiver v. Mason, 121 Neb. 484, 237 N.W. 581, 65 A.L.R. 1413.
It is rather unusual that the lower court should have held in the decree of May 20, 1937, that the $5000 of Okolona Banking Company was a deposit, while in the opinion rendered on the final hearing the court refers to these funds as having been loaned by appellant Love to Merchants Bank and Trust Company. The fund was a deposit evidenced by the certificate of deposit of the bank. Appellant Love required security for the deposit in the form of the note of the directors, but regardless of whether the court considers the transaction as one involving the deposit of funds in the bank at Indianola or the lending of funds to the bank at Indianola, the funds, nevertheless, belong to the Okolona Banking Company, in Liquidation, and they were in the hands and under the charge of J.S. Love, as Superintendent of Banks, in his official capacity, and the funds were preferred in The Merchants Bank and Trust Company, Indianola, Mississippi, under the authority which we have cited, regardless of whether the court considers that the money was deposited in the Bank at Indianola or loaned to the Bank at Indianola by Superintendent Love.
It is shown by paragraphs 2, 3, and 4 of the amended and supplemental answer of appellants that appellee ratified the payments made to Okolona Banking Company, in Liquidation, and thus released appellants thereasto.
The settlement made between The Merchants Bank and Trust Company Liquidating Corporation and the Receiver of Okolona Banking Company was authorized by the Board of Directors of the Liquidating Corporation, after full knowledge that $2,153.33 had already been paid to the Receiver of the Okolona Banking Company, on the theory that the $5000 deposit was a preferred claim.
It is clear that there was an accord and satisfaction of the entire matter as a result of the settlement between appellee and the receiver at Okolona.
Clayton v. Clark, 21 So. 565; Greener Sons v. Cain Sons, 101 So. 859; May Bros. v. Duggett, 124 So. 476; Phillips v. Ins. Co., 125 So. 705; R.R. Co. v. Sideboard, 133 So. 669; Casper v. Y. M.V.R.R., 35 So. 162; Ins. Co. v. Perrin, 183 So. 917; Sec. 95, chapter 146, Laws of 1934; Fair Co. v. Warrell, 112 So. 24.
It is shown by paragraph 5 of the supplemental answer that appellee, because of its manner of handling the matter in controversy, prejudiced the rights of appellant Love and estopped itself to assert this claim against appellants.
The liquidation of Okolona Banking was being conducted by Love, as Superintendent, prior to passage of chapter 146 of the Laws of 1934. Then Foote was appointed receiver. He was the successor liquidator to Love. He took up where Love left off and continued to liquidate Okolona Banking Company. Love treated the deposit at Indianola as preferred. Foote maintained this position. Appellee was advised of this and also treated the deposit as entitled to preferential consideration because he, with Cox, paid $250 in settlement of balance owing after 50% had already been paid on the deposit. Allen, liquidator, testified that only 5% dividend was paid to general depositors. The deposit at Indianola was secured by $5000 note of A.C. Cox, et al. This note was probated against estate of A.C. Cox, deceased. This estate was solvent and the claim had not been disallowed by the court. As a result of the settlement by Cox and Allen, attorneys, directors and liquidator of appellee, the note was surrendered to Cox, the names of the signers were deleted, the probated claim was dismissed and the value of the security of the note entirely destroyed. The Cox estate has been wound up. Love was not consulted. It was not intended that he would be proceeded against. He cannot be placed in status quo ante. If the payments to Okolona Banking Company were improper, they cannot be recovered because it has been released. It is difficult for us to conceive of a case involving a more complete estoppel.
10 R.C.L., 703-704, sec. 30; Izard v. Mikell, 163 So. 498; Staton v. Bryant, 55 Miss. 261.
Equity binds appellee to its election. It ratified, accepted and approved what Love had done. On the strength of this it secured a settlement of disputed matter from the receiver at Okolona. And by virtue of the settlement by appellee and Cox it obtained the security for the deposit and destroyed it. It would be a fraud on the rights of Love to permit appellee to recover under the facts of this case. Our court is in line with the general holding that a party cannot take inconsistent positions.
