Behm v. Baird
| Decision Date | 01 August 1930 |
| Court | North Dakota Supreme Court |
Appeal from the District Court of Grand Forks County Swenson, J.
Reversed.
George A. Bangs, for appellant.
"Before the records of a corporation are admissible in evidence for any purpose, or on any theory, it must be made to appear prima facie, at least, that they are the books of the corporation and that they have been kept as such, and that the entries therein were made by the proper acting officer." 3 Thomp. Corp. § 1963.
Mere proof that the entries are in the handwriting of an officer of the corporation is insufficient unless it appears that it was the duty of such officer to make the entries. Lowry Nat. Bank v. Fickett, 122 Ga. 489, 50 S.E. 396.
The books of a corporation are no more evidence against the directors than against strangers and the same foundation must be laid for the introduction thereof. Ruff v Robinson, 126 N.Y. 113, 12 L.R.A. 473, 22 Am. St. Rep. 816, 26 N.E. 1046.
"An honest mistake as to the condition of the bank and an honest belief in the solvency of the institution, if it exists, negatives the conclusion of the fraud upon which the plaintiff's cause of action must depend." Williams v. Van Norden Trust Co. 93 N.Y.S. 821.
The depositors cannot recover the deposit without showing that the officers knew of the insolvency and received the deposit fraudulently. People v. St. Nicholas Bank, 28 N.Y.S. 407; Brennan v. Tillinghast, 120 C.C.A. 37, 201 F. 609; Williams v. Cox, 97 Tenn. 555, 37 S.W. 282; Steele v. Allen, 240 Mass. 394, 134 N.E. 401.
"The fact that the claimant's property paid or reduced the indebtedness or liability of the insolvent corporation, so that it will pay a larger percentage of its debts, justifies no lien on its assets by or in preference in payment to the cestui que trust." Dixon v. Nelson, 26 F.2d 411; Macy v. Roedenbeck, 142 C.C.A. 42, 227 F. 346; Klepper v. Cox, 97 Tenn. 534, 34 L.R.A. 536, 56 Am. St. Rep. 823, 37 S.W. 284.
A. W. Ponath, for respondent.
In order to render the books of account of a party admissible to show admissions against interest, it is only necessary that they be shown to be his books kept in the regular course of business, and that the entries therein were made by himself or an agent authorized to make them. Zang v. Wyant, 25 Colo. 551, 56 P. 565; Rudd v. Robinson, 12 L.R.A. 475; Chenango Bridge Co. v. Lewis, 63 Barb. 111; Hubbel v. Meigs, 50 N.Y. 480; First Nat. Bank v. Tisdale, 84 N.Y. 655.
"A bank is insolvent when it is unable to meet its liabilities as they become due in the ordinary course of business, or, in shorter terms, when it cannot pay its deposits on demand in accordance with its promise." 7 C.J. 727, sub-sec. 482.
"Where a bank remains open, holding itself out as ready to transact business, this is implied representation of solvency, and for it to receive a deposit when its insolvency is known to its officers is a fraud upon the depositors." 7 C.J. 731.
"Acceptance of a deposit is a fraud within this rule where the depositor would not have left his money had he known as much as the officers did about the bank's condition. 7 C.J. 731.
The knowledge of the president was the knowledge of the bank. Martin v. Webb, 110 U.S. 7; Bank v. Walker, 130 U.S. 267; Grand Forks County v. Baird, 54 N.D. 315, 209 N.W. 782; Ramsey County Nat. Bank v. Kelly, 54 N.D. 122, 208 N.W. 831.
"When a trustee mingles trust funds with his own . . . it will be presumed that he makes payment from his own funds and retains the funds which do not belong to him, and except so far as he may distinguish what is his own, the whole fund will be treated as the trust property." Widman v. Kellogg, 22 N.D. 396, 133 N.W. 1020.
The identical money need not be traced into the hands of the receiver when the funds received by him are in any event increased by the amount of the deposit. 3 R.C.L. 181; Western German Bank v. Nowell, 134 F. 724; Richardson v. New Orleans Debenture Redemption Co. 52 L.R.A. 67, 102 F. 780.
It is only when there gather around any deposit or line of deposits circumstances of a peculiar nature, which individualize that deposit or line of deposits, and inform the bank of peculiar facts of equitable cognizance, that it is debarred from treating the deposit as that of moneys belonging absolutely to the depositor. Union Stock Yards Nat. Bank v. Moore, 25 C.C.A. 150.
