Bank of Poplar Bluff v. Millspaugh

• Decision Date: 15 March 1926
• Citation: 281 S.W. 733,313 Mo. 412
• Parties: BANK OF POPLAR BLUFF v. FRANK C. MILLSPAUGH, Commissioner of Finance, in Charge of Liquidation of Bank of Puxico
• Court: Missouri Supreme Court

281 S.W. 733

313 Mo. 412

BANK OF POPLAR BLUFF v. FRANK C. MILLSPAUGH, Commissioner of Finance, in Charge of Liquidation of Bank of Puxico

Supreme Court of Missouri

March 15, 1926

Transferred from St. Louis Court of Appeals.

Reversed (with directions).

Oliver & Oliver for appellant.

(1) Where a note or draft is sent by one individual or bank to another bank for collection and remittance of the proceeds to the sender the relation of principal and agent is created and not that of creditor and debtor. Upon that fundamental underlying principle of law and equity this claim should be allowed as a preferred claim. Midland Natl. Bank v Brightwell, 148 Mo. 358. (2) "The Missouri doctrine . . . is, that where a trustee, agent or bailee wrongfully mixes trust money with his own so that it cannot be distinguished which is his own, and which is trust money, and becomes insolvent, equity will follow the trust money by taking out of the insolvent estate of the fiduciary the amount due the cestui qui trust, although it cannot be identified or separated from the other fund with which it is fixed." Paul v. Draper, 158 Mo. 200; Stoller v. Coates, 88 Mo. 514; Harrison v Smith, 83 Mo. 210; Bank v. Brightwell, 148 Mo. 365; Schulz v. Bank of Harrisonville, 246 S.W. (Mo. App.) 614. (3) When a bank receives from its correspondent a check upon itself, it is the agent for its correspondent to make presentation to itself. Hilsinger v. Trickett, 36 Ohio St. 286, Anno. Cases, 1913-D, p. 421. (4) This check for $ 5000 was accepted by Bank of Puxico. It kept it three days and then sought and pretended to pay it by the issuance, on December 14th ten days before it closed its doors, of its own check on the Bank of Gorin. When the check was accepted by the Bank of Puxico that immediately operated as an assignment of its funds to that extent under our statute. Sec. 975, R. S. 1919. (5) The net result of the transaction of payment and the receipt thereof by the collecting bank was the same as though it had drawn the currency into its own hands by means of a check, and had, thereupon, delivered the same to the collecting bank in payment of the sight draft. (6) The plaintiff is entitled to preference. British & Am. Mtge. Co. v. Tibbetts, 63 Iowa 468; Messenger v. Carroll Trust & Savings Bank, 187 N.W. 546; Page County v. Rose, 130 Iowa 296; Kansas State Bank v. First State Bank, 62 Kan. 788; State Natl. Bank v. First Natl. Bank, 124 Ark. 531; Natl. Life Ins. Co. v. Mather, 118 Ill.App. 491; Arnoz v. Bingham, 55 Hun, (N. Y.) 653; Peoples v. Merchants Bank, 92 Hun, 159; Cunningham v. State, 115 Ark. 176; Capital Natl. Bank v. Cold Water Natl. Bank, 49 Neb. 786.

John A. Gloriod for respondent.

(1) No trust fund or agency relation existed between appellant and respondent. Appellant stands in the same position as Mrs. Reichert, the drawer of the draft in question, and the relation is that of creditor and debtor. American Bank of De Soto v. People's Bank, 255 S.W. 943; Utley v. Hill, 155 Mo. 232; Allen Grocery Co. v. Bank, 192 Mo.App. 476. (2) No trust fund was created in this case, neither was there an increase of the assets of the Bank of Puxico, nor was there any reduction of its liabilities. American Bank of De Soto v. People's Bank, 255 S.W. 943; Midland Natl. Bank v. Brightwell, 148 Mo. 358; 7 C. J. 675.

White, J. All concur, except Otto, J., not sitting.

OPINION

WHITE

This case reached the Springfield Court of Appeals on appeal from a judgment for defendant in the Circuit Court of Stoddard County. The Court of Appeals reversed the judgment, but deeming the conclusions reached to be in conflict with the ruling of the St. Louis Court of Appeals in American Bank v. People's Bank, 255 S.W. 943 certified the case to this court.

The opinion of Bradley, J., who spoke for the Springfield Court of Appeals, so clearly presents the reasons for the conclusions, which we think to be sound, that we adopt his language as follows:

"This is an action to have allowed as a preferred claim a demand against the Bank of Puxico, which failed and was placed in the hands of the Commissioner of Finance for liquidation. On trial below the claim was allowed as a general claim, but was denied preference. From the judgment plaintiff appealed.