R.R. Co. v. Wade, 139 So. 403, 162 Miss. 699; Clark v. Dorsett, 128 So. 79; Kelson v. Robinson, 172 Miss. 828, 161 So. 135; Thompson v. Gore, 178 So. 81; Skinner v. Mahoney, 140 Miss. 625, 106 So. 211; Carter v. Jennings, 134 Miss. 263, 98 So. 687; Taylor v. Ross, 129 Miss. 536, 92 So. 637.
Love did not profit from the transaction. He was not acting for himself or in his individual capacity, but officially. And if he should be liable to appellee, because of exceeding his authority in making payments to Okolona Banking Company, the law must require that he be dealt with fairly and equitably. If he is to stand full responsibility for the transaction, appellee must be in position to put him in status quo ante when payment is made. It would not be right, it is not just, to permit appellee to deal with the matter as it saw fit, by making settlement and surrendering security, all without Love's knowledge, and then hold him personally responsible.
First Natl. Bank of Missoula v. Holding, 4 P.2d 709.
All material aspects of the transaction were altered by the settlement between appellee and the receiver of the Okolona Bank. As a result thereof, there was an accord and satisfaction of the obligation. Thereafter neither party had any rights with reference thereto against the other. And finally, as regards appellee and Harold Cox, attorney, and the estate of A.C. Cox, deceased, the $5000 note was surrendered and the probated claim (admittedly solvent) was dismissed, the estate distributed and closed. Thereafter, it was impossible to place Love in status quo ante with reference to the original obligation, the note held as security, or in any other respect. Love did not consent to the settlement (he knew nothing of it until he was later sued), and having been prejudiced by the alteration of the obligation and the surrender of the security in an amount greater than the amount for which he is sued, the settlement with the receiver of the Okolona Bank also released and discharged appellant Love. B.B. Allen, of Indianola, and Harold Cox, of Jackson, for appellee.
Our position on the facts are (1) that if the Okolona indebtedness were a deposit and not a loan, that it was merely a common deposit because the funds did not in any sense belong to the State of Mississippi, but belonged to the individual creditors of this liquidation; (2) that this court has already adjudged on a hearing of this account and the exceptions thereto, that Love is liable to the appellee, and it is our view that this order is res judicata; and (3) that Love's claim for subrogation, and that he was prejudiced and discharged by the independent acquisition of the note and certificate of deposit by third persons, are without merit.
If the Okolona Bank deposit and note were entitled to any priority of payment, such priority must find its justification in section 2914, Mississippi Code 1930. The section declares to be a trust fund all monies "deposited in a bank, or with any depository, by or for a tax collector, or other officer having the custody of public funds, state, county, municipal, levee board, road district, drainage districts, or school districts, etc."
In Potter v. Fidelity Deposit Co. of Md., 101 Miss. 823, 58 So. 713, the appellee claimed subrogation as a surety on a bond given under the state depository law. The court in denying such subrogation held: "The contention is that the state's debt constituted a trust fund, and because the appellee company paid the state's claim, it has the right to be subrogated to the state's right. In discussing this case we may state that if the state has any priority over the general creditors, it must obtain it by virtue of some statute of the state or constitutional provision. In the absence of statute, or other constitutional authority, the state as sovereign has no preferential rights in this state. This was settled as the law of this state when the case of Shields v. Thomson, 71 Miss. 260, was decided. But if the court had not already set at rest this question, we would have no hesitancy in now declaring this to be the law. Since the state has no sovereign right to priority, if it has any such right under the laws of this state, it must obtain that right under section 3485, Code of 1906, or by virtue of the depository law of 1908, for these are the only two places in the law of the state where the method of dealing with the public funds is regulated. In construing this statute (3485) let us consider for a moment the rules of construction that are to be applied. When the state's sovereignty is involved in any statute, statutes in derogation thereof are to be strictly construed in favor of the state; that is to say, the state's sovereignty is to be broadened and upheld, and not narrowed or destroyed, when the courts are called upon to construe a statute infringing upon sovereign power. But we have held that the state's sovereignty is not involved where the question is one of priority merely. The state stands in the same position, in questions of this character, as does the humblest citizen, unless the Constitution or laws give it a priority over general creditors. If this be true, then this statute giving this priority to the state over general creditors is a statute in derogation of common right, and such statutes are to be strictly construed as against parties asserting claims by virtue of such statute. They are to be so construed as to bring within their scope only such rights as are plainly within the terms. Such we conceive to be the rule by which this statute is to be construed."