On Saturday, November 19, 1927, the Bank of Niagara was open for business, sold drafts, received deposits and paid checks. On that day the plaintiff made a general deposit of a cashier's check for $ 500 issued to him by the Northwestern National Bank of Grand Forks, and then gave a check to the Security Bank for this amount in payment of a debt. The Bank of Niagara was indebted to the Northwestern National Bank for prior indebtedness amounting approximately to $ 9,000; but had a credit balance in that bank on open account of $ 835.45. The same day the Bank of Niagara remitted this cashier's check, and other items of commercial paper, -- in all $ 1,605.12 -- to the Northwestern National Bank "for collection and credit," and the account was so credited on November 21 before the Bank of Niagara closed. Thus the drawer paid the check. On the 19th the Bank of Niagara issued drafts on the Northwestern National Bank for $ 1,812.76, as shown by the books of the bank offered in evidence by the plaintiff. Two of these checks were as follows: To the Security State Bank of Niagara, $ 1,547.50, as "clearings;" to the Northwestern National Bank, $ 105.13. These two drafts came to the Northwestern National Bank about the same time as the remittance, and were charged to the account leaving a credit balance of $ 787.50. The record does not show whether these two drafts and the remittance were in the same letter, or were separate transactions, or whether the Security State Bank sent in its draft at a different time but these drafts were received and paid before the Bank of Niagara closed. That same day, by letter or telephone, the Bank of Niagara called on the Northwestern National Bank for $ 500 in currency which was shipped. Thus its credit on the books of the Grand Forks bank was reduced to $ 287.57. There was nothing whatever to indicate that when the Niagara bank remitted the cashier's check it required the Grand Forks bank to send cash in lieu thereof. The two transactions are totally unconnected so far as the record shows.
The Bank of Niagara evidently sold additional drafts, or in some other way reduced its credit, for on its closing its books shows a balance to its credit in the Northwestern National Bank of $ 11.30 only. The record does not show whether these additional drafts or reductions were purchased by check or cash.
On the evening of November 21, the Bank of Niagara closed its doors, having on hand $ 335.65 in cash. The Northwestern National Bank applied the credit of $ 287.57 on the $ 9,000 indebtedness. Later, defendant Baird was appointed receiver of the Bank of Niagara.
The Security State Bank of Niagara could not cash plaintiff's check and returned it to him. Plaintiff demanded from the receiver the return of his money, and on refusal of the demand brought this action to impress a trust on the cash found in the bank. The lower court rendered judgment in his favor for $ 335.65, and the receiver appeals.
Plaintiff asks the receiver to give him a preferred claim because of fraud, claiming the Bank of Niagara was hopelessly insolvent and that the officers knew it.
Appellant claims there is no sufficient proof showing that hopeless insolvency of the bank was known to its officers on November 19th, nor any competent proof showing the books, examined in the trial and from which much of the evidence was received, are the books of the bank. Assuming the position of the respondent on these points the issue becomes one of fact.
This deposit made by plaintiff was a general one, the check being accepted as cash, a deposit slip made out, and credit given the plaintiff so that he might check against it. The check became the property of the bank, and the relation of creditor and debtor was created. Shuman v. Citizens State Bank, 27 N.D. 599, L.R.A.1915A, 728, 147 N.W. 388; Citizens State Bank v. Iverson, 30 N.D. 497, 153 N.W. 449; Friberg v. Cox, 97 Tenn. 550, 37 S.W. 263; Acme Hay & Mill Feed Co. v. Metropolitan Nat. Bank, 198 Iowa 1337, 201 N.W. 129.
Plaintiff says it was a fraud on him to take his check. A claim founded on fraud is not by that fact alone entitled to priority over other claims. "The acceptation of a deposit of drafts by a bank irretrievably insolvent, constitutes such a fraud as entitled a depositor to reclaim his drafts or their proceeds" (Widman v. Kellogg, 22 N.D. 396, 39 L.R.A.(N.S.) 563, 133 N.W. 1020; St. Louis & S.F.R. Co. v. Johnston, 133 U.S. 573, 33 L. ed. 685, 10 S.Ct. 390); but, as Judge Taft says in City Bank v. Blackmore, 21 C.C.A. 514, 516, 43 U.S. App. 617, 75 F. 771, "It is only where, by the rescission of the contract out of which the claim arises, on the ground of fraud, the specific thing parted with or its proceeds can be sufficiently identified to be returned, that fraud seems to give a priority of distribution."
In order to impress a trust upon the money which came into the hands of the receiver, the plaintiff must trace the funds which he deposited so as to prove that this cash is the proceeds of the cashier's check which he deposited. See Central Nat. Bank v. Connecticut Mut. L. Ins. Co. 104 U.S. 54, 26 L. ed. 693. He "may follow such property and reclaim it in...
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