Opinion
No. 30829.
December 5, 1933.
1. BANKS AND BANKING.
Superintendent of banks need not formally declare bank in liquidation before suing stockholders for statutory liability, but need only make it reasonably appear that assets of bank will be insufficient to pay depositors (Code 1930, section 3815).
2. BANKS AND BANKING.
Stockholders of insolvent bank cannot set off their deposits with bank against their statutory liability, since such liability is not debt due bank by stockholders, but is security for benefit of depositors who are entitled thereto free of equities between bank and stockholders (Code 1930, section 3815).
3. STATUTES.
Erroneous construction placed on unambiguous statute relative to liability of bank stockholders by banking department which permitted stockholders to set off their deposits in insolvent bank against their liability held not binding on Supreme Court (Code 1930, section 3815).
4. APPEAL AND ERROR.
Set-off allowed appellants against claim of appellee who filed no cross-appeal thereto cannot be disturbed.
5. BANKS AND BANKING.
Stockholders who paid their double liability under trust agreement whereby bank delivered notes and securities to trustees who allocated part thereof to stockholders for whom trustees collected money on remainder and deposited money in same bank which subsequently was taken over by superintendent of banks, who brought suit against stockholders for statutory liability, held not entitled, in such suit, to set off money so deposited in bank by trustees (Code 1930, section 3815).
6. BANKS AND BANKING.
Superintendent of banks could join all bank stockholders in suit in equity to recover statutory liability from stockholders who were all proper parties thereto (Code 1930, sections 363, 3815).
7. BANKS AND BANKING.
Chancery court had jurisdiction over nonresident stockholder who was made party defendant to suit by superintendent of banks against all stockholders of bank to recover statutory liability from stockholders, absent contention that none of stockholders resided in county where suit was brought (Code 1930, sections 363, 3815).
ON SUGGESTION OF ERROR. (Division A. Feb. 26, 1934.) [153 So. 369. No. 30829.]1. TRUSTS.
Where power to revoke or modify trust is not expressly reserved, and creation of trust is not affected by fraud, duress, or mistake, settlor is without power to revoke or modify trust, even though created without consideration.
2. BANKS AND BANKING.
Where stockholders in state bank, under resolution of directors, advanced money to retire doubtful assets, and bank assigned such doubtful assets to trustees for benefit of stockholders, entire proceeds of such assets which were collected and deposited in bank, notwithstanding only part of assets was allocated to trust, held proper set-off against stockholders' liability.
APPEAL from Chancery Court of Alcorn County.
W.C. Sweat, of Corinth, for appellants, contributing stockholders.
This court seems never to have passed upon the question as to whether or not it is necessary for the superintendent of banks, in his official capacity, to determine that a bank is insolvent and make an assessment against its stockholders. Other jurisdictions having similar statutes to ours have passed upon the question, holding that it is a necessary prerequisite to the institution of suit by the superintendent of banks or the comptroller, as the case may be.
Tunnicliffe v. Noyes, 135 So. 505; Kennedy v. Gipson, 8 Wall. 498, 18 L.Ed. 476; Aldrich v. Skinner, 98 Fed. 375; Page v. Jones, 7 F.2d 541.
When our banking act was passed, the majority of the cases from the United States courts, construing the section of the National Banking Act had already been decided; and, when our legislature passed this statute, which is in all substantial respects, the same as the United States statute, it was adopted with full knowledge of the construction placed upon it by the United States Supreme Court and, in construing it, the court will put the same construction upon it which has been placed upon it by the federal courts before its adoption.
Yates v. Jones Nat. Bank, 51 L.Ed. 1002; Thomas v. Taylor, 56 L.Ed. 673; Corsicana Nat. Bank v. Johnson, 64 L.Ed. 141; Marquise v. Caldwell, 48 Miss. 23; Ingraham et al. v. Regan, 23 Miss. 226; 25 R.C.L. 1069, sec. 294; 59 C.J. 1065, sec. 627.
Stockholders of the bank, who had deposits in the bank at the time it closed, were entitled to have these deposits used as an offset, to be credited upon their stock liability.
Contemporaneous construction of statute by governmental department charged with its execution, while not controlling, is entitled to great weight.
