Cantley v. Beard
| Decision Date | 12 November 1936 |
| Citation | 98 S.W.2d 730,339 Mo. 649 |
| Parties | S. L. Cantley, Commissioner of Finance, and Frank J. Quigley, Special Deputy Commissioner in Charge of the Bank of Barnett, Appellants, v. R. A. Beard, J. E. Boan, J. D. Bradshaw, Ivor E. Bradshaw, W. W. Gillum, Reu Miller and Morgan County |
| Court | Missouri Supreme Court |
Appeal from Morgan Circuit Court; Hon. Nike G. Sevier Judge.
Reversed and remanded (with directions).
R M. Livesay, Frank J. Quigley and Mongomery, Martin & Montgomery for appellants.
(1) The evidence clearly shows that the notes in controversy were taken from the Bank of Barnett by the individual defendants directors and officers of the bank, to secure themselves as sureties upon the depository bond executed by them in favor of Morgan County. (2) The hypothecation of the notes with the sureties by the cashier of the bank without any power and authority having been given such cashier by the board of directors pursuant to a resolution of the board of directors, a written record of which having first been made, was in direct contravention of the provisions of Section 5380, Revised Statutes 1929, and the act of the cashier in so pledging and hypothecating said notes was null and void under the provisions of said statute. Sec. 5380, R. S. 1929, Mo. Stat. Ann., p. 7596; Miles v. Bank, 187 Mo.App. 230, 173 S.W. 713; Bank v. Lyons, 220 Mo. 538, 119 S.W. 540; Walker v. Hayes, 25 S.W.2d 523; Moseley v. Smith, 223 Mo.App. 1189, 21 S.W.2d 637; Long v. Long, 167 Mo.App. 79, 150 S.W. 1123; Bank v. Sloop, 198 Mo.App. 225, 200 S.W. 72; Taylor v. Fuqua, 203 Mo.App. 587, 219 S.W. 971.
G. Logan Marr, Arthur J. Bolinger and Roy D. Williams for respondents.
(1) No right is more fully recognized than the right of a cestui que trust to pursue and recover trust funds wrongfully diverted. A change of character cannot divest a fund from its trust character. Midland Natl. Bank v. Brightwell, 148 Mo. 358; Johnston v. Johnston, 173 Mo. 91; Horigan Realty Co. v. First Natl. Bank, 273 S.W. 772. (2) No effort was made to comply with the depository law. Tate v. Citizens Bank, 21 S.W.2d 227; Aurora School Dist. v. Bank of Aurora, 52 S.W.2d 484; In re Cameron Trust Co., 51 S.W.2d 1025; Ralls County v. Comr. of Finance, 66 S.W.2d 115; White v. Greenlee, 49 S.W.2d 132; Marion County v. First Sav. Bank of Palmyra, 80 S.W.2d 861; Polk Twp. v. Harrison, 64 S.W.2d 744; Huntsville Trust Co. v. Noel, 12 S.W.2d 751. (3) The Bank of Barnett was a trustee ex maleficio and the money was traced into the notes sought to be impressed by the trust. Evans v. People's Bank, 6 S.W.2d 655; Wauer v. Bank of Pendleton, 65 S.W.2d 167. (4) The evidence of the action of the bank, was only offered by Morgan County to trace its money and was competent for that purpose.
Bradley, C. Ferguson and Hyde, CC., concur.
This cause is in equity, commenced by the Commissioner of Finance and his deputy, to determine the interest of the parties plaintiff and defendant in certain notes and collections thereon. The notes, when made, were payable to the Bank of Barnett, Barnett, Missouri, Morgan County. Also, plaintiffs seek judgment against Morgan County for the amount collected on these notes and turned over to the treasurer of the county, and to enjoin the defendants from making further collections on the notes. The trial court found the issues in favor of the county and declared "a trust in favor of Morgan County against the notes and their proceeds." Motion for new trial was overruled and plaintiffs appealed. Commissioner Cantley's successor in office was substituted as party plaintiff, but the record here is styled as in the petition when filed and we leave it so.
