Mildenstein v. Hirning

DILLON, J. On March 19, 1921, the People’s State Bank of Canova, S. D., accepted the note of one Aldrich in the amount of $10,300, and, in exchange therefor, delivered to him $300 in cash and ten certificates of deposit of $1,000 each. Said Aldrich later delivered to the bank, as collateral to^ the note, stock in the People’s Telephone Company of Canova, S. D. One of the ten certificates of deposit of $1,000 each was later negotiated to plaintiff. The People’s State Bank of ¿Canova became insolvent on or about October 26, 1921, and its affairs were taken charge of by the state banking department, and the superintendent of banks gave notice to the creditors of said bank to file their claims on or before a certain date. Plaintiff filed his claim in the proper manner, and it was approved by the state superintendent of banks as a claim against the assets of the bank, but was disallowed as a claim against the guaranty fund. The assets of the insolvent bank were inadequate to' pay said claim, and this action was brought to recover from the guaranty fund. The lower court denied the relief prayed for by plaintiff, dismissed the action, and entered judgment against plaintiff for the costs and disbursements. It is from such judgment and order denying a new trial that this appeal is taken. Appellant has argued his assignments of error under three heads: First, jurisdiction of the court; second, rights of plaintiff as a holder in due course; and, third, original transaction as a deposit. Respondent first contends that the court is without jurisdiction over the subject-matter; second, that the quasi judicial decision of the state superintendent of banks is not reviewable on mandamus proceedings. Respondent is in error in both of these contentions. The rule as laid down in First National Bank v. Hirning, 48 S. D. 417, 204 N. W. 901; Parsons v. Smith, State Superintendent of Banks, et al, 48 S. D. 445, 205 N. W. 36, es561 ta'blishes the jurisdiction of this court over the subject-matter contained in this case, and also establishes a mandamus proceeding as the proper remedy. . In view of the two decisions above mentioned, it will be unnecessary to go into a further discussion as to the merits of the contention of respondent. The only question remaining.to be determined is whether or not the certificates of deposit, issued in exchange for Aldrich’s note for $10,300, constituted a deposit in good faith within the meaning of section 9020, R. C. 1919, as amended by chapter 134, Laws of 1921. It would be a difficult task to- define “deposit” as meant by the guaranty law, so as to embrace all situations which may arise. In defining “deposit” the Supreme Court of Kansas, in Fourth National Bank v. Bank Commissioner, 204 P 715, 110 Kan. 380, said: “Speaking generally, to create a deposit, within the meaning of the statute, money or the equivalent of money must be in intention and effect be placed in or at the command of the bank, under circumstances which do not transgress specific limitations of the bank guaranty law.” The Supreme Court of Iowa, in State v. Corning State Bank, 113 N. W. 500, 136 Iowa 79, describes a depositor as “one who delivers to or leaves with a bank money subject to his order, either upon time deposit or subject to check.” In State v. Bank (Neb.), 202 N. W. 460, it is said: “To create ‘deposit’ protected by bank guaranty, law, money" or its equivalent must in intention and effect be placed in or at command of bank under circumstances not transgressing bank guaranty law. * * * Law looks through semblances and forms to ascertain whether there has been bona fide deposit within terms of bank guaranty law.” The guaranty law does not protect transactions if not bona fide deposits in manner evidenced. The contention of appellant that he. is a “holder of exchange in good faith,” regardless of whether or not the original transaction was a deposit is without merit. The liability of the guaranty fund is purely statutory, and must be determined by the original transaction between the original parties. The original transaction, as shown above, did not constitute a “deposit,” but was a loan pure and simple. Said Aldrich therefore could not be [562] held to be a “holder of exchange in good faith,”-and appellant stands in the same position as said Aldrich (payee in the certificate), regardless of whether or not he was an innocent purchaser, and regardless oí whether or not the said certificate was negotiable. The liability of the guaranty fund is entirely separate and distinct from the law pertaining to negotiable paper. In State v. Farmers’ State Bank, 196 N. W. 908, 111 Neb. 117, the Supreme Court of Nebraska says; “The argument is made by appellants that, they being owners of the several certificates of deposit, therefore they were ‘holders of exchange,’ and entitled to priority over other claims. * * * This contention, in so far as it seeks to hold the guaranty fund liable, is, we think, without merit. The term ‘holders of exchange’ as used in this section relates to those transactions -where money or its equivalent has been deposited in the bank ¡and a bill of exchange upon some other bank has been issued in lieu thereof.” The record clearly shows that the certificate of deposit in controversy was not issued in consideration of any deposit of money or its equivalent, and cannot be held to constitute a deposit in good faith within the definition and intent of the Guaranty Fund Law (Rev. Code 1919, § 9020, amended by Laws 1921, c. 134) of this state. The state superintendent of banks did all that he could rightfully do when he allowed the claim against the assets of the bank. The judgment and order denying a new trial are affirmed.