Case Name: Sunflower County v. Bank of Drew
Court: Mississippi Supreme Court
Jurisdiction: Mississippi
Decision Date: 1925-05-25
Citations: 139 Miss. 408
Docket Number: No. 24978
Parties: Sunflower County v. Bank of Drew.
Judges: 
Reporter: Mississippi Reports
Volume: 139
Pages: 408–423

Head Matter:
Sunflower County v. Bank of Drew.
(Division B.
May 25, 1925.
Suggestion of Error Overruled June 23, 1925.)
[104 So. 355.
No. 24978.]
Moocly & Williams, for appellant.
Ward Allen and Flowers, Broivn S Hester, for appellee.
Argued orally by J. L. Williams, for appellant, and J. T. Brown, for appellee.
Headnotes 1. Banks and Banking, 7 C. J., section 532 (1926 Anno); 2. Depositaries, 18 C. J., section 73 (1926 Anno); On liability of public officer or his bond for interest received on public money, see note in 30 L. R. A. (N. S.), 855.

Opinion:
Ethridge, J.,
delivered the opinion of the court.
The Bank of Drew was the legally qualified depository of certain funds of Sunflower county, Miss., during the year 1920. In January, 1921, the bank filed a bid which was accepted by the board of supervisors to act as depository for the year* 192.1 for the said funds, but failed to file the bond necessary under the law to qualify as such depository. However, the county treasurer deposited the funds in the bank, and the funds were partially paid out on warrants issued by the board of supervisors. On January 20, 1922, the bank was taken over by the state banking department for liquidation, and at the time of the taking over the following funds were in the Bank of Drew to the credit of the county's funds: General bond interest fund . $9,212.40 District No. 2 road bond interest fund . 6,728.61 Wade consolidated school fund.............. 18.79
A suit was filed by Sunflower county against the bank and others for such funds, which suit the court refused to entertain because the chancery court had charge of the bank in' liquidation for administration in the liquidation proceeding's. See Sunflower County v. Bank of Drew (Miss.), 101 So. 192. The opinion in that case, with reference to granting the relief in that aspect of the case, said:
"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."
Thereafter on the 28th of June, 1924, the special agent of the state banking department paid into the treasury of Sunflower county the sum of eighteen dollars and seventy-nine cents, the principal sum due the Wade consolidated school fund, and the sum of nine thousand two hundred twelve dollars and forty cents, the principal sum due the general bond interest fund, and on July 31, 1924, paid into the county treasury the sum. of six thousand seven hundred twenty-eight dollars and sixty-one cents, being the principal sum due district No. 2 road bond interest fund. The county treasurer at that time demanded the payment of interest on said sums, but the interest was not paid, and this suit was brought therefor.
The interest demanded is six per cent, per annum, amounting to a total of two thousand three hundred ninety-five dollars and forty-nine cents.
The case was tried on an agreed statement of facts in which it is agreed, among other things:
"It is further agreed that, since the said Bank of Drew was taken over by the state banking department, there has been collected out of the assets of the bank, as interest on outstanding indebtedness, the sum of eight thousand dollars, the same being for interest at the rate of eight per cent, per annum; that the said state banking department has paid out of the assets of the said bank, since its liquidation began, on prior liens on property on which the Bank of Drew held securities, the sum of fifty thousand dollars; and that there is now on hand in cash the sum of fourteen thousand dollars of the assets of the said bank. ' '
The court below refused to allow the interest claimed on these county deposits, and dismissed the bill, from which judgment this appeal is prosecuted.
It is contended by the appellant that, as the county's funds were placed in the bank without the security required by law, and when the bank was liquidated demand was made for the money and refused, and the money used for other purposes by the banking department in liquidation, six per cent, interest should be allowed from the date of liquidation until the payment of the funds.
It is the contention of the appellee that, inasmuch as there was no contract for interest on the money deposited in the Bank of Drew by the county treasurer, and as interest is a mere incident in the nature of damages for the detention of the money, payment of the principal sum discharges the full obligation of the bank to the county, and that a separate suit cannot be maintained for interest alone.
It seems to us that under the state of facts here involved the moneys deposited in the bank are trust funds under section 3485, Code of 1906 (Hemingway's Code, section 2823), which so provides, and that the bank having the money as trustee for the county and having refused to pay the "money on demand of the county, and having used the money and the assets constituting the securities of the county, and by such use having collected interest thereon, that the duty of the bank as trustee is to pay over to the principal, the county, the money and interest collected thereon. The county's claim,, being a preference claim and having priority over other claims, should have been promptly paid out of the first moneys available by the banking department upon liquidation of the Bank of Drew, and, if there were no funds on hand with which to pay it, its duty was, as speedily as possible consistent with safe administration, to have paid the county's claim out of the first funds received. But having failed to do so, and having used the assets, funds and securities for the purpose of earning interest thereon, it should account to the county for the interest on these funds.
