Aetna Cas. & Sur. Co. of Hartford, Conn. v. Local Bldg. & Loan Ass'n
| Decision Date | 28 February 1933 |
| Docket Number | 20330. |
| Parties | ÆTNA CASUALTY & SURETY CO. OF HARTFORD, CONN. v. LOCAL BUILDING & LOAN ASS'N. |
| Court | Oklahoma Supreme Court |
Syllabus by the Court.
1. The funds of a school district which have been wrongfully embezzled or misappropriated are trust funds and may be traced and recovered until they have reached the hands of one who received them without knowledge of their trust character and parted with value or suffered detriment by reason of their receipt.
2. The deposit of trust money in a bank, although it creates the relation of debtor and creditor between the bank and depositor, does not relieve the funds of its trust character until and unless the rights of innocent parties have intervened.
3. The knowledge of agent is not imputed to his principal where the knowledge sought to be imputed concerns, or is connected with, an independent fraudulent act being perpetrated by the agent for his own benefit, unless such agent is the only agent acting for the principal in connection with the transaction both in perpetrating the fraudulent act and in receiving the benefits thereof.
4. Where an agent who has previously embezzled moneys from his principal misappropriates the funds of a school district, of which he is treasurer, and uses them to account to the principal for the money embezzled, and such school district funds are transmitted to the principal through checks drawn on a special agent's account, which checks are received and cashed by other agents of the principal, such agent is not the only agent acting for the principal in the receipt of the funds.
5. A principal which through other agents has received money impressed with a trust character from one of its agents without knowledge, either actual or imputed, of the source thereof, and which by reason of the receipt of such money has suffered detriment or altered its position to its detriment is, to the extent that its position has been altered, an innocent holder of such money for value.
6. In an action by the beneficial owner to recover trust funds, the question of whether or not an innocent person into whose hands such funds have been traced has parted with value or suffered detriment by reason of that receipt is ordinarily a matter of defense and should be pleaded and proved as such even though the facts pleaded in the petition raise a strong inference that detriment was suffered.
7. Petition examined, and held that it appears therefrom that the defendant in possession of trust funds is innocent of any knowledge, either actual or constructive, of their character. Held further, that it does not affirmatively appear in the petition that the defendant parted with value by reason of the receipt of such funds.
8. Record examined, and held the acts of the trial court in sustaining a demurrer to the petition and dismissing the cause should be reversed, with directions.
Appeal from District Court, Oklahoma County; Geo. W. Clark, Judge.
Action by the Ætna Casualty & Surety Company of Hartford, Conn against the Local Building & Loan Association. From a judgment sustaining a demurrer to the petition and dismissing the action, the plaintiff appeals.
Reversed with directions.
Green & Farmer, of Tulsa, for plaintiff in error.
Everest, Vaught & Brewer, of Oklahoma City, for defendant in error.
This is an appeal from a judgment rendered by the district court of Oklahoma county sustaining a demurrer to the petition and dismissing the case.
The parties will be referred to as they appeared in the trial court.
The plaintiff, plaintiff in error herein, filed its action in the district court of Oklahoma county in March of 1927, seeking to recover from the defendant, Local Building & Loan Association, defendant in error herein, the total sum of $12,843.46, on four causes of action. The different causes of action may be considered collectively. The following is the substance of the facts as stated in petition.
Defendant Local Building & Loan Association is a domestic corporation with its principal place of business located at Oklahoma City. During May and the subsequent months of the year 1925 it was conducting its business in the city of Henryetta, Okl., through its agent R. B. Campbell, through whom it made its loans and collected the installments due thereon. Campbell made monthly remittances of the collections thus received to the defendant association. During the same period of time Campbell was treasurer for the Henryetta school district. The plaintiff herein was surety on his official bond conditioned upon the faithful performance of his official duty.
Several bank accounts are concerned in this case. Campbell carried an account in the Henryetta State Bank in the name of Local Building & Loan Association, R. B. Campbell, agent. He carried his personal account in the same bank. Funds of the school district were on deposit in that bank as well as the Citizens' Bank of Henryetta. On July 3, 1925, Campbell drew a check against the account of the Local Building & Loan Association, R. B. Campbell, agent, to the defendant in the sum of $3,225.81, which purports to represent June, 1925, collections, collected by Campbell as agent of the defendant association. This check was mailed to the defendant at Oklahoma City, and by the defendant deposited in due course, reaching the Henryetta State Bank for payment on July 14, 1925. When the check was drawn the account on which it was drawn contained the sum of $2.26. On the 9th day of July, 1925, Campbell drew out of the funds of the school district in the Citizens' Bank of Henryetta $3,250. With this he procured a cashier's check payable to his individual order, and on the same day deposited this sum in his personal account in the Henryetta State Bank, at the same time drawing a personal check on his personal account for the sum of $3,250 and depositing it in the account of the Local Building & Loan Association, R. B. Campbell, agent. His personal account was overdrawn when he deposited the money in it, and overdrawn after he had taken it out. This deposit was used by the bank in meeting the check mailed to the Local Building & Loan Association bearing date of July 3, 1925.
The above transactions formed the basis of the first cause of action. The second, third, and fourth causes of action were based upon similar transactions occurring in the subsequent months of September, October, and November, respectively. The details of these subsequent transactions are herein omitted for the reason that their recitation would serve no useful purpose. All of them were similar in character. In each of them, Campbell drew a check on the special agent's account purporting to represent the previous month's collections. The checks were mailed to the defendant association at Oklahoma City, and there received and placed in the process of clearance by other agents of the defendant. While each check was in the process of clearance, Campbell, in order that it might be paid when presented, transferred the funds of the school district under his control as treasurer through his personal account. On each occasion there was only a small balance, and on some occasions an overdraft in both the personal account and the special agent's account at the time of the transactions. It is apparent that these accounts were used by Campbell as a convenient means of transferring the money of the school district to the defendant without revealing to either the defendant or the school district what was going on. On each occasion the complete transfer from the school district account to the special agent's account was accomplished in the same day.
Plaintiff alleges that the defendant association through its agent and representative Campbell had actual and constructive knowledge of the disposition being made of the school board funds, and received said funds with that knowledge.
The plaintiff by reason of its obligation on the surety bond was compelled to and did reimburse the school district for the loss it has sustained, and by reason thereof was subrogated to the rights of the school district in connection with each of the transactions above referred to. Each of the remittances to the Local Building & Loan Association together with the surrounding and attending circumstances forms the basis of a separate cause of action; the first cause of action being for the sum of $3,320, and the second for the sum of $3,215.11, the third for the sum of $3,693.72, and the fourth for the sum of $2,611.14.
The trial court sustained a demurrer to each of the four causes of action contained in the petition of the plaintiff on the grounds that the facts therein pleaded did not constitute a cause of action. Plaintiff elected to stand on the petition. The court there-upon dismissed the case, and the plaintiff perfected its appeal to this court. For the purpose of this review the facts as stated in the petition are deemed to be true.
A survey of the facts as above outlined will reveal that we are confronted with the problem of determining which of two innocent parties shall suffer a loss. This is always a perplexing problem, and, in this particular situation, the adjudicated cases are by no means in harmony as to the proper ultimate result.
The identical problem presented by this case does not seem to have previously confronted this court. A correct solution requires a review of the rules of law involved, together with an examination of the reasons for some of these rules, in order to determine their proper application.
The plaintiff urges that the defendant is liable because the money was taken by its agent under circumstances amounting to fraud, and further contends that notice of the fraudulent manner in...
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