The court accordingly held that where funds were deposited in a public depository, that they lost their character as trust funds, and that only the security provided by the Depository Act remained as security for the repayment of this money, and that if such security failed, that the fund was a common deposit. For this reason, it was held that the state had no priority of right and that its surety therefor had no such priority which entitled it to be subrogated to any supposed preferences for this deposit.
U.S.F. G. Co. v. First State Bank of Shaw, 60 So. 47, 103 Miss. 91.
The unvarnished facts in this case lead us to the unmistakable conclusion that Love loaned this money to The Merchants Bank at Indianola.
The doctrine of subrogation is not a fixed and inflexible rule of law or equity and does not flow from any fixed rule of law; it is not a matter of strict right, but is a matter of grace, the operation of which is governed and controlled by the principles of equity. It makes its appeal solely to the conscience of the court.
60 C.J. 707, sec. 18.
Love was not wholly without fault in making this loan, or deposit, in this newly opened bank. Love knew of the deplorable financial condition of this institution, which was opened with his unbounded approval, and which approval deserves the condemnation of this entire community. The bank was opened with the obligation to discharge the obligations of the Sunflower Bank, which was hopelessly defunct. Love desired, no doubt, to foster and nurture this unfortunate institution, which was permitted to open at the expense of innocent capital. He even saw justification in advancing to this institution in such deplorable financial straits the amount of $5000, belonging to another unfortunate liquidation under the so called supervision of his department.
60 C.J. 708, sec. 21.
Love in this case can find no justification for having made this loan with these liquidation funds in the first place. He knew that it was not even safe enough to be classed as a state depository. He knew or should have known of the unsafe condition of this bank, yet he was willing to imperil and hazard the funds of this liquidation, with the same reckless abandon that he dealt with the organizors and depositors of The Merchants Bank at Indianola, and has the temerity to seek relief in this court against this relatively small demand; it may be stated that Mr. Love is, indeed, fortunate that his bond was not called in question for at least half of the penalty thereof for the manner in which The Merchants Bank was opened. These facts are merely mentioned to dispel any thought that Love is free of fault or stands before this court with clean hands seeking any sort of right to subrogation. Love was not a party to the note or certificate of deposit. His direction to Moore to pay the note was purely voluntary, and evinced but a desire to clear his skirts with the Okolona Liquidation.
60 C.J. 716, sec. 27; Berry v. Bullock, 33 So. 410, 81 Miss. 463; Demourelle v. Piazza, 27 So. 623, 77 Miss. 433; Good v. Golden, 19 So. 100, 73 Miss. 91, 55 Am. St. Rep. 486; Union Mortg. Banking, etc. v. Peters, 18 So. 497, 72 Miss. 1058, 30 L.R.A. 829; Slaton v. Alcorn, 51 Miss. 72.
Even if the Okolona Bank deposit were preferred, and if it afforded any protection to any person by way of subrogation, such protection would not be afforded Love.
60 C.J. 721, sec. 29.
Ordinarily before subrogation can be enforced the debt must be paid. It must be paid in full, at least in so far as the rights of a principal creditor are concerned.
60 C.J., page 719, sec. 28, and page 722, sec. 30.
A partial payment of a debt does not entitle the payor to subrogate.
60 C.J. 745, sec. 54; Magee v. Leggett, 48 Miss. 139.
Dr. Moore was an agent for Mr. Love in handling the affairs of the bank.