"The cause was tried upon an agreed statement of facts, which agreed statement in substance is as follows: December 11, 1923, Ethel Reichert had on deposit in the Bank of Puxico $ 5,000, and on that date she drew a draft upon said Bank of Puxico, payable to plaintiff bank. This draft was delivered to plaintiff with direction to collect said $ 5,000 from the Bank of Puxico and place it to her credit in plaintiff bank. December 12th plaintiff bank presented said draft to the Bank of Puxico and demanded immediate payment, and said draft was accepted by said Bank of Puxico. The Bank of Puxico failed and refused to pay said draft or any part thereof throughout the 12th, 13th, 14th, and 15th of December, although during that time it paid checks, drafts and claims drawn upon it by others. On December 15th the Bank of Puxico drew and mailed to plaintiff its draft dated December 14th for $ 5,000, on the Citizens Trust Company of Gorin, Missouri, payable to the order of plaintiff. Said trust-company draft was received by plaintiff December 16th, and was forwarded in the usual way and presented to the drawee, the Citizens Trust Company of Gorin, on December 19th, but payment was refused. The draft on the trust company was protested, and on December 19th plaintiff was advised by telegram of non-payment. On same day, December 19th, plaintiff again demanded of the Bank of Puxico payment of the Reichert draft drawn on December 11th, and said Bank of Puxico promised to pay it, but did not do so. Again on December 20th and 21st plaintiff demanded payment and each time the Bank of Puxico promised, but failed to pay.

"From December 12th, when the Reichert draft was first presented and accepted, to December 22nd the Bank of Puxico continued to receive deposits, and pay numerous demands amounting in the aggregate to many times $ 5,000. There was in the till of the Bank of Puxico and to its credit in other solvent banks more than $ 5,000 on December 12th when the Reichert draft was first presented and accepted, and that condition continued to exist up to and including December 20th. The books of the Bank of Puxico showed at all times mentioned herein that it had on deposit with the Citizens Trust Company of Gorin more than $ 5,000, but the books of the trust company showed only $ 640.46, and it is agreed that $ 640.46 is correct.

"December 22nd the Bank of Puxico ceased to do business, but on December 26th the Commissioner of Finance, or the deputy in charge, charged the account of Ethel Reichert with the $ 5,000 drawn by her on December 11th.

"The act of the plaintiff bank, under the existing facts, in sending to the Bank of Puxico the Reichert draft was equivalent to designating the Bank of Puxico as the agent of plaintiff to present the draft to itself, collect it, and send the money to plaintiff. In other words, the act of the plaintiff bank in sending the Reichert draft to the Bank of Puxico for collection and remittance created between the plaintiff bank and the Bank of Puxico the relation of principal and agent. [Midland Nat. Bank v. Brightwell, 148 Mo. 358, 49 S.W. 994, 71 Am. St. 608; Capital Nat. Bank v. Coldwater Nat. Bank, 69 N.W. 115, 59 Am. St. 572; State v. Bank of Commerce, 85 N.W. 43, 52 L. R. A. 858; State Nat. Bank v. First Nat. Bank, 124 Ark. 531, 187 S.W. 673; Goodyear Tire & Rubber Co. v. Hanover State Bank, 204 P. 992, 21 A. L. R. 677; Federal Reserve Bank of Richmond v. Bohannan, 127 S. E. (Va.) 161; Federal Reserve Bank of Richmond v. Peters, 123 S. E. (Va.) 379; Board of Supervisors v. Prince Edward-Lunenburg County Bank, 121 S. E. (Va.) 903; Nyssa-Arcadia Drain. Dist. v. First Nat. Bank, 3 F. 648.]

"In Midland National Bank v. Brightwell, supra, the court said: 'When a note or draft is sent by one individual or bank to another bank for collection and to remit the proceeds to the sender the relation of principal and agent is created, and not that of creditor and debtor.'

"When the agent, the collecting bank, has collected the item sent to it for collection and remittance, it holds the proceeds, according to the great weight of authority, prior to remittance, as trustee for the sender, unless the two banks, the sender and the collecting bank, are transacting business with each other on what is known as the reciprocal accounts method, about which we shall have more to say, infra. If the money is sent in remittance all the authorities agree that the transaction is final, and the forwarding bank's title to the money after it leaves the hands of the collecting bank is superior to all claims against the collecting bank. [Federal Reserve Bank v. Peters, supra, l. c. 382.] The divergence of opinion, when the reciprocal-accounts method does not exist, is upon the legal effect of the collecting bank remitting by draft instead of sending the money. Some authorities hold that the act of remitting by draft changes the theretofore relation of principal and agent to that of debtor and creditor. [Akin v. Jones, 27 S.W. 669, 25 L. R. A. 523, 42 Am. St. 921; Sayles v. Cox, 32 S.W. 626, 32 L. R. A. 715, 42 Am. St. 940.] Also some authorities hold that where an item for collection is sent by one bank to another in the usual course of business and without instructions that only the relation of debtor and creditor is created. [United States Nat. Bank v. Glanton, 92 S. E. (Ga.) 625, L. R. A. 1917 F, 600; Union Nat. Bank v. Citizens Bank, 54 N. E. (Ind.) 97; Peters Shoe Co. v. Murray, 71 S.W. 977.]

"Also some cases have been ruled because of a...