Andrew v. Farmers Sav. Bank of Goldfield

• Decision Date: 23 January 1929
• Docket Number: 39267
• Citation: 223 N.W. 249,207 Iowa 394
• Parties: L. A. ANDREW, State Superintendent of Banking, Appellee, v. FARMERS SAVINGS BANK OF GOLDFIELD, Appellee; MAGNUS HANSON, Guardian, Appellant
• Court: Iowa Supreme Court

223 N.W. 249

207 Iowa 394

L. A. ANDREW, State Superintendent of Banking, Appellee, v. FARMERS SAVINGS BANK OF GOLDFIELD, Appellee;

MAGNUS HANSON, Guardian, Appellant

No. 39267

Supreme Court of Iowa, Des Moines

January 23, 1929

Appeal from Wright District Court.--T. G. GARFIELD, Judge.

This is an action to establish a trust on the funds belonging to the defunct Farmers Savings Bank in the receiver's hands because of a wrongful deposit of the minor's moneys by the guardian. The claim was denied by the trial court, and the minor appeals.--Modified and affirmed.

Affirmed.

Nagle & Hill, for appellant.

J. W McGrath and McGrath, Archerd & McGrath, for appellee.

KINDIG J. ALBERT, C. J., and EVANS, STEVENS, and FAVILLE, JJ., concur.

OPINION

KINDIG, J.

It appears from the record that M. F. Coons was president, and W. M. Coons cashier, of the Farmers Savings Bank of Goldfield. M. F. Coons was at one time the administrator of the estate of George C. Nelson, who died survived by a minor daughter, Margery Nelson. W. M. Coons, the cashier, was appointed guardian of Margery's property. At the time the George C. Nelson estate was closed, the administrator turned over to the guardian, on September 22, 1924, the sum of $ 6,665.30. That money was deposited by the guardian in the Farmers Savings Bank, as a loan, without order of court authorizing or approving the same. The original certificate of deposit was paid, and a redeposit of the proceeds thereof again made, without judicial sanction. So, when the bank ceased operations because of insolvency, March 11, 1926, the account of the minor's guardian therein consisted of a certificate of deposit for $ 5,500 and a checking account of $ 655.22. When the bank closed its doors, appellee, who was then state superintendent of banking, was duly appointed receiver. Afterwards, Magnus Hanson, the present guardian, was substituted for W. M. Coons, the original guardian. Claim for a preference on behalf of the minor was made by the new trust officer, who is now the appellant.

Basis for that preference on the theory of a trust is asserted by appellant to be found in the illegal deposit by the former guardian. Such relief was denied by the trial court, but the demand was allowed as a general deposit. Ground for reversal is now predicated upon the thought that a trust grew out of the transaction before explained, and the minor's property should be redelivered to her present guardian accordingly.

I. Section 12581 of the 1924 Code provides:

"Guardians of the property of minors must prosecute and defend for their wards, may employ counsel therefor, lease lands, loan money, and in all other respects manage their affairs, under proper orders of the court or a judge thereof."

In the case at bar, the initial guardian of Margery Nelson loaned his ward's money and managed her affairs without either being first authorized so to do or subsequently receiving approval of such previous act by an order of any court or a judge thereof. Did the absence of such judicial sanction vitiate the loan and deposit agreements? An answer to that question can be found in the adjudicated cases.

No loans made, or other management of the minor's estate, have validity, generally speaking, without "the proper order of the court or a judge thereof." McCutchen v. Roush, 139 Iowa 351, 115 N.W. 903; McIntire v. Bailey, 133 Iowa 418, 110 N.W. 588; Easton v. Somerville, 111 Iowa 164, 82 N.W. 475; Andrew v. Sac County State Bank, 205 Iowa 1248, 218 N.W. 24. Specific application of that doctrine has been made to a guardian's attempt to make an unauthorized loan. Bates v. Dunham, 58 Iowa 308, 12 N.W. 309; Slusher v. Hammond, 94 Iowa 512, 63 N.W. 185. Bates v. Dunham, supra, says:

"We are of the opinion that Section 2250 of the Code [of 1873, now 12581, under 1924] modifies the common-law rule as to the power of a guardian over the property of his wards. The powers which the guardians of property possess are conferred in Section 2250. They must manage the interests of their wards under the direction of the court. They may thus--that is, under the direction of the court--lease their lands, loan their money during their minority, and do all other acts which the court may deem for the benefit of the wards. This implies an inhibition upon the doing of these acts without the direction of the court. * * * But when an act is to be done under the direction of the court, as provided in Section 2250 of the Code of 1873, the direction precedes the act, and without such direction there is no authority to do the act. * * *"

