McFerson, Bank Commissioner v. National Surety Co., et al.

No. 10,139. McFerson, Bank Commissioner v. National Surety Co., et al. Decided January 8, 1923. Action by bank commissioner to recover collaterals deposited by an insolvent bank with a surety company. Judgment for defendant. Affirmed. 1. Banks and Banking — Deposits—Bond. A bank, in order to secure deposits, may give an indemnifying bond to secure the depositor against loss. 2. Pledgor and Pledgee — Possession of Collaterals. When collaterals have been pledged as security, the pledgor has no right to their possession until the pledge has been fulfilled. 3. Banks and Banking — Bank Commissioner — Collaterals. A bank commissioner who has taken over the affairs of an insolvent bank, cannot, in the absence of fraud, recover possession of collateral securities pledged by the bank, where the bank itself could not obtain them. Error to the District Court of the City and County of Denver, Hon. Henry J. Hersey, Judge. Mr. Victor E. Keyes, attorney general, Mr. Frank McLaughlin, for plaintiff in error. Mr. T. J. O’Donnell, for defendants in error. En banc. [MAJORITY — Mr. Justice Teller] Mr. Justice Teller delivered the opinion of the court. The plaintiff in error, who at the time of the beginning of this action was in charge of the insolvent Louisville Bank, which had theretofore absorbed the Lafayette Bank, sought to recover from the defendant in error certain securities received by the defendant in error under the following circumstances: Each of the above-named banks had agreed with the county treasurer of Boulder county that, in consideration of his depositing county moneys with them, they would give him indemnifying bonds. In pursuance of that agreement the defendant in error' became surety upon the bonds of the said banks, and received from each bank collateral to indemnify it against loss. It is the collateral thus deposited with the defendant in error, which the bank commissioner seeks by suit to recover. For the plaintiff in error it is claimed that the deposit of this collateral was void as an attempt to prefer one creditor over others, and hence it may be recovered. We see no ground for this contention. The right of the treasurer to deposit the money in the banks is not involved, and that right is of course undoubted. There is no question that a bank, in order to secure deposits, may give security for them. The giving of the indemnifying bonds was within the authority of the banks, and was a matter of ordinary business. The banks owned the securities pledged to the surety company, and had full right so to pledge them. It is further undoubted that when collateral has been pledged as security the pledgor has no right to such collateral until the purpose of the pledge has been fulfilled. It is unnecessary to cite authorities on these points. There being no fraud charged, and no violation of law in the transaction having been shown, the rights of the bank commissioner are no greater than were the rights of the respective banks. If they could not recover the security, neither can he.. The transaction appears to have been one in the ordinary course of business, proper in everjr respect, and the surety company having, as the record, shows, paid the full amount of its liability under the bond, is entitled to retain the collateral to the extent necessary to repay it. There is no principle of law or equity under which the plaintiff is entitled to recover. The various questions of pleading raised by the briefs need not be considered. The judgment is affirmed. Mr. Justice Whitford, Mr. Justice Allen and Mr. Justice Campbell not participating.