Bankers' Agr. Credit Corporation v. Maize State Bank

• Decision Date: 26 January 1935
• Docket Number: 31993.
• Citation: 141 Kan. 210,39 P.2d 922
• Parties: BANKERS' AGRICULTURAL CREDIT CORPORATION v. MAIZE STATE BANK et al.
• Court: Kansas Supreme Court

39 P.2d 922

141 Kan. 210

BANKERS' AGRICULTURAL CREDIT CORPORATION v. MAIZE STATE BANK et al.

No. 31993.

Supreme Court of Kansas

January 26, 1935

Syllabus by the Court.

Deposit of proceeds of mortgage foreclosure sale placed in bank in name of clerk, who was also bank's cashier, held mere general deposit, and not entitled to priority on bank's closing, where deposit was commingled with general funds of bank without agreement for trust or bailment.

A man was appointed to clerk a mortgage sale. He was cashier of a bank, and the mortgagor owed also the bank. When the sale was made, the proceeds of it were placed in the name of the clerk of the sale as other general deposits are made. The money was not segregated or set apart, and there was no understanding shown that the bank stood in the relation of a trustee or bailee of the deposit. The money was used for honoring checks, making loans, and was commingled with the general funds of the bank. Held, that the deposit is a general one creating the relation of debtor and creditor, and is not entitled to be preferred.

Appeal from District Court, Sedgwick County, Division No. 3; Grover Pierpont, Judge.

Action by the Bankers' Agricultural Credit Corporation against the Maize State Bank and Charles W. Johnson, receiver. From an adverse judgment, plaintiff appeals.

A. M Ebright, P. K. Smith, and Bernard Peterson, all of Wichita for appellant.

Paul J Wall, Carl I. Winsor, and John E. Boyer, all of Wichita, for appellees.

JOHNSTON Chief Justice.

This was an action brought against the receiver of a failed bank to establish his right to a fund claimed as preferred. A demurrer to plaintiff's evidence was sustained, from which ruling the plaintiff claiming the preference has appealed.

O. Riley owed the plaintiff a debt of $527.58, which was secured by a chattel mortgage on Riley's cattle and other property. Riley held a public sale and sold the mortgaged property. He was also indebted to the Maize State Bank, so he employed F. P. Bowen, cashier of the Maize State Bank, to act as clerk of the sale. The agreement with Riley was that Bowen should act as the cashier and should clerk the sale and keep a record of the items sold and collect the accounts. Riley and Bowen had an understanding that the proceeds of the sale should first pay the costs of the sale; second, pay the plaintiff's mortgage, and then any balance over and above the amount of plaintiff's mortgage was to be applied on Riley's indebtedness to the bank, but there was no agreement with the bank that the deposit should be held in trust or as a bailee. The proceeds collected from the sale were taken by Bowen and placed in the bank under the name of "F. P. Bowen, Clerk of the Riley Sale." Bowen gave some checks for expense of sale; gave the plaintiff a check in the amount of $527.58 in payment of the plaintiff's note and mortgage. This check was signed "F. P. Bowen, Clerk of the Riley Sale." It was dated February 20, 1933, indorsed on the back, but was not paid, as the bank had closed its doors on February 28th.

On February 20, 1933, there was on deposit to this account the sum of $552.89. At the time the bank closed, there was a balance of $495.42, part of the deposits had been checked out by Bowen to pay other costs incident to the sale. This money came into the hands of the receiver when he took charge of the bank, but was not a separate fund. The receiver contends that it is not a trust fund.

The real question involved in the case is, Is this deposit which passed into the hands of the receiver a trust fund and entitled to be declared a preferred claim, or is it a general deposit in which the relation of debtor and creditor was created?

Bowen made the deposit in the bank substantially in the way all deposits of a general character are made. There was no agreement to keep the deposit as a separate fund or to create the relation of principal and agent as to the deposit. While Bowen was an officer of the bank, he was not acting for the bank in the making of the deposit. He took the results of the sale and deposited them...