Conard Ft. Co. v. Miss. State Tax Commission, 160 Miss. 185, 133 So. 652; I.C. Railroad Co. v. Middleton, 109 Miss. 199, 68 So. 146; Robertson v. Texas Oil Co., 141 Miss. 356, 106 So. 449.
While it is true that this construction, which had been placed upon this statute for a period of years by the banking department, is not controlling in this court, yet it is persuasive; and, in the light of the continued action of the banking department over this period of years, these stockholders should be given credit on their stock liability for such deposits as they had in bank.
A constructive trust arises whenever another's property has been wrongfully appropriated.
Tiffany on Agency, sec. 77, page 323; Brogan v. Kreipe, 116 Kan. 506, 227 P. 261; 3 Pomeroy's Equity Jurisprudence, sec. 1051.
Where a deposit is made under such circumstances as to constitute a trust fund in the hands of the bank, such deposit is entitled to be repaid in preference to general creditors, where it can be identified, and, according to some authorities, even though it has been mingled with the general funds of the bank, where it augmented the assets of the bank.
7 C.J. 751; State v. Am. St. Bank of Aurora, 108 Neb. 111, 187 N.W. 762; Collins v. Johnson, 136 Wn. 256, 239 P. 393; Morse on Banks Banking, sec. 185, page 506; 26 R.C.L. 1236, sec. 83; Reeves v. Pierce, 64 Kan. 502, 67 P. 108.
A fund contributed by stockholders to commissioners, and deposited in bank for the special purpose of replacing bad paper, constituted a trust fund.
Austin v. Hough, 10 S.W.2d 655; 26 R.C.L. 1235, sec. 82, page 1236, sec. 83; Sawyer v. Conner, 114 Miss. 373; Fogg v. Bank, 80 Miss. 750.
This court, in a long line of decisions, has held that, where deposits have been made in a bank under such circumstances, the bank did not have a right to take the funds and mingle them with the other money of the bank; that the bank did not get title to the property and that the relation of debtor and creditor did not exist, and that the depositor is entitled to have his deposit declared a trust fund, or a special deposit, and a preference claim against the bank in insolvency.
Armour-Cudahy Pkg. Co. v. First Natl. Bank, 69 Miss. 400, 11 So. 28; Love v. Meridian Grain Elevator Co., 162 Miss. 773, 139 So. 857; Sawyer v. Conner, 114 Miss. 363, 75 So. 171; Love v. Little, 148 So. 646.
In the case at bar, the bank most certainly did not get title to the funds which were deposited therein by the trustees.
The court, in its opinion, in referring to the money that was collected by the trustees on the notes which were turned over to them, stated that all of the money so collected by them, except a small amount which was distributed to the appellants, was deposited by them, in the Corinth Bank Trust Company to their credit, and there so remained until the bank was taken over by the appellee. The court was evidently laboring under a misapprehension as to the facts disclosed by the record. This money was not deposited in the bank to the credit of the trustees, and it did not there so remain until the bank closed. An account was opened in the name of the trustees; but, within a few days, this account was closed and the money transferred to what is known as the "directors' fund." From that time until the time the bank closed, all collections made from these notes which had been turned over to the trustee were deposited in the "directors' fund." None of it was placed in the trustee's account; and the bank, with full knowledge of the fact that this money belonged to the stockholders, used it from time to time to take out questionable paper. When the bank closed, all of these funds had been used by the bank, except the small amount which had been distributed to the stockholders, being a little more than four thousand dollars.
W.H. Kier, of Corinth, for appellant, Mrs. Sam Brackstone.
The brief heretofore filed in this cause by W.C. Sweat, being intended to apply also for Mrs. Sam Brackstone, one of the appellants, I.W.H. Kier, of counsel for Mrs. Sam Brackstone, for the purpose of being more specific, to make certain thereof, hereby adopt the said brief heretofore filed by the said W.C. Sweat as his brief, and join therein as of counsel for the said Mrs. Sam Brackstone.
Ely B. Mitchell, of Corinth, for appellant, Mrs. W.F. Elgin.
