Board of Levee Com'rs v. Powell

States. Public funds. Insolvency of depository. Priority. Statutes. Under Code 1906, section 3485, providing that all money deposited in a bank by an officer having the custody of public funds is prima facie public money, and a trust fund, and not liable to be taken by general creditors of the officer or of the depository, and Laws 1908, chapter 97, requiring banks, before being entitled to any deposit of funds of a board of levee commissioners, to deposit with the treasurer of such board bonds equivalent to fifty per cent, of the estimated maximum amount to be kept on deposit, and declaring that such additional security should not be a waiver of any rights conferred by law upon the commission in the matter of recovering public moneys or trust funds from banks in 'which they might be deposited, such board, upon the failure of a bank which had complied with the statute, was entitled to priority of payment from its receiver.

Appeal from the chancery court of Tunica county. Hon. M. E. Denton, Chancellor. On suggestion of error, sustained, decree of lower court reversed, demurrer to bill overruled and appellee granted thirty days to answer. We insist that the cases of Potter v. Fidelity S Deposit Company of Maryland, 101 Miss. 823, and Powell v. Board of Supervisors of Tunica County, 65 So. 499, are not inconsistent with our contention. The Potter case is apparently the chief reliance of counsel in support of their position. In the Potter case, as pointed out by us in our original brief, the court had an entirely different question before it for construction. Were the terms of the two depository laws the same, that, is, the state depository law and the levee board depository law, we should be forced to concede, as we have conceded, on that condition, that we were asking the court for relief which had already been denied ns under former decisions of this court. But, the levee board depository law has never been.before this court for construction or interpretation and what has been said by this court in the two cases cited by counsel for appellee in construing the state and county depository laws was said with reference to the particular provisions of the statutes creating the relationships involved in those cases, or, more strictly speaking, authorizing the particular relationships involved therein. In our view, the construction by the court of these two wholly different legislative acts is not conclusive as to the issues here involved except in so far as the court has construed similar provisions of these acts. However, as to the part of the depository act relied upon by us in the case at bar, there is no similar provision in either the state or the county depository law. In support of our position that the court had in mind the construction of the state depository law only in the Potter case and only decided that case on its construction of that particular statute we quote from the opinion of Chief Justice Mayes: “The Law of 1908, in intent and purpose, is the reverse of section 3485 of the Code in every particular, and intended to cover a different state of affairs. It is complete in itself and furnishes its own measure of legal rights. . . . Let us examine chapter 96 of the Laws of 1908, for a moment. The act is new to the law and complete in itself. It nowhere declares that the funds deposited in accordance with its terms shall be deemed ‘trust funds.’ The deposit is made by the sovereign power itself for the purpose of gain, with the intent that the funds shall be used by the depository as any other general funds. , . . The manner of dealing with these funds as authorized by the Law of 1908 is antagonistic to every idea of a trust fund. ’ ’ On the other hand, ive find that the depository law provided for the levee board by chapter 97 of the Laws of 1908, is not complete in itself and is not intended to furnish a complete scheme in itself for the security of the funds of the levee board but, by its express terms, the additional *and potent savings clause was inserted and by direct terms the act refers bach to and incorporates within the scheme of the legislature section 3485 of the Code of 1906. We again quote this clause as counsel have, in the main, declined to discuss its terms. “It is further provided that the creating of this additional security and the acceptance of the collateral hereinbefore mentioned shall not be construed as waiving any rights, benefits or privileges conferred by law upon the commission in the matter of recovering public monies or trust funds from banks in which they may be deposited. ’ ’ The act expressly declares that it is not complete in itself and that it does not furnish its own measure of legal right and expressly refers to the funds deposited as trust funds, and preserves their character as such trust funds. Thus, we find all these features embraced in the act now before the court, and we find that it was upon the absence of these very features from the state depository act that the court based its holding in the Potter case. When the two acts are differentiated and distinguished we find the Potter case supports rather than refutes our argument. Considering the act in the light of the legislative intent, it is evident that the purpose of the legislature was, First, to provide a method by which the funds of the levee board might be lawfully and safely let and be made revenue producing until such time as they might be called into use by tbe levee board. Second, to throw every safeguard around these funds and insure the return of same .to the board. To accomplish this second purpose it provided the particular security to be required under the act and, in addition, through an abundance of caution, perhaps., added as an additional safeguard the provision that the condition of the funds should still remain trust funds under section 3485 of the Code and the levee board should still have the rights and preferences applicable to the funds of the levee board under said section as enjoyed by it at the time of the enactment of the depository law. The act did not specify this section of the law but this was the only right or benefit that the board enjoyed at that time superior to any other creditor and this section must have been in consideration when this reference was made. To express the idea differently, the legislature would seemingly have intended and expressed by the terms of this act the purpose to permit the creation of depositories for the levee board with the express reservation contained in the act that, the creation of such depositories and the taking of this additional security should not impair any rights the levee board had to recover its funds provided such rights existed before the enactment of the depository law. That it might take this additional security but could not. relax or relinquish any security it enjoyed at the time of the passage of this act. Counsel complains of the language of the majority of the court, quoted on the second page of the suggestion of error, as follows: “Section 3485 was intended to protect funds which had gone out of the actual possession of the legal custodian and