Cable v. Iowa State Sav. Bank

• Decision Date: 28 September 1923
• Docket Number: No. 34789.,34789.
• Parties: CABLE ET AL. v. IOWA STATE SAV. BANK.
• Court: Iowa Supreme Court

197 Iowa 393

194 N.W. 957

CABLE ET AL.

v.IOWA STATE SAV. BANK.

No. 34789.

Supreme Court of Iowa.

Sept. 28, 1923.

Appeal from District Court, Woodbury County; Miles W. Newby, Judge.

This is an action in equity to impress a trust upon funds which it is alleged were deposited in the defendant bank by the Ward Commission Company as plaintiffs' agents to its own credit. The facts are fully stated in the opinion. There was a decree dismissing plaintiffs' petition, and they appeal. Reversed and remanded.

Superseding former opinion, 190 N. W. 262.

E. E. Wagner, of Sioux City, for appellants.

Shull, Stilwill, Shull & Wadden, of Sioux City, for appellee.

PER CURIAM.

The material facts are not in dispute, and, briefly summarized, are substantially as follows: On or about July 3, 1920, appellants consigned 46 head of steers to the Ward Commission Company, a corporation located and engaged in the live stock commission business at Sioux City, Iowa, for sale upon the market with directions to remit the net proceeds derived therefrom to the Hudson State Bank of Hudson, S. D., the point at which the shipment originated. The steers were sold to one Birmingham for $7,561.25, who gave his check for that amount to the Ward Commission Company, payable to its order. The Ward Commission Company, on July 6th, deposited the check in the appellee bank to the credit of its general account. On July 3d the Commission Company drew a check, payable to the Hudson State Bank, for $7,452.11, the proceeds of the sale, less commissions, yardage, and freight and forwarded the same by mail to the payee as directed by appellants. July 4th was Sunday, and Monday was observed as a legal holiday. The check of the Ward Commission Company, which was received by the Hudson State Bank in due course of mail, was presented to appellee on July 7th for payment. Payment was refused by the bank upon the ground that there were not sufficient funds in the bank to the credit of the drawer to pay the same. The books of appellee on said date showed a tentative balance of something in excess of $10,000, but it is claimed by the bank that the balance was made up, in large part, at least, of checks that had been deposited in the bank by the Ward Commission Company and sent out for collection, but which had not yet been paid. W. M. Ward, the president of the Ward Commission Company, was indebted to appellee upon a note for $3,000, upon which there was a balance due of $2,500, and the Ward Commission Company was indebted to the bank upon a note for $4,000, upon which there was a balance due of $2,313.67. Some time before the close of business on July 7th the bank charged the account of the Ward Commission Company with $4,897.41, the amount due on the notes, and issued a cashier's check to itself for $2,338.03, the balance then remaining in the account. The cashier's check was still held by appellee at the time of the trial.

It is not claimed by appellee that the beneficial owner of a fund deposited in a bank by a factor or commission merchant to his own credit may not maintain an action in equity against the bank to impress a trust on such fund, and to recover the same from the bank, if it has acquired no equitable right thereto, without notice of the claim of such beneficial owner, nor that, if any portion of the proceeds of the sale of the steers in question are now in the possession of the appellee bank, appellants are not entitled to a decree in their favor for whatever amount the evidence shows remains therein; but it is contended by appellee that the Birmingham check was received by it and credited to the general account of the Ward Commission Company without knowledge or notice of appellants' claim thereto or ownership thereof, and that same was fully paid out and dissipated on July 6th upon checks drawn by the Ward Commission Company and presented for payment and paid in the usual course of business, and that if, upon any theory, any portion of such deposit was in the possession of the bank on July 7th and applied by it to the payment of the indebtedness of either W. M. Ward or the Ward Commission Company, it was so applied in good faith, for a valuable consideration, and without notice of any claim or right of appellants thereto, and that therefore the bank is not liable.

[1][2][3][4][5][6] The law is well settled that the title to property consigned to a factor or commission merchant for sale remains in the consignor, and that such factor or commission merchant holds the proceeds derived from the sale of such property in a fiduciary or trust capacity, and that its character is not changed by being placed to his credit in the bank (Union Stockyards National Bank v. Gillespie, 11 Sup. Ct. 118, 137 U. S. 411, 34 L. Ed. 724;Central Nat. Bank v. Conn. Mut. Life Ins. Co., 104 U. S. 54, 26 L. Ed. 693); that the owner may maintain an action in equity against a bank to impress a trust upon any portion of the funds deposited therein by such factor or commission merchant to his own credit and remaining in said bank, unless it has acquired an equitable right thereto without notice of the true claims of the owner (Smith v. Des Moines National Bank, 107 Iowa, 620, 78 N. W. 238;Packer v. Crary, 121 Iowa, 388, 96 N. W. 870;Shotwell v. Sioux Falls Savings Bank, 34 S. D. 109, 147 N. W. 288, L. R. A. 1915A, 715;Fidelity & Deposit Co. of Maryland v. Rankin, 33 Okl. 7, 124 Pac. 71; Union Stockyards National bank v. Gillespie, supra; Central Nat. Bank v. Conn. Mut. Life Ins. Co., supra; Clemmer v. Drovers' Nat. Bank, 157 Ill. 206, 41 N. E. 728;Hewitt v. Hayes, 205 Mass. 356, 91 N. E. 332, 137 Am. St. Rep. 448); that a bank may appropriate a general deposit of a debtor to the discharge of a matured indebtedness (Smith v. Sanborn State Bank, 147 Iowa, 640, 126 N. W. 779, 30 L. R. A. [N. S.] 517, 140 Am. St. Rep. 336); that a cestui que trust cannot recover trust funds which were deposited in a bank by the trustee in his own name, and which without notice of its trust character the bank has applied to the payment of a matured indebtedness, surrendering to the trustee the evidence of the indebtedness (Smith v. Des Moines National Bank, supra; Kimmel v. Bean, 68 Kan. 598, 75 Pac. 1118, 64 L. R. A. 785, 104 Am. St. Rep. 415); conversely that the owner may maintain an action in equity against the bank if such trust fund has been applied by it with notice of the claim of the cestui que trust to the payment of a matured indebtedness of the trustee (Smith v. Des Moines National Bank, supra; Allen v. Puritan Trust Co., 211 Mass. 409, 97 N. E. 916, L. R. A. 1915C, 518; Fidelity & Deposit Co. of Maryland v. Rankin, supra; Clemmer v. Drovers' Nat. Bank, supra; Union Stockyards National Bank v. Gillespie, supra); that if the trust fund be withdrawn by the trustee in the usual course of business, so that the same has been entirely dissipated, an action against the bank cannot be maintained (Hanson v. Roush, 139 Iowa, 58, 116 N. W. 1061; Smith v. Des Moines Nat. Bank, supra; Stilson v. First State Bank, 152 Iowa, 724, 133 N. W. 354;Officer v. Officer, 120 Iowa, 389, 94 N. W. 947, 98 Am. St. Rep....