Bartlett v. McCallister

• Decision Date: 20 December 1926
• Docket Number: 25198
• Parties: Ralph S. Bartlett, Erwin J. Bartlett, Homer F. Schooling and Bartlett Brothers Land & Loan Company v. Joe McCallister et al; Milan State Bank and Frank C. Millspaugh, Commissioner of Finance, Appellants
• Court: Missouri Supreme Court

289 S.W. 814

316 Mo. 129

Ralph S. Bartlett, Erwin J. Bartlett, Homer F. Schooling and Bartlett Brothers Land & Loan Company v. Joe McCallister et al; Milan State Bank and Frank C. Millspaugh, Commissioner of Finance, Appellants

No. 25198

Supreme Court of Missouri

December 20, 1926

Appeal from Livingston Circuit Court; Hon. Arch B. Davis Judge.

Affirmed.

T. E Francis and Ernest A. Green for appellants; William C. Irwin of counsel.

(1) This suit cannot be maintained against appellants, because no claim was filed by plaintiffs, or either of them, with the Commissioner of Finance as required by law, and the trial court, therefore, erred in failing and refusing to find for defendants and dismiss plaintiffs' bill. Sec. 11720, R S. 1919; Laws 1915, p. 123; Koch v. Missouri-Lincoln Trust Co., 181 S.W. 48; Steffens v. Bank, 43 Mo. 385; Wisconsin Trust Co. v. Cousins, 179 N.W. 801. (2) The court erred in finding and rendering judgment for plaintiffs and erred in failing and refusing to enter judgment in favor of appellants, for the following reasons, and each of them: (a) The remittance of $ 29,355, as made by plaintiff Bartlett Brothers Land & Loan Company to its agents, the defendants Joe and Mark McCallister, constituting the McCallister Loan Company, was not impressed with a trust even as against the old Milan Bank; and the trial court erred in not so holding. 39 Cyc. 71; 7 C. J. 751, sec. 548; 26 R. C. L. 1180; Truby v. Pease, 240 Ill. 513; Butcher v. Butcher, 134 Mo.App. 67; Paul v. Draper, 158 Mo. 199; Benton v. German-American Bank, 122 Mo. 339. (b) The remittance from plaintiff Bartlett Brothers Land & Loan Company to the McCallister Loan Company was placed in the old Milan Bank as a general deposit, and hence did not constitute a trust fund; and the trial court erred in not so holding. Butcher v. Butcher, 134 Mo.App. 67; Paul v. Draper, 158 Mo. 199; Harrison v. Smith, 83 Mo. 210; Stotler v. Coates, 88 Mo. 514; Midland Nat. Bank v. Brightwell, 148 Mo. 358; Minard v. Watts, 186 F. 247; School District v. Bank, 102 Mass. 174; Fletcher v. Sharp, 108 Md. 276; Wetherell v. O'Brien, 140 Ill. 146; Mudd v. Bank, 175 Mo.App. 398; Ihl v. Bank, 26 Mo.App. 129; Pennington v. Bank, 77 S.E. 456. (c) The knowledge on the part of the defendant Joe McCallister with reference to such remittance and the purpose for which it was sent, which was received by him other than in his official capacity as cashier of the Milan Bank, was not knowledge that could be imputed to the Milan Bank; and the trial court erred in not so holding. Bank v. Fitze, 76 Mo.App. 363; Benton v. German-American Nat. Bank, 122 Mo. 339; Bank v. Bryan, 72 W.Va. 29; Pueblo Savings Bank v. Richardson, 39 Colo. 319; Hilliard v. Lyons, 180 F. 687; 1 Morse on Banks & Banking (5 Ed.) sec. 166, pp. 370, 372; Melton v. Pensacola Bank, 190 F. 126; Bank v. Lovitt, 114 Mo. 519; Bank v. Loyhead, 28 Minn. 396; Leonard v. Latimer, 67 Mo.App. 138; Latimer v. Equitable Loan Co., 78 Mo.App. 467. (d) The moneys paid by the plaintiffs Ralph S. Bartlett and Erwin J. Bartlett to the McCallisters and deposited by them generally to the McCallister-Schooling account cannot be held to be a trust fund for the same reasons. The Milan Bank was not chargeable with notice of its special character; and the trial court erred in not so holding. (e) In no event could the Milan State Bank be held as a trustee ex maleficio, since it acquired the assets of the Milan Bank in consideration of its assumption of the liabilities of the latter bank, without any notice or knowledge, actual or constructive, that any trust existed in favor of or was claimed by plaintiffs, or any of them. (f) The trial court erred in holding that the assets of the Milan State Bank were impressed with a trust in favor of plaintiffs, to the extent of $ 16,600 and $ 2008.12 interest, for the reason that the agreed facts establish that, at the time the Milan State Bank acquired the assets of the Milan Bank, there was on deposit to the credit of the account in question (the McCallister & Schooling account) only $ 618.65, the balance of the funds which plaintiffs claim were impressed with a trust having previously been checked out. (g) The plaintiffs, respondents, having elected to accept an assignment from the defendant Joe McCallister of certain assets for the purpose of recouping the same losses for which they now sue, are estopped from proceeding against the assets of the Milan State Bank to recover for the same alleged losses and the trial court erred in failing to so hold. Ottumwa Nat. Bank v. Totten, 94 Mo.App. 596; Dry Goods Co. v. Warden, 151 Mo. 585; Nanson v. Jacob, 93 Mo. 331; Realty Co. v. American Surety Co., 238 S.W. 494.

Chas. H. Mayer for respondents.