Likewise, Slusher v. Hammond, supra, declares:

"This section [2250 of 1873 Code] was under consideration in the case of Bates v. Dunham, 58 Iowa 308, 12 N.W. 309, and was held to so far modify the common-law rule as to inhibit the investment of money and the doing of other acts by the guardian for the ward without the direction of the court, and to require that the direction be given before the act. * * * It is true, the facts in that case are in some respects unlike those in this, but the general rule announced in that case, that the direction of the court must precede the act of the guardian in making investments and doing other acts for his ward, is applicable in this."

Andrew v. Sac County State Bank, supra, is in harmony with the above and foregoing discussion. There, the action of the guardian did not amount to a loan or management of the ward's affairs, but rather, the transaction involved only a temporary deposit for safe-keeping, pending the presentation of the guardian's final report to the court for approval. Before us, however, in the case at bar, is a very different situation. Here, the course pursued by the guardian amounted to more than a mere precaution on his part to put the minor's funds in a place of safety. Rather than that, the original guardian negotiated for and attempted to effect a deposit in the nature of a loan, extending over a definite time, at a prescribed rate of interest. Hence, in this case, the guardian's endeavors in the premises were of no avail, because there was absent the supporting order of the court or judge, as required by said legislation. (There may be instances where such deposit could receive the subsequent approval of the court and thereby become valid. We do not have that question here, and consequently do not decide it.)

II. Deposits in banks come within the purview of that well established principle. If, then, the placing of money in the financial institution was not properly authorized, the result is a nullity, so far as the attempted contractual relation is concerned. Consequently a trust arises, and the funds involved are to be held by the bank as a trustee, for the benefit of the ward. Garner v. Hendry, 95 Iowa 44, 63 N.W. 359; In re Assignment of Knapp & Co., 101 Iowa 488, 70 N.W. 626. See, also, City of New Hampton v. Leach, 201 Iowa 316, 207 N.W. 348; Leach v. Grinnell Sav. Bank, 205 Iowa 1345, 219 N.W. 483; Leach v. Battle Creek Sav. Bank, 205 Iowa 971. Upon this subject, Garner v. Hendry, supra, consistently states:

"The law of this state inhibits the investment of money and the doing of other acts by the guardian in behalf of the ward without the direction of the court, and that direction must be given before the act. * * * In the proceeding to have the claim established as against the funds in the hands of the assignee of the bank, it was found and adjudged that the transactions between the defendant and the bank were of such a nature that the subject of the transaction retained its trust character. That could not have been the case, had the money in question been loaned to the bank by authority of the court. We conclude that the evidence was sufficient to justify the court in finding that the money was invested in a manner not authorized by it; that the defendant should be held responsible for the investment; and that he is liable in this action for its full amount."

To the same effect is the following language in In re Assignment of Knapp & Co., supra:

"The fact of the wrongful deposit, in which the bank participated, takes the case out of the usual rule as to deposits, whereby the title to the money deposited is changed from the depositor to the bank, and the bank takes the property in trust. Because the trustee, or other officers in charge of the trust fund, has no authority to deposit it, its character, when deposited, is preserved in the interest of the cestui que trust; and as the trustee could not, by the act of depositing, prejudice the rights of the cestui que trust, he cannot, by his subsequent acts in taking a dividend, prejudice such rights."

III. Therefore, appellant's remedy in this proceeding is predicated upon the fact that the closed bank holds the ward's property in trust. Ownership thereof, under those circumstances, remains in the minor, and the relationship of debtor and creditor between the bank and the minor did not arise through the former guardian's actions. Andrew v. State Bank of New Hampton, 205 Iowa 1064, 217 N.W. 250; Leach v. Iowa State Sav. Bank, 204 Iowa 497, 212 N.W. 748; Leach v. Farmers' Sav. Bank of Hamourg, 204 Iowa 1083, 216 N.W. 748; City of New Hampton v. Leach, 201 Iowa 316, 207 N.W. 348.

As the redress is here sought upon that ground, appellant's right to recover is not completed by the mere establishment of the trust alone. He must go further before the receiver of the defunct institution can be compelled to turn over to him any part of the trust property. Identification of the ward's money is necessary, and the burden is upon appellant to trace the same as a trust fund into the custody of the receiver. Andrew v. State Bank of New Hampton, supra; Leach v. Farmers Sav. Bank of Hamburg, supra; ...