In order to enforce the liability of stockholders for the debts of the bank it must first be established that there is a liability on the part of the bank and service of process on stockholders prior to such establishment is premature.
7 C.J. 512, secs. 86, 88.
It is admitted that it has been the universal custom of the banking department, since its organization in 1914 until after this bill was filed, to allow the stockholders to set off their stock liability with the deposits they had in the bank.
27 R.C.L. 155, secs. 4, 6, 9 and 14.
Long established customs and usages are to be judicially recognized as part of the law.
Dale v. Patterson, 134 U.S. 399, 58 L.Ed. 1378; U.S. v. Orredondo, 6 Pet. 691; MacCulsky v. Klosterman, 10 L.R.A. 785, 20 Or. 108, 25 P. 366.
Usage if known to the parties to a contract to which it relates is obligatory, and unless excluded by the terms of the contract, enters into and forms a part thereof as much as though it had been written therein.
Horace v. Strachan, 86 Ga. 408, 22 A.S.R. 471; First National Bank v. Fiske, 133 Pa. St. 241; Crane L. Co. v. Lumber Co., 79 Mich. 308; Samuels v. Oliver, 130 Ill. 73; Clark v. Hall, etc., L. Co., 41 Minn. 105; Patterson v. Crowther, 70 Md. 105; Ambler v. Phillips, 132 Pa. St. 167.
The bank guaranteed to W.F. Elgin that if the bank became insolvent, he would be permitted to pay off his stock liability with the deposits he had in the bank at the time the bank closed its doors. A.C. Powell, the liquidating agent of the Corinth Bank Trust Company, recognized this general custom, and carried out the instructions of the superintendent of banks, and gave Mrs. Elgin the receipt.
A receipt is a written admission of the fact of payment and receipt of money or thing of value.
48 C.J. 634, secs. 75, 78, page 585, sec. 1, page 608, sec. 39; 21 R.C.L. 122, page 123, sec. 136, page 7, sec. 1, page 19, sec. 13.
Contemporaneous construction by the different departments of the state, and by the officers, for nearly a generation, is not of itself controlling in the interpretation of the statute, but is deemed valuable in aiding the court in determining the real meaning and purpose of the statute involved, and to that extent, we may say, is persuasive as to the true meaning of the act.
Robinson, Revenue Agent v. Texas Oil Company, 141 Miss. 336; L.H. Conrad Furniture Co. v. Miss. State Tax Commission, 133 So. 656.
E.C. Sharp, of Jackson, for appellant.
It will be noted that it is contemplated in each of the sections, 495 and 363, Code of 1930, that the jurisdiction of both the chancery and circuit court shall be limited to the residence of the defendant or where the property may be found, except in those cases specially provided for in the above mentioned sections.
Burgin et al. v. Smith, 141 So. 760; Section 155, Griffith's Chancery Practice.
We are familiar with the case of Abbey v. Delta Bank Trust Company, 139 Miss. 36, 103 So. 801, which holds that one suit may be brought against all stockholders of a bank jointly, but in that case no question was raised as to the non-residence of any of the parties, and, therefore, the question presented in this case was not passed upon by the court.
Under the law, as now construed by our court, the amount of assessment is discretionary with the superintendent of banks, and when he has determined the amount of the assessment the only thing that can be litigated is whether or not any assessment is necessary, and whether or not the defendant is a stockholder.
Kidder v. Hall, 251 S.W. 497; Chapman v. Seabury, 263 S.W. 1107; Austin, Bank Commissioner, v. Davenport, 272 S.W. 244.
This double liability of the stockholder is placed on the same basis as any other contract, and it would not be contended for an instant by anyone that if a number of parties entered into separate and distinct contracts with a domestic corporation, that all of them could be sued in a joint action in the county of the domicile of the corporation on the various contracts, regardless of the residence of the various parties.
Gift et al. v. Love, 144 So. 562; Richmond v. Irons, 121 U.S. 27, 7 Sup. Ct. Rep. 788, 30 L.Ed. 864.
It was not controverted that this appellant was not a resident citizen of Alcorn county, the county in which the suit was brought, nor was it contended that he was a non-resident of the state.