(1) Joe McCallister knew that the $ 29,355 sent by Bartlett Brothers Land & Loan Company to the McCallister Loan Company was sent to the latter company for the specific purpose of paying the encumbrances on the farm and perfecting title in Schooling, so that the Bartlett Brothers Land & Loan Company mortgage would be a first lien, and his knowledge, he being the sole managing officer of the Milan Bank, was the bank's knowledge. Moreover, in accepting the deposit from the McCallister Loan Company and in afterwards changing the account to McCallister & Schooling, he was acting both for himself and for the bank. Leonard v. Latimer, 67 Mo.App. 138; Bank of Amsterdam v. Welliver, 215 Mo.App. 247; Citizens' Trust Co. v. Coppage, 227 S.W. 1059; Farmers & Merchants Bank v. Loyd, 89 Mo.App. 262; Latimer v. Loan Co., 78 Mo.App. 463; Bank of Senath v. Douglass, 178 Mo.App. 664; Tatum v. Bank & Trust Co., 69 So. 508; State v. American State Bank, 187 N. W. (Nebr.) 769; First National Bank v. Blake, 60 F. 78; State Bank v. Adams, 17 N. W. (Minn.) 927; Farmers & Merchants Bank v. Kohler, 198 N. W. (Minn.) 415; Mays v. First State Bank, 247 S.W. 845. (2) The remittance of $ 29,355 in the hands of McCallister Loan Company was a trust fund; the Milan Bank, with knowledge that it was a trust fund, took it, added it to and mingled it with its other assets, and therefore the general assets of the bank should be charged with the amount wrongfully converted. Harrison v. Smith, 83 Mo. 210; Stoller v. Coates, 88 Mo. 514; Evangelical Synod v. Schoeneich, 143 Mo. 652; Pundman v. Schoenich, 144 Mo. 149; Leonard v. Latimer, 67 Mo.App. 138. (3) In taking from the assets of the bank the Hoselton note for $ 10,600 and the McCallister note for $ 6,000, and, in lieu thereof, placing in the assets of the bank $ 16,600 of the funds sent by Bartlett Brothers Land & Loan Company to McCallister Loan Company, Joe McCallister, the cashier, was the sole representative of the bank, acting in a banking transaction of financial interest to the bank. The bank not only gave no consideration for the $ 16,600, but, through its cashier, Joe McCallister, acting in this very transaction, the bank knew that the funds were not the funds of the bank. The Milan Bank, its successor in possession, the Milan State Bank, and the latter's receiver, the Commissioner of Finance, with full knowledge of McCallister's fraud, and with full knowledge that no consideration whatever was given by the Milan Bank for this $ 16,600, still seek to retain the benefit of McCallister's fraudulent act and to hold the $ 16,600; they must be held to have adopted McCallister's whole act, fraud and all. Atlantic Mills v. Indian Orchard Mills, 147 Mass. 268; Diddy v. Dominion Nat. Bank, 75 F. 769; United States v. State Nat. Bank, 24 L.Ed. (U.S.) 647; Pensacola State Bank v. Thornberry, 226 F. 620; Hallett v. Fish, 120 F. 986; Holden v. New York & Erie Bank, 72 N.Y. 294; State v. Am. State Bank, 187 N. W. (Nebr.) 763; First Nat. Bank v. Dunbar, 9 N. E. (Ill.) 186. (4) It is admitted that Joe McCallister obtained the last payment of $ 10,209 toward the purchase price of the farm from Ralph S. Bartlett and Erwin J. Bartlett by practicing the rankest fraud. Acting as cashier of the Milan Bank, he deposited this money in the bank, mixed it with other assets of the bank, and thereby swelled the assets of the bank. The Milan Bank was chargeable with knowledge of Joe McCallister's fraud, and thereby became a trustee ex maleficio. 3 Pomeroy (4 Ed.) p. 2404, sec. 1053; Moore v. Crawford, 130 U.S. 122, 32 L.Ed. 878. (5) The Milan State Bank is not an "innocent purchaser" of the assets of the Milan Bank, and therefore took those assets subject to any existing equity. The transfer of the assets was illegal and utterly void, for the reason that there was no meeting of the directors. 2 Purdy's Beach on Private Corps., p. 976, sec. 665; Conyngton on Corp. Procedure, p. 362, sec. 424; Chouteau Ins. Co. v. Holmes, 68 Mo. 601; Hill v. Rich Hill Mining Co., 119 Mo. 24; Brinkerhoff Zinc Co. v. Boyd, 192 Mo. 613; Calumet Paper Co. v. Haskell Ptg. Co., 144 Mo. 331; State ex rel. v. Rubber Co., 149 Mo. 202. (6) The receiver, the Commissioner of Finance, of course, stands in no better position than the Milan State Bank. Skud v. Tillinghast, 195 F. 5; State v. American State Bank, 187 N. W. (Nebr.) 762. (7) Respondents, by accepting an assignment of certain "assets" from Joe McCallister, which assets the oral testimony shows were worthless, are not estopped from proceeding against the bank. 20 C. J. 37, sec. 32; Eastin v. Bank of Harrisonville, 246 S.W. 994; Horigan Realty Co. v. First Nat. Bank, 273 S.W. 777; Holland Bank v. Broocks, 266 S.W. 188; Otto v. Young, 227 Mo. 219; Cowan v. Young, 282 Mo. 488.

OPINION

Blair, J.

Suit in equity to have certain assets of the Milan State Bank in the hands of the Commissioner of Finance impressed with a trust in favor of respondents. The case was tried in Livingston County, after change of venue from Sullivan County. The trial court found that...