The Bank of Barnett closed November 2nd, and was formally taken over by the Commissioner of Finance November 9, 1931. Plaintiffs allege that on the -- day of January, 1931, the Bank of Barnett was "designated by the county court of Morgan County," a depository of the county, and that thereafter, on March 20, 1931, the bank "qualified as such depository" by filing bond; that on March 24th the county deposited in said bank "as a county depository," the sum of $ 12,000, and that the individual defendants, directors and cashier of the bank, took out of the assets of the bank the notes in question, aggregating $ 12,000, "to secure themselves as sureties" upon the depository bond; that plaintiffs are entitled to recover possession of the notes and the proceeds therefrom. It is further alleged that since November 2, 1931, the individual defendants have collected on these notes approximately $ 6000 (amount shown $ 5405.88) and turned the money over to Morgan County; that under the law defendants held the notes and the collections thereon in trust for plaintiffs, and that because of the multiplicity of "suits that would be necessary to determine" the rights in these notes, plaintiffs sought the equity side of the court.
The individual defendants, after formal admissions, answered by general denial, and then allege that on the -- day of January (March) 1931, the County Court of Morgan County, and defendant W. W. Gillum, acting for himself and the other individual defendants, "made a contract" with Morgan County by which contract, $ 12,200 county money "should be by the said defendants (individual) received from the county treasurer and by them invested in solvent notes" owned by the Bank of Barnett; that in pursuance of said alleged contract, $ 12,000 was, by the county treasurer, delivered to the individual defendants, and "that said funds were used to purchase (for the county) the notes" in question; that said notes and the proceeds therefrom "were held in trust . . . for the use of Morgan County;" that the $ 12,000 "did not go into and become a deposit in the Bank of Barnett, but was by said defendants (individual) invested in the notes;" that all the money collected on these notes by the individual defendants has been paid to the treasurer of Morgan County "in execution of the trust reposed." The prayer in the answer of the individual defendants is, in effect, that a trust be declared upon the notes and the collection thereon in favor of Morgan County.
Morgan County, after formal admissions, answered by general denial, and then alleges that on the -- day of March, 1931, the county court and the directors of the Bank of Barnett, by its president, W. W. Gillum, and cashier, Ivor E. Bradshaw, "made and drew up a contract" with Morgan County "for the sum of $ 12,000 public monies belonging to Morgan County, Missouri, to be received, and was transmitted, transferred and given over to the Bank of Barnett as (a) trust fund of the public monies of Morgan County, Missouri, to be deposited to the account of Morgan County;" that the notes and their proceeds "have been in the hands of the directors of the Bank of Barnett as trustees of a trust in behalf of and for Morgan County." The prayer in the answer of defendant county is "that a trust be declared upon the said notes and the proceeds in favor" of the county. Plaintiffs filed separate reply to the answer of the individual defendants and to the answer of the county.
The facts developed are about these. Shortly prior to March 2, 1931, Morgan County received from the Union Electric Light & Power Company, $ 126,575 as damages for the inundation of its public roads. At that time the Bank of Versailles and the First National Bank in Versailles were the duly selected and acting depositories of the county. March 2nd, there was filed in the county court, and entered on record that day, a proposition by the two depository banks and four other banks, including the Bank of Barnett. This proposition pertained to the apportionment, between the banks named therein, of $ 100,000 of the money received by the county for the inundation of its roads. In the proposition it appears that the submitting banks agreed among themselves as to the portion of the $ 100,000 each would receive, and $ 12,000 was the amount the Bank of Barnett was to receive. The proposition, after a preliminary paragraph, is divided into divisions I, II and III. In division I the two depository banks released any claim they had to all of the $ 100,000 and consented that the apportionment might be made according to the percentages stated in division II. Division II recites that "as between the undersigned banks as parties of the first part and the county court as parties of the second part," it was agreed that whatever sum was turned over to the banks concerned, the county treasurer would "abide by the terms of Section 12188-1929." (This section has reference to the duty of the county treasurer to transfer to depository banks, when properly selected, the funds allotted to them.) Then follows, in division II, the percentages of the $ 100,000 to each of the six banks. Division III provides that the "undersigned banks, and by their proper officers, shall execute to the State of Missouri and the County of Morgan bonds in kind as designated in Section 12187-1929 (), the same to be executed as provided in said section and approved by the county court of Morgan County, and this provision III is so taken and agreed on by and between the undersigned banks."
The county court record of March 2nd recites that "the above contract and agreement made between the Bank of Versailles and the First National Bank in Versailles, and the contract and agreement made between the county court of Morgan County and the above named banks in part III was examined and approved by the county court."
March 20th all individual defendants, except Miller executed a bond to Morgan County in the sum of $ 40,000, conditioned ...
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