Therrell v. Commissioner of Internal Revenue, 88 F.2d 871.
Under the laws of this state a liquidating agent is not a public officer, but merely a deputy or agent charged with doing such duties as may be done by the official, his principal, and when the principal dies or is removed from office, the deputy or agent also loses his job.
Waggoner v. State, 184 So. 633; Love v. Roebuck, 169 So. 827.
The funds in question were funds that came into the hand of Mr. Love as superintendent of banks, from the Okolona Banking Co., in liquidation. They were funds that did not belong to the public, but were funds that belonged to private individuals who were the depositors of the Okolona Banking Company, in liquidation, and under the holding in Therrell v. Commissioner of Internal Revenue, 88 F.2d 871, handed down by the United States Supreme Court, such funds were held to be "the property of private individuals," and in no sense public funds.
Under no theory of the law could appellants have been hurt by the act of the Okolona Banking Company parting with title to the evidence of this debt, or the certificate. Nor could they be entitled to subrogation of any right that that institution might have had, nor were appellants prejudiced thereby in any manner. Subrogation is not a matter of right, but only of grace, and certainly may not be invoked by defendants in this suit on any theory.
If Love had the right of subrogation in this case, it would avail him nothing unless under the law the money paid out was public money and protected by preference and certainly it was not public money and not protected by the statute under the doctrine of U.S.F. G. v. First National Bank of Shaw, 60 So. 47, 103 Miss. 91. It follows, therefore, that he could only be subrogated to an empty right or no right at all.
The lower court very correctly overruled Mr. Love's motion to set aside the judgment theretofore entered against him for the amount he had sued for, first: because Mr. Love had been duly and legally in court, and second: because Mr. Love failed to state any meritorious defense to the cause of action as a prerequisite to the making of said motion.
Hurst v. Gulf States Creosoting Co., 141 So. 346; Walton v. Gregory Funeral Home, 154 So. 717.
If anybody has been guilty of any neglect or wrong in this case, it has been Mr. Love in failing to look after the affairs of this closed bank. He cannot now be heard to say that on account of his lack of diligence, he has suffered a wrong, and ask us to reimburse him for his own wrong-doing. He cannot profit by his own wrong-doing.
The trial court has heard the evidence and in fact has presided at the trial of this case throughout the entire course of the liquidation of this bank. It is not to be lightly assumed that the trial court would under such circumstances hold that Love was a party to this proceeding, if it were not sure of its ground. Unless this court can say with confidence that the trial court committed manifest error in so holding, we submit that such holding was and is correct.
Love v. Hytken, 150 So. 777.
It is submitted with deference and confidence that the decree of the lower court in this case should be affirmed because (1) the appellant, Love, wrongfully disbursed the amount in controversy to the Okolona Banking Company without any authority so to do; (2) that Love was not privileged to have disbursed more than five per cent of the amount of its deposit to the Okolona Banking Company, because whether it be a loan or a deposit, it held no preferred claim against this liquidation, and (3) that Love was not prejudiced by the acquisition of the note from Okolona Banking Company by Cox, and by the acquisition of the certificate of deposit by the appellee. Love's liability had already been incurred, and nothing was done thereafter to increase such liability. He was not entitled to be subrogated, and if he were entitled to have these obligations turned over to him, he made no attempt to acquire them, and the third persons were guilty of no wrong or impropriety in acquiring such instruments for their own protection and use. Love voluntarily incurred this liability without taking the precaution of securing court approval. He was more interested in protecting his responsibility to the Okolona Banking Company by reason of having disbursed this money under such circumstances than he was in the welfare of the depositors of the appellee bank.