into a bank, not in the way provided by law, but in a manner which under the statute was unlawful.” We insist that the opinion of the court on this point is clearly correct, as will appear by reference to the authorities cited in our original brief, wherein we have reviewed all of the cases, from the early case of Shields v. Thomas, 71 Miss. 260, to the case of Powell v. Board of Supervisors of Túnica County, 65 So. 499. It will be noted that in the first named , case, Shields v. Thomas, supra, the court held, in discussing the general principle, independent of the statute, which had not been then enacted, that as to the general assets • of the Bank of Greenville, the tax collector was not entitled to relief upon the facts stated in the petition, because it was not shown that the funds deposited by the tax collector at that time formed a part of the assets in any form. • It was to provide a relief for the public and a protection for trust funds which were deposited in a bank that section 3485 of the Code of 1906 was enacted. The law did not, theretofore, authorize a tax collector to deposit his funds in a bank, he was required to keep them safely and account for and pay them over at the proper time to the proper officials. Therefore, we entirely agree with the court and think that the majority opinion is manifestly correct in the part above quoted. This is not a case in which the taxpayers of the levee district in question can possibly lose any part of their money. The board of levee commissioners, acting under authority of the law, have loaned this money to the Bank of Tunica. In doing so, they took the securities from that bank which the law provided for, and which the petition in this case shows are ample, perfect and more than complete for all of the money on deposit in the bank by the levee board at the time of its failure. This is a petition, not to collect money from this bank as a preference claim which could not be collected any other way, but praying that the chancellor shall take over four thousand dollars of this levee board’s own bonds for the benefit of the receiver and that this receiver pay over to the levee board over seven thousand dollars of money on deposit which can be collected-by the levee’ board itself, first: By the sale of the four thousand dollars of bonds and then, by resorting to its indemnity bonds in the sum of nine thousand dollars, which are shown to be perfectly solvent, and force the sureties on those bonds, who are surety companies, doing business in Mississippi, to make the levee board whole in its entire deposit. In other words, this petition asks that the court require the receiver to take the money of the general depositors and general creditors of the bank and pay it out to the levee board and then take the levee board’s own bonds of four thousand dollars in lieu of part thereof and, after disposing of them, either the surety companies will be released from their liability for the balance, or the receiver would have to sue the surety companies. We challenge the counsel to produce any law which sustains any such contention. ' True it is that the depository law provides that “the creation of this additional security and the acceptance of the collateral hereinbefore mentioned, shall not be construed as waiving any rights, benefits, or privileges conferred by law upon the commission in the matter of recovering public moneys or trust funds from banks in which they may be deposited,” but we agree with the majority opinion of the court that there were no rights, benefits or privileges conferred by law upon the commission for funds so deposited, for the reason, as expressly decided both in the Potter case and in the Powell case, that section 3485 of the Code of 1905 was 'only operative to protect funds placed in a bank with-put authority of law, or funds placed in a bank in excess of the amount of the security taken. The burden of the appellant’s contention in their suggestion of error is that if the provision of the levee board depository law above quoted is not applicable to a case of this kind, they cannot understand what it means or to what kind of.a case it would be applicable, and the distinguished dissenting judge said in his opinion that no state of facts can be conjectured other than the facts of the present case to which the clause can be applied. We submit that his honor has overlooked several propositions in' this statement; first: This provision in the law would clearly be applicable if the levee board had not taken sufficient security to protect the amount of money which was actually deposited in the Bank of Tunica and would apply to the excess, and the learned justice, dissenting, concedes this proposition in the concluding part of his opinion, wherein he says: “What this law means is manifest to my mind. The law, after having named the securities to be taken, says after all these named securities are exhausted, if anything remains unpaid, a trust is imposed on the assets of the depository in favor of the levee board for the purpose of enabling the board to collect the balance due. It means this, if it means anything.” We have no criticism to make of this language of the learned dissenting justice, but conceding him to be entirely correct in this statement of the law, it is perfectly clear that it does not apply to the case at bar, because in this case, the petition shows that the securities have not been exhausted and nothing will remain unpaid or can remain unpaid after the levee board has exhausted its securities. That there would then be no “balance due,” after exhausting the securities, to which balance to apply this provision of the levee board depository law. There is another state of the case in which, as we argued in our original brief, this provision of the depository law might apply, to wit: If the levee board had accepted municipal bonds of a town, or any other than its own bonds, and they had lost their market value to the extent that they could not be sold for a sufficient amount of money to protect the deposit, or if the levee board had accepted' individual sureties, or suretyship of surety companies which had become insolvent aftér their acceptance and before the failure of the bank, then, this provision of the law might apply for the protection of the levee board, but surely it was not the intention of the legislature that when the bank had deposited fifty per cent, of the maximum deposit in the bonds of this levee board itself and had given security by indemnifying possible deposit,' in surety bonds of surety companies who were and have continued to the present time to be absolutely solvent, that notwithstanding, the levee board has its own bonds in its hands for a large part of its deposit and perfectly solvent surety companies securing by surety bonds, the remainder of the deposit and more, that they can take out of the funds belonging to the creditors of the bank the whole amount of their deposit without attempting to resort to any of their securities. We, therefore, submit that under the concluding paragraph of the dissenting opinion in this case, the decree of the chancery court must be .affirmed.