Buder v. Holt

• Decision Date: 26 May 1938
• Docket Number: 34468
• Parties: G. A. Buder v. R. Waldo Holt, Commissioner of Finance of the State, and Ralph D. Griffin, Special Deputy Commissioner of Finance of the State, in charge of the business and property of Scruggs, Vandervoort & Barney Bank, a Corporation, in liquidation, Appellants
• Court: Missouri Supreme Court

117 S.W.2d 235

342 Mo. 666

G. A. Buder v. R. Waldo Holt, Commissioner of Finance of the State, and Ralph D. Griffin, Special Deputy Commissioner of Finance of the State, in charge of the business and property of Scruggs, Vandervoort & Barney Bank, a Corporation, in liquidation, Appellants

No. 34468

Supreme Court of Missouri

May 26, 1938

Appeal from Circuit Court of City of St. Louis; Hon. M. G Baron, Judge

Reversed.

William T. Jones, David Baer, Jr., and Carter & Jones for appellants.

(1) Where funds of two trustees are deposited in a bank they may not be offset against the individual indebtedness due the bank by one of the trustees. 5 Michie, Banks and Banking, p 215, sec. 115-A, p. 269, sec. 141; 57 C. J., pp. 451, 453 secs. 100, 103; 90 A. L. R. 1009; 7 C. J., p. 745, sec. 535; Jones' (10 Ed.), Puterbaugh Common Law Pleading & Practice, sec. 187, p. 285; Dakin v. Bayly, 78 L.Ed. 229; Johnson, Gdn., v. Payne & Williams Bank, 56 Mo.App. 263; McDonald v. Harrison, 12 Mo. 295; Smallwood v. Lafayette County, 75 Mo. 454; Gansner v. Franks, 75 Mo. 64; Advance Exc. Bank v. Baldwin, 31 S.W.2d 97; Mayer, Curator, v. Citizens Bank, 86 Mo.App. 97; Moore v. First Natl. Bank, 135 S.W. 1006; American Law Institute, Restatement of the Law of Trusts, sec. 324-I, p. 969; Bollow v. Farmers Bank, 45 S.W.2d 882; Myers v. Cantley, 18 S.W.2d 112; Aab v. French, 279 S.W. 436; Cosmopolitan Trust Co. v. Wasserman, 146 N.E. 773. (2) When a bank knowingly applies money standing in the name of a person as trustee to satisfy the individual indebtedness of such person the bank is liable to the cestuique trust for the funds so applied. 5 Michie, Banks & Banking, sec. 136, p. 261, sec. 141, pp. 269, 274; Shepard v. Meridian Natl. Bank. 48 N.E. 351; Horigan Realty Co., v. First Natl. Bank, 273 S.W. 775; Johnson, Gdn., v. Payne & Williams Bank, 56 Mo.App. 257; Brown v. Maguire's Real Estate Agency, 101 S.W.2d 46; Morse on Banking, sec. 317; Clark, Admx., v. First Natl. Bank, 57 Mo.App. 287; Mayer v. Citizens Bank of Sturgeon, 86 Mo.App. 422; Moore v. First Natl. Bank, 135 S.W. 1006; 13 A. L. R. 325; 31 A. L. R. 756; 50 A. L. R. 632. (3) A deposit in a closed bank may not be assigned or transferred to another party after the closing of the bank, for the purpose of permitting the other party to offset the deposit against his indebtedness to the insolvent bank. 71 A. L. R. 806; Yardley v. Philler, 42 L.Ed. 198; 7 Am. Jur., Banks, sec. 474, p. 341; Storts v. George, 51 S.W. 491; United States F. & G. Co. v. Wooldridge, 69 L.Ed. 933; 7 C. J., Banks & Banking, sec. 536, p. 746; In re Fed. Trust Co. v. Finney, 51 S.W.2d 149; 93 A. L. R. 1164; 7 Am. Jur., Banks, sec. 735, p. 529.

