Green v. Cole

Anderson, J., delivered the opinion of the court. The appellees, J. A. Barney, as sheriff and tax collector, and J. B. Cole, as treasurer, of Wayne county, filed their bill in the chancery court of that county against the appellant John Green. The appellant answered the bill, and there was a trial on bill, answer, and proofs, resulting in a decree in favor of appellees, from which this appeal is prosecuted. The Bank of Waynesboro, a banking corporation under the laws of this state, became insolvent and suspended business in June, 1908, and some time afterwards, at the instance of creditors, was put into, the hands of a receiver. At the time of its failure the bank was indebted to the appellee Barney as sheriff and tax collector in the sum of five thousand, eight hundred eighty-seven' dollars, and twenty-three cents, and to the appellee Cole as county treasurer in the sum of fifteen hundred sixty-six dollars, and seventy-three cents. At the January term, 1909, of the circuit court, appellant, Green, who was a general creditor of the bank, recovered a judgment against it for two thousand, one hundred, thirty-three dollars and thirty-seven cents and costs, with a stay of execution for four months. At the expiration of the stay, execution was issued on this judgment and levied on the lot, bank building, furniture, and fixtures of the bank. After this levy, and before sale under the execution, appellees filed this bill against the appellant, Green, the sheriff having the execution in his hands, and the bank, by which they sought to charge the proceeds of the sale of the property so levied on with the [77] prior payment of their claims dne them by the bank, which were for public funds deposited by them in the bank during the year 1908, prior to its failure. The bill prayed for an injunction against the proceeds of the sale of the property being applied to the debt of the appellant, and that they first be applied to the payment of their claims. The lot, bank building, furniture, and fixtures were acquired by the bank two or three years before its failure, and before the claims of appellees were incurred. It was shown that none of the public funds deposited by the appellees in the bank were traceable into this property; but, on the other hand, it was paid for out of other assets of the bank. The question is whether, under section 3485, Code of. 1906, an officer having the custody of public funds, deposited in a bank which has become insolvent, is entitled to priority of payment, as against general creditors, out of assets of such bank acquired and paid for prior to the deposit of such funds. Section 3485 of the Code is as follows: “All money deposited in bank, or with any other depository, by or for a tax collector, or other officer having the custody of public funds, state, county, municipal, or levee board, whether the same be deposited, in the name of the officer, as an individual or as an officer, or in the name of any other person, is prima facie public money and a trust fund, and is not liable to be taken by the general creditors of the officer or by the creditors of the depository.” In Bank v. Hardy, 53 South. 395; referring to Fogg v. Bank, 80 Miss. 750, 32 South. 285, and Metcalfe v. Bank, 89 Miss. 649, 41 South. 377, the court said: “We find no fault with the principles announced in these cases. The statute in question was intended to provide for the security of the public funds. As against general creditors it stamps a charge on all the assets of the bank for the prior payment of such trust funds; and it is not required, in order to enforce such preference, that the [78] very funds, either in their original or transmuted forms, be pointed out in the hands of the receiver. It is only necessary to show that the funds went into the bank.” It is true this exact question was not decided in either of those cases; but they show that the trend of decision is to give the statute such a construction, consistent with its terms, as will accomplish the purpose of its enactment, viz., the security of the public funds. In Shields v. Thomas, 71 Miss. 260, 14 South. 84, 42 Am. St. Rep. 458, it was held that equity will follow trust funds through all their changes, whether in their original form, or merged in a mass of which they form a part; but one seeking to fix a charge upon the mass of assets for the- payment of such funds must either point out his specific funds among the mass, or that they are there in a transmuted form. If appellant’s construction of this statute (which was passed after the decision, in Shields v. Thomas, supra) is sound, it is merely declaratory of this well-established equitable principle, and therefore ineffectual for any purpose whatever. Our judgment is that the remedy provided by this equitable doctrine was by the statute in question, as concerns public funds held in trust, extended and enlarged so as to give the officer having such funds on deposit the right to impress all the assets of the depository, as against general creditors, with their prior payment, even though shown not to be traceable into such assets. The language, “a trust fund, and is not liable to be taken by the . . . creditors of the depository,” means it may not be “taken” by such creditors, either directly or indirectly, and whether before or after the insolvency of such depository. Under the facts here, if appellant should prevail in his claim, it would be equivalent to the creditors of the bank taking these trust funds. To illustrate: "When they were deposited, the assets of the bank were swelled that much, and when insolvency came, if they were not on hand in some form, it was [79] because they had been paid out by the bank to its creditors — had been “taken” by its creditors — possibly the very creditors whose funds went into the lot, bank building, furniture, and fixtures in controversy. When so taken, the remaining assets must take their place. The presumption is that the bank as trustee managed the trust funds lawfully, did not embezzle nor misappropriate them, that, they were preserved until the other assets were exhausted, and if not part of its assets, that they were paid out to creditors in the usual course of business. Fogg v. Bank, supra. A case might arise where it could be shown that the funds had been unlawfully diverted or misappropriated by the depository, never becoming part of its assets, and therefore could not have been “taken” by its creditors. But that is not this case. Appellant is not prejudiced; for, if these funds, stamped as trust funds, not to be taken by creditors, had not gone into the bank, there would have been that much less assets out of which to make his debt. Having gone into it, to give him priority out of the assets left would amount to a taking by him and other creditors indirectly of such funds. Affirmed.