It seems to us that the principles announced in Adams, State Revenue Agent, v. Williams, 97 Miss. 113, 52 So. 865, 30 L. R. A. (N. S.) 855, Ann. Cas. 1912C, 1129, support this view. In that case the original bill alleged that Williams deposited the money or funds belonging to the board of levee commissioners with various hanking institutions; that the money was placed in such hanks to his credit as treasurer of said board; that said banking' institutions, with whom the said money was deposited or to whom it was loaned, paid to the said. Williams interest on the public money so deposited. But while the said Williams accounted to the said board for all moneys paid to him as treasurer by order of the board, he failed neglected, and refused to account to the levee board for the money paid him as interest or commissions on the public funds. This interest he appropriated to his individual personal use, making no entry of the receipt thereof on the books of account, making no report thereof to the board of levee commissioners, and concealing from the said hoard the fact that he had received said interest. ITe never accounted to the board for the interest so received by him, and failed, neglected, and refused to pay the same over to the said hoard, or in anj^ way to account for the same. In that case, in stating the questions for decision, the court said, among other things :
"Fifth, is the surety on this official bond liable for interest received on the public funds by the principal, "Williams? Sixth, is the treasurer of the levee board required to pay into' the treasury money received by him as interest on the funds intrusted to his keeping?"
In discussing these principles (Adams v. Williams, 97 Miss., at pages 144-146, 52 So. 871, 872), this court held:
' ' The great underlying principle here is that the interest on this money logically, legally, and necessarily belongs to whoever owns the money. The use of that money earns the interest. The interest is a mere increment to the principal fund, and it is impossible, on any clear thinking in logic, or in law, to escape the conclusion that the interest is necessarily payable to the owner of the principal fund. Whenever, therefore, the question is settled as to who owns the principal fund, all the rest follows without difficulty. Nothing more is necessáry to show who is the owner of this fund than a reading of our statutes. Always and everywhere, public money is referred to and treated as the property of the state, or the county, or the levee board, etc. In no just legal sense can it be possible to say that the treasurer, Williams, was the owner of this money; that he had the legal title to this money in the sense that the money was his absolutely. He is the custodian of the money. He handles the money, he deals with it, but he has the custody, he handles it, he deals with it for, and on account of, his principal, the levee board. The money is the money of the levee board. If Williams died, the money did not go to the administrators of. his estate as Williams' money. It would pass into the hands of his administrator, temporarily only; but it is made the statutory, legal duty of his administrator to promptly pay over the money to the proper authorities. Code 1906, sections 3485, 3486. See Bank v. Fogg, 80 Miss. 750, 32 So. 285, a case which supports the appellant, not the appellee, and shows that the money is the property of the levee board. . . . 'The treasurer may well be held liable absolutely for all money of the state coming into his hands,, and be held liable also for interest on deposits. As stated in another form, such absolute liability does not estop the state to maintain that such interest was received by the treasurer, by virtue of his office, and belongs to his office.' [McFetridge Case, 84 Wis. at p. 517, 54 N. W. at p. 11, 20 L. R. A., at p. 237.] And this we think is plainly sound. It is a complete non sequitur to say that, because Williams was an absolute insurer, therefore the interest belonged to him,. The two principles have no relation whatever to each other. Once settled clearly and definitely whose money the principal sum was, the interest necessarily belongs to that person as an increment to the principal fund, and to argue to the contrary is simply to lose one's self in a metaphysical fog of sophistry, failing to give effect to the central principle of right and justice, making the interest the property of the party who owned the principal sum. As said by the court in the McFetridge Case again: 'It has already been held herein that the public funds were lawfully deposited by Treasurer McFetridge with the banks, and that he lawfully received from such banks compensation by the way of interest for the use of such deposits.' Under those circumstances, and in the absence of any statute separat-ing the interest from the funds and diverting it to other-uses, such interest was an accretion or increment to the fund, thus becoming a part of it, and logically and necessarily belongs to the owner of the fund, to-wit, the state.
"It is immaterial that the treasurer stipulated for interest on the deposits, or that the banks paid him such interest, or that both the treasurer and the banks thought he should retain the interest as his own, believing that he was entitled thereto. Such intention and belief- cannot affect the ownership of the interest, or its essential character as a portion of the public funds in the hands of the treasurer. Notwithstanding such intention and belief, the interest was, in fact, paid to the said treasurer, and belonged to his said office, within the meaning and intention of the bond in suit. A lawful act cannot be rendered unlawful merely because the actors intended to follow it by an unlawful act. So when the treasurer lawfully received money, which of right belonged to his office, he receives it by virtue of his office, and cannot, by forming' ánd executing an intention to retain the money as his own, divest the act of receiving the money of its official character."
The only difference between the case at bar and the Williams case, supra, is that in that case the suit was against the treasurer for interest received, and here the suit is against the bank, who was the custodian of the public funds. The same principles were applied in the case of Commercial National Bank & Trust Co. v. Hinton (Miss.), 103 So. 359, where a guardian had been removed by the chancery court and the bank appointed as guardian. But the bank did not qualify as such as directed by the decree of the court but afterwards received the funds of the minor from the discharged guardian, with notice that such bank had been appointed guardian at the time of the receipt of the money, and the bank used the money in its business. It was not shown in that case how much the particular funds earned as interest as used by the bank, but the money of the minor was commingled with the bank's funds, and the bank loaned its funds and made profits thereby. The court there held that six per cent, was a proper amount to be charged against the bank for the use of the money under the facts and conditions there existing.
It would be an anomalous situation if a bank, or other person, should take funds intrusted to it as trust funds and use them in earning profits for the bank, or other person, and, after demand and refusal to pay over such trust funds, should'be enabled to escape an accounting for the amount received by it through its improper conduct. It is not a mere case of interest being given as damages for wrongful detention, but it is a holding of the trustee to a strict accounting of the trust and refusal to permit the trustee to profit by his own wrong.
The judgment of the court will be reversed and the cause remanded.
Reversed and remanded.