Reimers v. Larson, 202 N.W. 653, 40 A.L.R. 1177; Baird v. Lefor, 38 A.L.R. 807, 201 N.W. 997; First State Bank Case, 202 N.W. 391; Trolio v. Nichols, 133 So. 207; Tchula Commercial Co. v. Jackson, 111 So. 874; Tribette et al. v. Illinois Central Railroad, 70 Miss. 182, 12 So. 32, 19 L.R.A. 660, 35 Am. St. Rep. 642.
We think the statute which authorizes the bank commissioner to proceed either in law or in equity is indicative of the fact that defendants were not to be deprived of their valuable right of a trial in the county of their residence in cases of this character, and had the appellee in this case proceeded in a court of law, we do not think it would be seriously contended that this suit could have been maintained in a county other than the residence of the defendant, and certainly he should not be deprived of this right because of the election of the superintendent to proceed in a court of equity.
Cumberland Telephone Telegraph Co. v. Williamson, 101 Miss. 1; Hale v. Allison, 188 U.S. 56, 23 Sup. Ct. 244, 47 L.Ed. 380; Stark County Agr. Society et al. v. Brenner, 172 N.E. 659.
The only material difference between our statutes pertaining to stockholders' liability and that of the national law on the same subject is that, under the Mississippi statutes the proceeds collected from stockholders' liability is a trust fund for the benefit of the depositors, while under the national law it is for the benefit of the creditors. Therefore, we contend that the same procedure should be followed in the enforcement of the stockholders' liability in state banks in Mississippi as is required by national banks.
Kennedy v. Gibson, 8 Wall. 498, 19 L.Ed. 476; Gerner v. Thompson, 74 Fed. 125; Page v. Jones, 7 F.2d 541, 46 Sup. Ct. 203, 269 U.S. 587; King v. Pomeroy, 121 Fed. 287, 58 C.C.A. 209.
Flowers, Brown Hester, of Jackson, for appellee.
The superintendent of banks is not required to make a formal assessment against stockholders under section 3815 of the 1930 Code, before being permitted to sue for the liability.
The liability created by this statute is a primary liability.
Pate v. Bank of Newton, 116 Miss. 683, 684.
The superintendent of banks may bring the suit against stockholders for the collection of their double liability whenever it is reasonably apparent that it is necessary to collect the same in order to pay the depositors.
Bank of Examiners v. Grenada Bank, 145 So. 242, 199 So. 903; Abbey v. Delta Bank Trust Co., 139 Miss. 36, 103 So. 801; Kent v. Love, 141 Miss. 633, 106 So. 772.
The rule seems to be well settled that section 3815 of the 1930 Code imposes a liability on stockholders to create a fund for ratable distribution among the depositors of a failed bank, and for this reason a set off of a deposit in the bank against stock liability is improper. This seems to be clearly settled by all the decided cases.
Reimers v. Larson, 40 A.L.R. 1177, 1184; Robinson v. Brown, 126 Fed. 429; Burget v. Robinson, 51 C.C.A. 488, 113 Fed. 669; Hale v. Calder, 113 Fed. 670; Swicord v. Crawford, 148 Ga. 719, 98 S.E. 343, 23 Ga. App. 522, 98 S.E. 817; Farmers State Bank v. Reed, 114 Kan. 216, 217 P. 320; Re Empire City Bank, 18 N.Y. 199, 8 Abb. Pr. 192; Van Tuyl v. Schwab, 85 Misc. 172, 148 N.Y. Supp. 292, 164 App. Div. 933, 149 N.Y. Supp. 1116; Van Tuyl v. Schwab, 165 App. Div. 412, 150 N.Y. Supp. 786; Richards v. Schwab, 101 Misc. 128, 167 N.Y. Supp. 535; Kimbriel v. State, 106 Okla. 177, 233 P. 420; Duke v. Force, 120 Wn. 599, 23 A.L.R. 1354, 208 P. 67; Maritime Bank v. Troop, 16 Can. S.C. 456, 27 N.B. 295.
The ultimate duty and responsibility of construction is upon the court, and departmental construction cannot well be resorted to where the language of the statute is plain. Before the court is justified in following departmental construction, the law under consideration must be doubtful, ambiguous or uncertain.