J.S. Love, Superintendent of Banks, of Mississippi, during the years 1928 to 1931, took over for liquidation the Okolona Banking Company, a banking corporation, and while in the process of liquidation had certain funds in his hands belonging to the said banking company, for its depositors and creditors. The Merchants Bank Trust Company, of Indianola, Mississippi, then a going banking concern, became pressed for funds, and applied to J.S. Love, Superintendent of Banks, for some assistance in tiding the Merchants Bank Trust Company over a period until crops could be marketed and debts due the bank be collected. After conferring with the directors and officers of the institution, J.S. Love agreed to deposit from the funds of the Okolona Banking Company in his hands, the sum of $5000 on time deposit, taking as security for said deposit a note signed by five officers and directors of the Merchants Bank Trust Company, of Indianola. The note was signed at a different date from the date of the deposit, but contemporary with the agreement between Love and the Merchants Bank Trust Company and its officers, who signed the note for the purpose of securing the deposit, said note bearing 8% interest, and the deposit bearing 4% interest. Such time deposit certificate was issued, and the note and time deposit certificate were delivered to Love, as Superintendent of Banks, in charge of the liquidation.
Thereafter, in the latter part of 1931, the Merchants Bank Trust Company, of Indianola, was in such condition that the Superintendent of Banks took it over for liquidation, and C.C. Moore was appointed liquidator by the Superintendent of Banks, his appointment being approved by the Chancery Court; and he took charge of the liquidation of the bank.
Thereafter A.C. Cox, one of the officers and directors of the Merchants Bank Trust Company, died, leaving a solvent estate, he being one of the signers of the note to secure the time deposit. His estate was administered.
After the Merchants Bank Trust Company, of Indianola, was in liquidation, under the active charge of C.C. Moore, it was conceived by the Banking Department that the deposit above mentioned was a preferred deposit, and it was so treated by the said Moore and J.S. Love, Superintendent of Banks. The Banking Department, in control of the liquidation through C.C. Moore, having collected funds, paid to the Okolona Banking Company in liquidation approximately half of the face value of the loan and interest, from the funds of the Merchants Bank Trust Company in liquidation. The Okolona Banking Company undertook to probate the note signed by the officers and directors of the Merchants Bank Trust Company against the estate of A.C. Cox, but there is some question as to the legality of the probation, which it is not now necessary to discuss.
A.C. Cox's son, who was administering his estate, took up the settlement of the probated note with the liquidator of the Okolona Banking Company, which had then been re-organized under the law permitting the directors of the bank in liquidation, creating a liquidating corporation, to administer and wind up the affairs of the bank.
By negotiations between Cox, the representative of the estate of A.C. Cox, and the liquidating corporation of the Okolona Banking Company, Cox bought the $5000 note for the sum of $100, and the said probated claim on the note against the estate of A.C. Cox was not paid, but appears to have been withdrawn.
After the passage of the banking law of 1934, Laws 1934, chapter 146, the stockholders of the Merchants Bank Trust Company, of Indianola, organized a liquidating corporation to wind up its affairs. Thereafter the Chancery Court ordered C.C. Moore to file a final account of the operation of the Merchants Bank Trust Company during the administration of the Banking Department, which Moore did. In this report the name of J.S. Love, as Superintendent of Banks, was used, and the Chancery Court approved the final account, with the exception of the sum of $2153.33, involved in the deposit in favor of the Okolona Banking Company. It is contended by J.S. Love that he was not notified of this order and report, and that during the years following 1930, while he was Superintendent of Banks, there were many such banks in liquidation under liquidators, and that he could not personally look after the various banks being so administered; and that he did not know of the order to file the account, and of the action of the attorneys representing C.C. Moore, using his name, and did not know of the decree disapproving the amount of $2153.33.
After the liquidating corporation was formed for the purpose of winding up the affairs of the Merchants Bank Trust Company, of Indianola, they paid to the Okolona Banking Company, or to the liquidator in charge, a 5% dividend, or credit, amounting to 5% of the deposit above mentioned. The liquidators now in charge, deeming the deposit not to be a public deposit, but an ordinary deposit, paid to the liquidating Okolona Banking Company 5%, — $250 — which it paid to other creditors of the bank in the preferred class.
