The Bismarck tribune. [volume] (Bismarck, N.D.) 1916-current, 1923-10-13
VIOLATED LAW
LOSES CLAIM
FOR DEPOSIT
Supreme Court Holds Where
Interest Exceeded 6 Per
Cent Protection Lost
HAD SUED TO RECOVER
Sought to Force Guaranty
Commission to Award Claim
For $4,000 He Lost

FOR $0,UUU he LOSL
The state supreme court, in an
opinion handed down today, decided
that E. McQuerry of Dazey, N. D.
does not have a valid claim against
the Depositors Guaranty Fund Com
mission for money lost in closed
bank on which the bank agreed to
pay a rate of interest in excess of
that permitted under the Guaranty
Fund law and regulations Of the
commission.
The court in deciding the case, af-
firmed District Judge Fred Jams on
ius of the Burleigh county district
court and settled legal question
expected to have far-reaching effect
in the settlement of claims under
the Guaranty Fund Commission law.
McQuerry, about October 1, 1920,
read an advertisement in Fargo pa
pers that the Security State Bank Of
New England would take liberty
bonds at par and issue certificates
Of deposit therefor which would be
guaranteed by the North Dakota De-
positors' Guaranty Law, the courts
opinion, by Justice L. E. Birdzell,
said: McQuerry, not having on hand
IN amount Of bonds sufficient to
meet the requirements of the trans
action, corresponded with the- bank
and the latter agreed to buy bonds
for him at the prevailing price of
80 and issue certificate of deposit
for par value. The plaintiff Nc
Query drew his check in favor Of
the New England bank for $1,000
which was paid in regular course.
The bank issued time deposit GER
tificate for $500 payable to the
plaintiff in three years with inter
est at five percent. On November
Is, 1920, the bank was closed. Nc
Cherry made claim for the money
from the Guaranty Fund Commits
sion.
Refused To Pay
The state examiner and the Guar
snty Fund Commission refused to
allow the claim for payment from
the Depositors' Guaranty Fund.
The court held that the plaintiff
knowingly received therefor GER
tificate of deposit which would en-
title him to return exceeding the
rate Of interest permitted by law"
In Hettinger county, the court sets
out the banks we're authorized to pay
six percent interest. Under the law
a bank could not pay more than 8
percent interest unless permitted
to do so by the Guaranty Fund Com
mission.
The court said: "A provision in a
depositors' guaranty law limiting
rates Of interest that banks shall be
permitted to charge upon deposits
can be inserted for but one object,
the protection Of the guaranty fund
against the consequences Of loose
banking methods. If a bank finds it
necessary to borrow money, this act
in no way limits its power to do SO,
but when it seeks to borrow the len
der will loan only on the strength
of the banks security. II the bank
be in such condition that it cannot
borrow on favorable terms or at all,
it might then seek indirectly to bor7
row by soliciting deposits and issuing
certificates Of deposit, giving assur-
ances that they would be secured by
the depositors' guaranty fund. Man
ifestly, the more favorable the con-
tract to the prospective 1epositor,
the more likely the bank would be to
succeed in obtaining such deposits,
and the larger the rate of interest
paid, the greater the likelihood Of
failure and Of consequent liability of
the guaranty fund. Hence, the limi-
tation of the contract rate Of inter
est on deposits and the stringency df
the penal provision in case of viola
tion:> Mahifestly,> if it should be
held that the depssitor entering in
to such a prohibited contract may
nevertheless pursue his claim against
the. depositoss' guaranty fund, he
.WVutu OS kNSH al oUV0HsABe ~ tuc
expense Of q fund whicHis leopard
sixed by his act, and, other depositors,
acting with scrupulous regard to leg
islative regulations, would be pre-
.judiced.
Jsepardi.es others
+ IF il. he contended that the plain
tiff sent his money to the bank for
the purpose Of purchasing liberty
bonds at tie current quotation which
The bank could repurchase from him
Int par and that, in the absence of
the consummation Of such trans
action, he should at least be consid-
cred 4 depositor of the amount SO
entrusted, the answer is that the
cohversion Of . fund held by q hank
f1r Investment does not make the
owner of the fund a generals deposi-
tor within the guaranty law"