Town of Wesson v. Collins, 72 Miss. 844; Railway Company v. Clark, 95 Miss. 689, 49 So. 177; State v. Cotton Compress Co., 123 Miss. 191, 55 So. 137; Railway Company v. Middleton, 190 Miss. 199, 68 So. 146; Robertson v. Texas Company, 141 Miss. 356, 106 So. 449; Conard Furniture Company v. Tax Commission, 133 So. 652; Board of Levee Commissioners v. Foote-Davis Co., 111 Miss. 10, 22 R.C.L. 455; 46 C.J. 1031, sec. 287; Love v. Anderson, Trustee of the Estate of J.E. Gift, deceased, 144 So. 562.
The state cannot be estopped by the unauthorized acts of its officers.
Eastman Oil Mills v. State ex rel. Roberson, 130 Miss. 63, 93 So. 484; Meridian Water Works Co. v. Meridian, 85 Miss. 515, 37 So. 927; Edwards Hotel City St. R.R. Co. v. Jackson, 96 Miss. 547, 51 So. 802.
The agreement of June, 1928, whereby certain stockholders put up subscriptions to take care of certain paper in the bank and had the paper transferred to trustees for their benefit was a valid and binding agreement supported by adequate consideration. This amounted to nothing more than the sale of these particular assets to the contributing stockholders. The superintendent of banks had a right to assess the stockholders under section 3780 of the 1930 Code (the statute of this state prior to the adoption of the 1930 Code was to the same effect), and he was proceeding under the statutory authority in making the assessment.
Bank v. Kimbrough, 157 Miss. 149, 127 So. 265; Love v. Dampeer, 159 Miss. 430, 132 So. 439.
Argued orally by Ely B. Mitchell and W.C. Sweat, for appellant, and by Clyde Hester, for appellee.
The appellee exhibited a bill in equity against the stockholders of the Corinth Bank Trust Company, now in the hands of the appellee for liquidation. Some time prior to the taking over of the bank by the appellee some of its stockholders paid to the bank the amount of their double liability on their stock, and others gave notes therefor under circumstances hereinafter to be set forth. One of the stockholders, a nonresident of Alcorn county, challenged the jurisdiction of the court as to him. Some of the stockholders had money on deposit with the bank when it was taken over by the appellee. The appellee did nothing formally evidencing his decision that the bank was insolvent before bringing the suit.
Pretermitting for the present the jurisdictional question raised by Sharp, the other questions presented for decision are: First, was the suit prematurely brought; that is to say, should the superintendent have first, in some formal way, declared the bank insolvent before bringing the suit? Second, are the stockholders who had money on deposit with the bank entitled to set off the amount thereof against their double liability on the stock? And, third, the questions growing out of the alleged payment by the stockholders of their double liability.
Section 3815, Code 1930, provides that: "The stockholders of every bank shall be individually liable, actually and ratably, and not for one another, for the benefit of the depositors in said bank to the amount of their stock at the par value thereof, in addition to said stock. . . . Such liability may be enforced in a suit at law or in equity by any such bank in process of liquidation, or by the superintendent of banks, or other officer succeeding to the legal rights of said bank." This statute does not require the superintendent of banks to formally declare a bank in liquidation before suing the stockholders thereof for the amount of the par value of their stock. All that is necessary is for him to make it reasonably appear that the assets of the bank will be insufficient to pay its depositors. Pate v. Bank of Newton, 116 Miss. 666, 77 So. 601.
When sued under this statute, the stockholders are without the right to set off any deposit of money they have with the bank against their liability thereunder, and thereby obtain a preference over the other depositors. Love, Superintendent of Banks, v. Mrs. R.H. Hooker (Miss.), 150 So. 917, decided November 20, 1933; Reimers, Receiver, v. Larson, 52 N.D. 297, 202 N.W. 653, 40 A.L.R. 1177, and note thereto. This statutory liability of the stockholders is not a debt due the bank by the stockholders, but is a security for the benefit of the bank's depositors who are entitled thereto free of equities between the bank and its stockholders. However, it is said by counsel for the appellants, and admitted by counsel for the appellee, that it has been the uniform custom of the banking department to permit such offsets when collecting the statutory liability of the stockholders of a bank to its depositors, and that this departmental construction of the statute should not now be departed from. If the proper construction of the statute in this particular was doubtful, the construction put thereon by the banking department would be entitled to great weight; but such is not the case, the banking department's heretofore construction of the statute was clearly erroneous.
