Woolley v. City of Natchez

SIBLEY, Circuit Judge.

Appellee, City of Natchez, obtained a decree that appellant Woolley, as receiver of the Britton & Koontz National Bank of Natchez pay over $5,125 in his hands belonging to the city. The District Court found as a fact “that the money furnished by the City of Natchez on the 15th of February, 1933, was furnished Britton & Koontz National Bank for the specific purpose of paying coupons and bonds that were falling due on that date under the terms and conditions of their issuance, and which would be presented to Britton & Koontz National Bank for payment, it being the place desig-natcd therefor, and that for said purpose the money so provided by the City was not to constitute any part of the assets of the defendant bank nor intended to go into the general funds of said bank, but was to be held and used by said bank solely for the purpose of paying said bonds and coupons due that day, towit, Feb. 15th, 1933, and that the officers of the Britton & Koontz National Bank and the City of Natchez so understood said purpose.” The receiver here contends that there was a general'deposit of the money, raising the relationship of debtor and creditor, and that the rule of pro rata distribution of a failed National Bank’s assets applies to the City of Natchez. The city admits that result if there was a general deposit, but contends that the court found the facts rightly, that the bank never obtained any title to the funds furnished it, and that those not disbursed still belonged to the city and should have been returned by the bank and must be by its receiver. The issue is thus one of fact as to the real nature of the deposit on February 15, 1933.

The city in 1927 issued $160,000 of bonds, the interest coupons falling due February 15th, and August 15th, and the bonds serially maturing on February 15th. Britton & Koontz National Bank and another were bidders for the bonds, both stipulating that they should be payable at that bank, and the bonds and coupons were made so payable on their face. Each six months since the city has furnished the bank on or about the date of maturity the exact amount necessary to pay maturing bonds and coupons, which were paid by the bank as they were presented over a period often of several months. The bank never made any report to or accounting with the city, but preserved the bonds and coupons and returned them canceled. The city never checked against the funds so deposited. It did no other business with the bank. Its legal depository was another bank which gave security and paid interest on deposits according to the Mississippi statutes. The city clerk was given a deposit slip in the ordinary form for funds left with the Britton & Koontz National Bank, usually sent to him by mail after the warrant drawn on the depository had been collected, and which the clerk testified he threw into the wastebasket. There was no passbook. The account was entered by the bank on its books as “City of Natchez Bond and Coupon Account” and the deposit slips were thus made out. The warrants were each marked “$160,000 Paving and Sewer Sinking Fund.” The clerk in delivering the warrant usually and on the occasion in question said: “Here is the money to pay our bonds and coupons due today.” The cashier who received many of the deposits and that here in question testified there were no special instructions about the deposits but “they were to be kept there to pay certain coupons or bonds as they were presented to our bank for payment.” He regarded them, however, as funds of the bank like those put to an individual checking account. So said the other bank officers. It is not denied that when the bank closed March 2, 1933, $5,125 of the last deposit was unexpended and that the receiver had it among the cash assets of the bank.

If one individual should deposit with another individual money to pay the former’s note due a third person about to be presented at the depositee’s office, no one would doubt that the money was a trust and not a loan, and to be returned if the note should not within a reasonable time be presented. It is otherwise when funds are left at a bank whose general business it is to receive money on general deposit, thereby borrowing it on the faith of the bank’s engagement to repay by honoring checks or by paying notes or drafts as directed. Funds put into bank as these were by an individual would be presumptively a general deposit, the individual having the burden of showing a contrary agreement. We think a different presumption applies when a public official under the law of Mississippi places public funds in a bank which is not the legal depository, but is the place of payment named in public obligations, in order to pay them. The Mississippi statutes authorize banks to become general depositories for public funds on giving the required security; and they pay interest thereon, of course acquiring title to and the right to use the funds deposited. Gulley v. Wisdom (C.C.A.) 69 F.(2d) 495. But a general deposit of public funds in a bank not qualified as a depository is not forbidden by law and can be made. Webster v. United States Fidelity & Guaranty Co. (C.C.A.) 71 F.(2d) 475. We are now dealing with a transaction within sections 5990 and 5992 of the Mississippi Code of 1930. The former section provides that when public bonds are issued “of which principal and interest shall be payable at some bank or trust company, or at some office other than the county tre-asury,” a warrant shall be issued against the proper fund for the amount of principal and interest due, and “exchange 'shall be forwarded to the paying agent * * * sufficient in amount to pay said principal and interest and a reasonable fee to said paying agent for handling same. * * * Said exchange shall be forwarded in time to reach the paying agent at least five days prior to the date on which said principal and interest shall become due, and the receipt of the paying agent * * * shall be sufficient voucher in the hands of said clerk for said remittance until the bonds or coupons shall have been paid and can-celled and returned to said clerk.” Section 5992 applies these provisions expressly to city bonds. The present transaction having occurred in Mississippi where this statute is of force, the clerk and the bank must be considered as having acted with reference to it. The statute, we think, does not intend to direct the clerk to lend the city’s money on general deposit to any bank or to the proprietor of any other office where the bonds are payable without security and without reference to financial responsibility. Its purpose is rather to have funds furnished to the bank or office as the city’s agent to disburse them and to return such as are not disbursed, receiving for the service a reasonable fee. A bank can earn additional sums by charging for remitting to those who send to it the bonds and coupons for collection, the entire service being well within usual banking functions. While no fee was here demanded or paid, this whole transaction was according to and covered by the statute. The bank understood that the deposit was no general deposit subject to check, but was one to pay coupons and bonds due to be presented that very day. The clerk did not intend to lend the money to the bank. The bank had no right to do anything with the proceeds of the warrant, on its face drawn on the sinking fund to pay bonds and coupons and expressly so stated by the clerk in delivering it, except to pay them and return any balance not required therefor. If for its convenience it commingled the funds with its own,'that does not prevent the restitution here demanded when the city’s money is traced as it has been. See Jennings v. United States F. & G. Co., 294 U.S. 216, 55 S.Ct. 394, 79 L.Ed. 869, 99 A.L.R. 1248; Wisdom v. Keen (C. C.A.) 69 F.(2d) 349; Washington Loan & Banking Co. v. Fourth Nat. Bank (C.C.A.) 38 F.(2d) 772. The creditors of the bank are not wronged. The city is entitled to its money back.

The judgment is affirmed.