The Bismarck tribune. [volume] (Bismarck, N.D.) 1916-current, 1926-11-16
CANNOT
PLEDGE ASSETS
FOR DEPOSITS
Supreme Court Hands Down
Decision in Bank Case of
Wide Importance
DIVIDE co. VS.. BARR
Wild Rose Bank Had Pledged
Certain Assets to County
For $6,5OO Deposit

Decision that banks have no right
to pledge their assets for deposits Of
public money, thereby making the
public corporation q preferred de-
positOr, was handed down by the su-
preme court Monday in the case Of
Divide county VS.. l.. X. Baird as re-
ceiver for the First State Bank of
Wildrose. appealed by Baird from the
Divide county district court.
Members Of the court were badly
divided on the opinion, however, one
Justice agreeing with the majority
only in part and the other dissenting
altogether.
The majority opinion, written by
Justice Johnson, was signed by JUS
tice Burke and Chief Justice Christ
hanson. The partial agreement was
filed by Justice Birdzell and Justice
Nuessle dissented
Affects Governors Plan
The case had been in the hands of
the court more than a year and is re-
garded as being Of wide Importance
both to banks and to persons charg-
ed with handling public money. A
plan advanced last winter by Gov
crnor Sorlie whereby the Bank Of
North Dakota would deposit money
in smaller banks which would put up
collateral security hinged on the
question Of whether or not such pro-
cedure would be legal. The present
decision definitely determined the
plan to be illegal.
Arguments in the case were first
heard almost year ago. At the Sep
tember term the court announced that
hnd ant "a i
asked attorneys interested to appear
again and present any additional in
formation they might have to offer
on the subject.
The majority decision holds that
fixed by statute and do not include
the right to pledge assets to secure
deposits.
In the Wildr0se case the bank had
pledged certain assets to the county
in return fora deposit OF $6.5OO.
The Majority Decision
The majority Of the court held that
"the general creditors Of bank are
innocent parties and have equities
which are superior to those Of coun-
ty seeking to enforce u pledge Of as
, sets to secure . public deposit when
the defense of ultra wires (Outside the
, power) is interlOsed against the pub
lie corporation. As between the
creditors and depositors Of an insol-
vent benk, whose cOntractural rela-
| ti0n with the corporation was created
lawfully, and the plaintiff, whose
contract Of pledge was outside the
powers of the bank. the former must
be preferred and they are not. estop-
o. kn ne
The whole fabric and intent of the
banking laws, the majority held. is te
protect the depositors in q bank. III
should occupy the position of a pre-.
| private depositors in the event of the
| insolvency of the depository, or that
such result could be brought about
by secret agreement between the
parties. It is held that the attempt
| ed agreement Of pledge was contrary
| to the policy Of express law and thai
the privilege to receive deposits o1
public funds was exercised in a man
ner contrary to the public policy Of
this state. The pledge agreement j.
unlawful, not merely in the senst
that in making It the bank and thu
county exceeded their charter Of
statutory powers, but also in tht
sense that it is against public policy
When q contract which q court Of
equity is asked to enforce is not onl,
impliedly forbidden, but is also con
trary to a well-defined legislative
policy, the court will refuse to givs
any relief thereunder."
Injustice to DepositOrs
In the body of the opinion. which
comprises 20 pages, Judge johnson
deals in strong language with th'
general and legal aspects Of the sit
uation, characterixing the procedure
Of the Wildrose bank and Divide
county officials as an injustice to thu
individual depositors.
In his remarks Judge Birdzell said
"While agreeing that the judgment
appealed from should be reversed thu
record here is in such shape that
have some doubt as whether ths
judgment should be entered in tht
form directed in the principal opin
ion. The pleadings and the findingl
CONTINUED on page two.)