The third question grows out of the following state of facts: On the 12th day of June, 1928, more than two years before the bank was taken over by the appellee, its board of directors adopted a resolution, which the reporter will set out in full. Pursuant to this resolution, some of the appellants paid the bank in question and others gave it their promissory notes, which together aggregated one hundred thirteen thousand seven hundred ten dollars and ninety-eight cents. The bank then delivered to the trustees under the agreement notes and securities, the par value of which aggregated one hundred seventy-eight thousand four hundred seventy-nine dollars and twenty-seven cents. The trustees thereupon, without consultation with any one, and we will assume without authority, allocated to the appellants a sufficient number of these notes and securities to aggregate, according to their par value, one hundred thirteen thousand seven hundred ten dollars and ninety-eight cents. They retained the other notes and securities and made collections on notes coming within each class, keeping their accounts so as to designate from which class the collections were made. All the money so collected by them, except a small amount which they distributed to the appellants, was deposited by them in the Corinth Bank Trust Company to their credit, and so there remained until the bank was taken over by the appellee. The appellants each claimed the right to set off his pro rata of the money so collected by the trustees and deposited with the Corinth Bank Trust Company. The court below allowed the set-off as to the money collected on the notes and securities allocated by the trustees to the appellants, but declined to allow it as to the money collected on the other notes and securities.
The appellee filed no cross-appeal to the set-off allowed the appellants, and consequently that ruling cannot be here disturbed, but the correctness thereof is necessarily involved in deciding whether the additional set-off claimed by the appellants should have been allowed. The contention of the appellants is that all of this money was wrongfully deposited in and received by the bank; therefore the bank held it as a trust fund for their benefit. When the trustees collected money on the notes and securities which they had allocated to the appellants, it became their duty within a reasonable time thereafter to distribute it pro rata among the appellants, and for the purpose of the argument we will assume that such also was their duty as to the money collected on the other notes and securities, in so far as the question here under consideration is concerned. Pending this distribution, the trustees had the right to deposit the money in a bank to their credit to be thereafter drawn out and distributed in accordance with the trust agreement; the bank, in receiving it on deposit and retaining it subject to the right of the trustees to withdraw it, violated no right of the cestui que trustent. The trust was not that of the bank but of the trustees in the trust agreement. That the money was deposited in this particular bank is of no consequence. It had the same right to receive it as any other bank would have had. The wrong done the appellants, if any, was by the trustees in delaying to pay the money over to them, for which the bank is not liable. Had the trust agreement required the money to be deposited with this bank, and it had been wrongfully retained by the bank after being so deposited, a different question would be presented, as to which we express no opinion.
This brings us to the jurisdictional question raised by Sharp as to him. The venue of this case is controlled by the provision of section 363, Code 1930, that "all cases not otherwise provided may be brought in the chancery court of any county where the defendant, or any necessary party defendant, may reside or be found." Had the appellee instituted separate suits against each of the stockholders, as he had the right to do, he would, of course, have had to sue each of them in the county of his residence, but he had the right to join all of the stockholders in a suit in equity, all of them being proper parties thereto. Abbey v. Delta Bank Trust Co., 139 Miss. 36, 103 So. 801. Such a suit, of course, must be filed in a county where a necessary party thereto is found. Leaving out of view what was said in Abbey v. Delta Bank Trust Company, supra, as to all of the stockholders being necessary parties, one of them certainly is such, and there is no contention here that none of the stockholders who are parties defendant to the bill reside in the county in which the suit was brought. The conditions of the statute were therefore met.
The complaints of the ruling of the court below on the cross-bill, not hereinbefore disposed of, are governed by Love v. State, for use of King (Miss.), 145 So. 619.
Affirmed.
ON SUGGESTION OF ERROR.