E. E. Schowengerdt and G. A. Buder, Jr., for respondent.

(1) In equity, the maker of a note to a bank, which thereafter became insolvent, may offset his indebtedness to the bank by a deposit in his name as trustee, where he was personally liable to his cestui que trust for the amount of the deposit. Upon a showing of insolvency, equity will take cognizance of the cross-claims between the parties and will set off one claim against the other even though wanting in mutuality and accruing in different rights. Funk & Son v. Young, 210 S.W. 145; Coburn v. Carstarphen, 139 S.E. 597; Dalton v. Sturdivant Bank, 76 S.W.2d 426; Hanson v. Bank of La Grange, 147 S.E. 124; Forrester v. Cantley, 51 S.W.2d 551; Bryant Bros. v. Wilson, 69 S.W.2d 1020; 5 Michie on Banks & Banking, sec. 157-B, p. 300; 24 R. C. L., p. 865, sec. 70; 57 C. J., p. 446, sec. 96; Merrill v. Cape Ann Granite Co., 161 Mass. 217; Rodick v. Pineo, 120 Me. 160; Ford v. Stevens Motor Car Co., 209 Mo.App. 144, 232 S.W. 222; Strong v. Gordon, 203 Mo.App. 470, 221 S.W. 770; 24 R. C. L., pp. 803, 806, 843, secs. 12, 14, 48; 57 C. J., p. 363, sec. 7; Wabash Railroad Co. v. Bowring, 103 Mo.App. 167; Foote v. Clark, 102 Mo. 409. (2) The fact that the deposit in the insolvent bank was made in the name of "G. A. Buder and G. A. Franz, Trustees," does not prevent in equity the allowance of the set-off. In view of the joint and several liability of G. A. Buder and G. A. Franz to their cestuis que trust for the money on deposit, it is proper to allow either of the parties, with the assent of the other, to use the deposit as an equitable set-off against a claim of the insolvent bank against him. Chamberlin v. Stewart & Powell, 6 Dana, 33; Solliday v. Bissey, 12 Pa. St. 349; Burns v. Lopez, 175 N.E. 537, 256 N.Y. 539; Collins v. Campbell, 53 A. 837, 97 Me. 23; Edelman v. Scholl, 65 Pa. S.Ct. 357; Jack v. Klepser, 196 Pa. St. 193; Montz v. Morris, 89 Pa. S.Ct. 392; Fulkerson v. Davenport, 70 Mo. 541. (3) Under the surety bonds given by the trustees in this case G. A. Buder became personally liable to pay over to his cestuis que trust the moneys owing by the insolvent bank on the certificate of deposit in question. In effect he became a surety, obligated to pay off the debt of the insolvent bank evidenced by the certificate of deposit to the cestius que trust and he is, therefore, entitled to be subrogated and to set off such certificate of deposit against his individual debt. Rubey v. Watson, 22 Mo.App. 433; State v. Bank of Magdalena, 270 P. 881; Fidelity & Deposit Co. v. Duke, 293 F. 661; Leach v. Bassman, 227 N.W. 339; Clark v. Sullivan, 13 L. R. A. 233; 24 R. C. L., sec. 65, pp. 861-2; 60 C. J., secs. 5, 6, 7, 17, 84, 90, 91, 94, pp. 697, 698, 700, 706, 774, 781, 782, 785; Smith v. Perry, 197, Mo. 462; Morrow's Assignees v. Bright, 20 Mo. 301; Strong v. Gordon, 203 Mo.App. 470, 221 S.W. 77; Forrester v. Cantley, 51 S.W.2d 550; Dalton v. Sturdivant Bank, 76 S.W.2d 425; People ex rel. Nelson v. Joliet Trust & Sav. Bank, 275 Ill.App. 144; Fisher v. Columbia Bldg. & Loan Assn., 59 Mo.App. 435.

Bradley, C. Ferguson and Hyde, CC., concur.

OPINION

BRADLEY

Plaintiff and G. A. Franz were cotrustees and as such, placed $ 60,503.75 of the trust funds on time deposit in the Scruggs, Vandervoort & Barney Bank, St. Louis, and received a time certificate of deposit for said sum, issued to them as trustees. The bank failed and was placed in the hands of the Commissioner of Finance on January 14, 1933, with the trust fund on deposit. At the time the bank closed, plaintiff, one of the trustees, individually owed the bank two notes, aggregating $ 45,000 principal. Plaintiff and his cotrustee unsuccessfully sought to get the trust fund deposit set off against the individual notes of plaintiff, but the commissioner refused to do this. The commissioner, however, approved the claim on the time certificate for its full amount as a general or common claim, and demanded payment of the notes and interest due thereon. Plaintiff then brought this suit in equity against the commissioner and his deputy, in charge of the bank, to compel the allowance of a sufficient sum from the time certificate of deposit to offset the sum due on the notes, and to allow as a general claim the balance due on the time certificate of deposit, and to return to plaintiff the notes marked paid.

The cause was submitted on an agreed statement of facts, and the court decreed as prayed for by plaintiff, and this appeal followed. The present commissioner has been substituted here as a party defendant in lieu of the commissioner at the time of appeal.

From the agreed statement it appears that: Plaintiff and G. A. Franz were named trustees in a trust estate created by Sophie Franz on January 30, 1909. The trust estate terminated upon the death of Sophie Franz, April 14, 1930, but the trustees have not been discharged because of "various and sundry matters" requiring their attention before the trust estate "can be finally wound up and the administration thereof completed." Under the trust instrument the trustees held certain property belonging to Sophie Franz individually, and certain property derived from the estate of Erhardt D. Franz, deceased, in which Sophie Franz had a life estate, the remainder interest being owned by certain named individuals and two estates of deceased persons.

June 16, 1910, the trustees gave a surety bond in the sum of $ 100,000 "for the use and benefit of any and all parties interested in the trust estate created by Sophie Franz . . . under date of January 30, 1909." The bond was executed by the American Bonding Company, as surety. This company was succeeded by the Fidelity & Deposit Company of Maryland. The condition of the bond was that the trustees "shall and will fully and faithfully account for all of the property which has heretofore come or which is now or which hereafter may come into their custody and possession as such trustees."

October 20, 1928, the trustees gave three additional bonds in the sum of $ 500,000 each, two of which have been reduced to $ 30,000 each, and the other to $ 50,000. The Fidelity & Deposit Company of Maryland was surety on these bonds, and the obligees, respectively, are "the estate and heirs of Walter G. Franz, deceased; the estate and heirs of Ernst H. Franz, deceased; and Ehrhardt W. Franz." (These estate obligees are the two estates above mentioned as having a remainder interest in the property in which Sophie Franz had a life estate, and Ehrhardt W. Franz is one of the individuals.) The three bonds executed October 20, 1928, provided:

"Whereas in the certain cause in equity, No. 6682, pending in the District Court of the United States in and for the Eastern Division of the Eastern Judicial District of Missouri wherein Ehrhardt W. Franz is plaintiff and Gustavus A. Buder and others are defendants, a decree was filed and entered on the 5th day of May, 1927, ordering, adjudging and decreeing, among other things, that said (naming the obligee) was then the owner of an undivided one-tenth (1/10) interest in remainder, as vested...