Thereafter negotiations were had between the liquidators of the Merchants Bank Trust Company in liquidation, and the liquidator of the Okolona Banking Company, by which the liquidator of the Okolona Banking Company agreed to accept $150 in final settlement of the deposit above mentioned, made in the Merchants Bank Trust Company by J.S. Love, Superintendent of Banks. Prior to this J.S. Love had gone out of office, and the banking act had been reshaped by the Legislature, the office of Banking Commissioner being created, having substantially the same powers and duties as the Banking Department had under the superintendency of J.S. Love.
After the transaction above mentioned, and about two and a half years after Love had gone out of office, the liquidator of the Merchants Bank Trust Company applied to the Chancery Court of Hinds County, where J.S. Love lived, and where the headquarters of the Banking Department were maintained, asking permission to sue Love on his bond for the amounts over 5% paid to the Okolona Banking Company in liquidation, which order was granted, and the bill filed, making demand upon J.S. Love, and the United States Fidelity Guaranty Company for the sum of $2,153.33, with 6% interest from May 29, 1937.
Answering the bill, Love set up a denial of the allegations thereof with reference to the filing of final account by him through his agent Moore, denied that Moore was the agent of J.S. Love, Superintendent of Banks, although he was appointed liquidating agent of the Merchants Bank Trust Company, of Indianola, under the banking laws of the state of Mississippi, with the approval of the Chancery Court of Sunflower county; but that Moore was appointed, not as the agent of J.S. Love, Superintendent of Banks, but of the Banking Department of the state of Mississippi, and that as such liquidating agent, Moore acted on his own responsibility, and not as agent of the respondent, Love, former Superintendent of Banks. That both in the discharge of the duties of liquidating agent, and in making reports and accounts, he was so acting; that the final accounts filed by Moore in the said matter were not the accounts of J.S. Love, former Superintendent of Banks; and that Love was not present at the hearing of the exceptions to the final account, was given no notice of the hearing thereon, and had no knowledge of such hearing until the same was completed, and order entered sustaining the objections and exceptions, and that he was not bound thereby, nor by the order entered on the 20th of March, 1937, made an exhibit to the bill of complaint. Respondents admit that they refused to pay the complainant $2153.33, as requested, and states that they are not liable for that or any other sum; that the primary responsibility for the liquidation of the affairs of the Merchants Bank Trust Company, of Indianola, rested on C.C. Moore, liquidating agent, whose appointment was approved by the Chancery Court of Sunflower county; and that the said sum of $2153.33 was improperly paid to the Okolona Banking Company, such payment having been made by C.C. Moore, the liquidating agent, and that he alone is responsible therefor, if anyone incurred liability because of such payment; which the respondents deny.
Further answering, they aver that they were advised that the payment to the Okolona Banking Company of the sum of $2153.33, as to which the complainant objects, was really made to the respondent, Love, Superintendent of Banks, in charge of the liquidation of the Okolona Banking Company, which was closed for liquidation on October 7, 1930; and while its affairs were being handled by Love, Superintendent of Banks, he made the deposit in his official capacity as such Superintendent of Banks; that the Merchants Bank Trust Company, of Indianola, was not a state depository; that the deposit so made of these funds constituted a public deposit under the provisions of section 2914, Code of 1930, and statutes prior thereto; that said deposit was a preferred claim or trust fund from the assets of the Merchants Bank Trust Company, of Indianola, in liquidation; that the deposit was made by Love in his official capacity; that they were public funds, and constitute a prior claim on the assets of the bank. The answer elaborates this proposition.