This case was affirmed on a former day of the court, and the appellants now suggest that we erred in affirming the action of the court below in disallowing a portion of its set-off claimed under the trust agreement referred to in the original opinion. In this they are correct; and that portion of the opinion will be withdrawn in so far as it affects this case, or as a precedent for future cases.
The error in the original opinion was one of fact, and will be hereinafter made to appear. The facts on which the claim to this set-off is based are substantially as follows: On the 12th day of June, 1928, more than two years before the bank was taken over by the appellee, the board of directors adopted a resolution (which is set out in 151 So. 367). Pursuant to this resolution some of the appellants paid the bank in money, and others gave it their promissory notes, which, together, aggregated one hundred thirteen thousand seven hundred ten dollars and ninety-eight cents. The bank delivered to the trustees, under the trust agreement, notes and securities, the par value of which aggregated one hundred seventy-eight thousand four hundred seventy-nine dollars and twenty-seven cents. The trustees thereafter collected a part of the amount due on a large number of these notes. They paid a small portion thereof to the appellants and deposited the other in the bank as collected. When the first collections were made, the money realized therefrom was deposited to the credit of the trustees, but this continued for only a short time when the account, with the consent of the trustees, was changed and thereafter designated on the bank's books as "directors' account," and was not thereafter checked on by the trustees. It constituted what is designated as a revolving account, and the greater part, if not all, of the money deposited therein seems to have been used by the bank to retire other paper due the bank. The error in the former opinion was in stating that this deposit continued in the name of the trustees at all times subject to their check. Some time after these notes were delivered to the trustees, all of whom were officers of the bank, one of them, without consultation with the others, or with any other person, separated them into two portions, one containing notes aggregating one hundred thirteen thousand seven hundred ten dollars and ninety-eight cents, and mentally allocated them to the purposes of the trust. The court below held that only the notes allocated by the trustee to the purposes of the trust became subject thereto, allowed the appellants' claim to a set-off to the extent of the collections on these notes, but disallowed it as to collections on the other notes.
The appellee's main contention seems to be that it was the intention of the bank in delivering these notes to subject only a sufficient part of them to aggregate at their face value the amount of money paid to the bank by the stockholders under the trust agreement, and that the trustee had the right to allocate them accordingly. This, as hereinbefore stated, was the theory on which the court below acted, but it is not supported by the evidence; for it is clear therefrom that all the notes were turned over to the trustees under the trust agreement. It is true that the bank was under no obligation to deliver to the trustees notes in excess of the par value of the amount paid it by the appellants under the trust agreement; but it had the right to do so, and, when it did, the notes became subject to the terms of the trust.
It may be that to the extent of the notes of par value in excess of the amount paid the bank by the appellants, the trust was voluntary; but, if so, the bank was nevertheless bound thereby, had no right thereafter to revoke it without the consent of the trust beneficiaries, and the trustees could deal with it only in accordance with the terms of the trust, for the rule is: "Unless a power to revoke or modify is expressly reserved, or the creation of the trust is affected by fraud, duress, or mistake, the settlor has no power to revoke or modify the trust, even though it was created without consideration." Bogert on Trusts, p. 248; 1 Perry on Trusts (7 Ed.), sec. 104 p. 132; 26 R.C.L. 1207; 65 C.J. 340; Nelson v. Ratliff, 72 Miss. 656, 18 So. 487. When the bank received from the trustees the money collected by them under the trust, as hereinbefore set forth, it held it under the terms of the trust subject thereto.
This brings us to the question of the appellants' right to set off the amount due them by the bank under this trust against their liability to the appellee, under section 3815, Code 1930, to the amount of their stock in bank. In answering this question we will confine ourselves strictly to the contentions of the appellee, and will not inquire into other matters that might relate thereto. The appellee admits the appellants' right of set-off as to the collections on the notes allocated to the trust by the trustees, and contends that the remainder of the notes did not become subject thereto. This contention, as hereinbefore set forth, is not maintainable; and, if that is the only reason why the set-off should not be allowed, then the appellants are entitled to it. The former judgment herein will be set aside in so far as it disallows the set-off here claimed, the decree of the court below reversed, and decree will be rendered here in accordance with this opinion.
So ordered.