Sunflower County v. Bank of Drew

Holden, J.,

delivered the opinion of the court.

The suit was instituted in the chancery court on behalf of Sunflower county against the Bank of Drew and the liquidating agent of the state banking department, and the United States Fidelity & Guaranty Company, *201 surety on the bond of the bank as a county depository, to recover a balance of about sixteen thousand dollars due the county by the bank for funds deposited therein, after the bank closed its doors January 20', 1922. From a decree denying the relief sought this appeal is prosecuted.

The case in substance is this: The Bank of Drew qualified as county depository from January 5, 1920, to January 5, 1921, with appellee guaranty company as surety on its bond. The bank closed its doors January 20, 1922. On January 5', 1921, the bond of the guaranty company had expired and the depository term of the bank ended. At this time the bank had on hand funds of the county amounting to thirteen thousand six hundred thirty-nine dollars and twenty-two cents. The funds remained in the bank to the credit of the county, and during the time between the expiration of the bond and the failure of the bank other funds of the county amounting to about thirty-two thousand dollars were also deposited in the bank.

The bank was not then a legal depository, but the treasurer reassumed the custody of the funds for the county, and the board of supervisors issued warrants and drew out of the bank during this time more than the sum of thirteen thousand six hundred thirty-nine dollars and twenty-two cents. When the bank closed its doors, there was a balance due the county which was unpaid, and this suit followed against the bank and the surety company to recover the unpaid balance.

When the depository term of the bank ended January '5, 1921, and the guaranty bond expired, the bank was due the county thirteen thousand six hundred thirty-nine dollars and twenty-two cents. Thereafter the treasurer, in legal effect, took over the funds for the county, as it was his duty to do under sections 4234 and 4240, Hemingway’s Code. From, that time on the bank was not a legal depository, but was the depository adopted by the treasurer, who, under the law, received the pub- *202 lie funds deposited therein for over one year after the expiration of the guaranty bond and until the bank was closed, January 20, 1922.

During the time between the expiration of the guaranty bond and the closing of the bank, warrants were drawn by the board of supervisors against the funds in the bank and were paid; the amount thus paid out by the bank was in excess of thirteen thousand six hundred thirty-nine dollars and twenty-two cents due the county by the bank at the end of the depository term and expiration of the guaranty bond.

During the period between January 5, 1921, and January 201, 1.922, while the bank was not a legal depository and after the guaranty bond had expired, about thirty-two thousand dollars was deposited’in the bank to the credit of the county7, and receipted for to the treasurer. Warrants were drawn by the board of supervisors and paid by the bank in the regular course of the business of the county until the bank closed January* 20, 1922, owing the county about sixteen thousand dollars, for which this suit was filed.

The contention of the appellee guaranty company is that it is not liable because its bond was discharged by operation of law, and also that the county had been legally repaid the balance due it January 5, 1921, before the bank’s suspension, January 201, 1922, and that the county’s rights in the premises were solely against the bank and its assets for the balance due at the time of its suspension.

The county contends that the guaranty company7 is liable on its bond for the thirteen thousand six hundred thirty-nine dollars and twenty-two cents due by the bank to the county on January 5*, 1921, the date of the expiration of the guaranty bond and the ending of the term of the bank as a depository7, because it did not turn over this balance to the county treasurer when its bond expired, and that the subsequent payment, of this amount *203 by the bank on warrants drawn during the period between January 5, 1921, and January 20, 1922, did not discharge the indebtedness due by the bank to the county January 5>; 1921, for the reason that about thirty-two thousand dollars was- deposited in the bank to the county’s credit between the time the bond expired and the bank -closed, and that this amount was a trust fund which could not be used in payment and satisfaction of the legal depository debt of thirteen thousand six hundred thirty-nine dollars and twenty-two cents.

We think the position of the appellee guaranty company is well grounded. The rule of the application of payments is well settled in this state. Under our rule, which seems to be contrary to that in many other jurisdictions, the law applies the payment most beneficially for the debtor, and not the creditor. Therefore where neither the debtor nor creditor applies the payment, the law will appropriate it most beneficially for the debtor. In the ease before us the payments made by the bank, which were in excess of the thirteen thousand six hundred thirty-nine dollars and twenty-two cents fund in question, are to be considered as payments of the fund it was due the county at the time its depository term ended and the guaranty bond expired. Therefore, the amount due by the bank to the county when the guaranty bond expired was paid to the county through the warrants drawn by the board of supervisors on the fund before the bank was closed. McLaughlin v. Green, 48 Miss. 175 ; 30 Cyc. 1246, and note 62.

The assumption of custody of the funds in the bank by the treasurer, and the payment of warrants drawn thereon in the regular conduct of the business of the county for the year following the expiration of the bond, constituted a new arrangement and released the guaranty company from liability after the thirteen thousand six hundred thirty-nine dollars and twenty-two cents had been paid to the county. Fidelity & D. Co. v. Wilkinson County, 100 Miss. 879 , 69 So. 865 .

*204 The other question presented in this case is whether or not the chancellor erred in refusing to give a decree against the bank in favor of the county for the amount of the funds due the county. We think the action of the chancellor in refusing the order was correct. It appears that the affairs of the closed bank are pending in and being liquidated by the same court, which has full control over all of the assets, and in due course of time will adjudicate the liability of the bank and the preference lien against its assets to ' secure the payment of the amount due the county, and will also’ make any further orders necessary to enforce the county’s special claims against the assets of the defunct bank. For this reason we think the chancellor was well within his discretion to deny the relief sought in the case at bar.

The judgment of the lower court is affirmed.

Affirmed.

Smith, C. J., concurs in the result.