A supplemental or amended answer was filed by J.S. Love, setting up, that the complainant should not recover anything, because it had ratified the payments theretofore made on the deposit of the Okolona Banking Company, and had recognized such deposits as being entitled to preferential payment from the assets of the Merchants Bank Trust Company, and ratified the payments made on the deposit before the organization of the Merchants Bank Trust Company Liquidating Corporation; and that in addition complainant had estopped itself to sue respondents for the balance of such deposits, because of the manner in which it had handled the matter with the Okolona Banking Company in liquidation, the details of which were set forth in the supplemental answer. That it appeared that the complainant had paid the $250 on the claim of the Okolona Banking Company with the understanding between the complainant and the Okolona Banking Company in liquidation that said amount was paid and received in addition to amounts already paid, in full settlement of the balance owing thereon; and complainant having paid this amount, in addition to the amount theretofore paid, is bound by such settlement, and cannot sue the respondents for the payments on said deposit, but are estopped to sue on the payment of $2153.33, because the amounts were not received by them, but by the Okolona Banking Company in liquidation, and if such payments were improperly made to the bank in liquidation, complainant should have proceeded to make claim for said payments of the Okolona Banking Company in liquidation, and if it had refused to pay said amounts, complainant should have proceeded against the bank in liquidation for the repayment and reimbursement of the amounts, which it had failed to do, but on the contrary, had released the bank in liquidation from further liability with reference thereto, by allowing it to retain said payments, and by paying it the additional sum of $250 in full settlement and satisfaction of said deposit.
It was then alleged that if the release of the Okolona Banking Company in liquidation from such payments is wrongfully made, then the complainant likewise released respondents from further liability with reference to said payments, that the complainant is estopped to make any claim whatever against them with respect to the $5000 deposit in question, because if respondents should be held for said payments, the complainant is not in position, because of its manner of handling the matter, to place respondents, particularly J.S. Love, in status quo ante with reference to the security held for the $5000 deposit; that deposit made by the Okolona Banking Company in liquidation in the Merchants Bank Trust Company was secured by a note for $5000, signed by A.C. Cox, C.P. Adair, A. Weinberg, J.F. Barbour and I.L. Gaston, which was a good and solvent obligation of the bank and of the endorsers thereof, several of whom were worth a great deal more than the value of the note, above all exemptions allowed by law, and therefore collectible in full; but that when the complainant made settlement with the Okolona Banking Company in liquidation, and surrendered the note to the endorsers thereof, at the request and with the approval of the complainant, it placed the note beyond its reach and control. This note and the claim for the balance of the $5000 deposit were surrendered by the Okolona Banking Company in liquidation with the understanding that the settlement thus made finally ended the matter with reference to said deposit, with the right in the Okolona Banking Company to retain the payments formerly collected thereon. It is shown that A.C. Cox, one of the endorsers on the note, died before settlement was made by the Okolona Banking Company in liquidation, leaving an estate of considerable value, worth more than all the claims probated against it, including the $5000 note endorsed by him; and upon consummation of the settlement the $5000 note so probated against his estate was surrendered to the son of A.C. Cox and the attorney for his estate, which estate has been wound up without payment of the claim based on the $5000 note, originally probated against the estate of the decedent, and the funds of the estate have been distributed. It is alleged that other endorsers of said note have died, and their estates have been distributed. And it is alleged that other endorsers of the note in question who are now living have made such conveyance of their property as to place same beyond the reach of creditors. For which reason the respondents claim that the complainant is estopped to claim the right to collect from them the amounts paid on said deposit of the Okolona Banking Company.
On motion the above answer was stricken, as not presenting a defense to the bill. Thereupon an amended answer was filed, in which the allegations above set out were reiterated, and in the amended bill it was set up that the decree relied on by the complainant, rendered in the Chancery Court of Sunflower county on May 20, 1937, and made an exhibit to the bill, made it necessary to file the suit in the Chancery Court of Sunflower County, where the interlocutory order was entered; and that if such decree is considered to be final, it cannot be made the basis of the suit against the respondents in that court, because if final all matters embraced therein have been finally adjudicated, and there is no necessity for a further decree; that on the contrary, rendition of a further decree by the court would be prejudicial to the rights of the respondents, for the reason that a further decree covering the same matters adjudicated by the Chancery Court of Sunflower county would result in the respondents having two final decrees rendered against them for the payment of the same money, in different courts; the effect of which would be to recover against him twice in different courts in the same matters, and to have enrolled against him two judgments in these courts, on the same matter.
It is further alleged that this suit should be dismissed if the order of May 20, 1937 is interlocutory; that this court can have no jurisdiction, the proper court for the filing of this suit being the Chancery Court of Sunflower county. They alleged, on the other hand, that if the order is considered final, there is no necessity for further proceedings against the respondents; that the Chancery Court of Hinds county is without jurisdiction to proceed in the cause, because of the facts above set out; and that a demurrer was incorporated in the answer to the bill.
A motion to strike this amended answer was filed and overruled, and the cause was transferred from the Chancery Court of Hinds county to the Chancery Court of Sunflower county. Thereupon a motion was made to consolidate the present suit with the suit in the court at Indianola, styled, "In the Matter of the Liquidation of the Merchants Bank Trust Company, Indianola, Mississippi," and numbered 5804 on the docket of said court. The motion to consolidate was sustained.
On the hearing the Chancellor held that the respondents were liable to the complainants in the sum of $2000, with interest at six per cent from the 14th day of April, 1932; and the further sum of $153.33, with 6% thereon from February 7, 1933; and that the application of the defendant to set aside the decree of May 12, 1937, ought to be overruled; and entered judgment against the defendants, J.S. Love, former Superintendent of Banks, and the United States Fidelity Guaranty Company as his surety, in the amount of $3041.49, with 6% interest thereon "from this date, and all costs;" and granted them an appeal to this Court.
After a consideration of all the matters developed in the case, we are of the opinion that J.S. Love, Superintendent of Banks, in charge of the Okolona Banking Company's assets and funds, had no legal right to make the deposit or loan to the Merchants Bank Trust Company, of Indianola, Mississippi. And, further, that such funds, so loaned, were not public funds within the purview of the statute, giving preference to public funds, because the funds here involved were not funds of the government, but funds held by a state officer in administering the liquidation of a bank for the benefit of the depositors and creditors, and consequently, they are not preferred funds. Whether such funds, under the circumstances stated and developed in the case, would be held to be trust funds, we leave open for future decision, as we think the judgment of the court below in this case should be reversed and remanded, and that the Okolona Banking Company in liquidation, or whoever has charge of the liquidation of that bank, if it is in liquidation, be made parties to the bill, to the end that all equities between the several parties may be adjudicated properly in one hearing. Of course, J.S. Love and the surety on his bond, will be entitled to have the benefit of the $5000 note securing the time deposit, if they are held liable, after the full development of the facts, for the payment of the funds paid out by the liquidators or receivers of the funds in the Merchants Bank Trust Company, in Indianola, in liquidation, mistaking such deposit to be a deposit of public funds, and therefore impressed with the trust.
The course which the matter took by those representing the Merchants Bank Trust Company in liquidation, and by the Okolona Banking Company in liquidation, if allowed to stand, would work an inequity upon Love and his surety. It would appear that selling a solvent $5000 note for $100, without allowing the credit which had been placed on the note through error, would itself be inequitable, and a fraud on the rights of Love and his surety, in law, although not intended to be fraudulent by the parties dealing therewith. Evidently, at that time the Okolona Banking Company in liquidation, and the administrator of the Cox estate conceived that the payments already made on the note were legal and valid.
It would also be inequitable to permit a compromise made by the liquidators with the Okolona Banking Company, by which they bought the $5000 certificate of deposit for $100, to stand, and Love and his surety to be held for the balance.
The matters involved in this suit are complicated, and we do not know what situation may be developed on the hearing, but we remand the cause to the Chancery Court, with directions to have the other parties brought in, either as complainants or defendants, the matters to be adjudicated after hearing the facts as they may exist. We believe this course will enable the court to take care of all the rights of the parties, and to render complete justice in the whole matter, saving a multiplicity of suits.
Of course, if Love and his bondmen are held liable for the $5000 so deposited in the bank, they should be subrogated to the rights of the Merchants Bank Trust Company, and all the rights it may have against the Okolona Banking Company in liquidation, or that Love might have against the Okolona Banking Company, for selling the note without collecting the amount of the money represented by the deposit.
The judgment will be reversed and the cause remanded, for proceedings in accordance with this opinion.
Reversed and remanded.