Cicero State Bank v. Crowley

• Decision Date: 28 November 1940
• Docket Number: No. 7256.,7256.
• Citation: 115 F.2d 1022
• Parties: CICERO STATE BANK v. CROWLEY et al.
• Court: U.S. Court of Appeals — Seventh Circuit

115 F.2d 1022 (1940)

CICERO STATE BANK v. CROWLEY et al.

No. 7256.

Circuit Court of Appeals, Seventh Circuit.

November 28, 1940.

Julius F. Smietanka, John T. Conlon, Vincent L. Knaus, and Frank Barry, all of Chicago, Ill., for appellant.

Albert J. Horrell, of Chicago, Ill., for appellees.

Before MAJOR and KERNER, Circuit Judges, and LINDLEY, District Judge.

KERNER, Circuit Judge.

The question presented by this appeal is whether a conservator who deposits funds in a bank which has become insolvent is entitled to priority of payment over the bank's other creditors.

Appellant as successor conservator filed its complaint against the appellee claiming that it was entitled to a preference in payment over the other depositors of the bank.

The amended complaint reduced to its simplest terms alleged that in December, 1919, the Probate Court of Cook County appointed Charles Rusek conservator of John Rusek, a distracted person; that as such conservator Charles Rusek deposited the proceeds of a United States war risk insurance policy with the Peoples National Bank & Trust Company of Chicago; that when making the deposit Charles Rusek informed the bank that the funds so deposited were the proceeds of a war risk insurance policy for injuries sustained by the distracted person while in the service of the United States Army; and that a pass book in the name of Charles Rusek, conservator of John Rusek, was issued. The deposit was made without an order of the Probate Court.

The complaint further alleged that on May 20, 1932, while the said Charles Rusek as such conservator had on deposit with the bank the sum of $5,196.20, the bank was closed and went into receivership; that appellee George D. Crowley is now the receiver of the bank; that Charles Rusek has been removed as conservator; and that appellant Cicero State Bank has been appointed in his stead.

The defendant moved that the complaint be dismissed on the ground that it fails to state a cause of action against him. The District Court sustained the motion, dismissed the complaint and rendered judgment for costs against the plaintiff. To reverse the judgment plaintiff appeals.

It is appellant's contention that the bank, having knowledge of the source and character of the funds deposited by the conservator, became a constructive trustee, obligated to deposit the funds in a special account in its trust department. In support of this contention counsel cite Hampton v. Herrin Loan & Improvement Co., 289 Ill.App. 439, 7 N.E.2d 332 and People, etc. v. First State Bank, 275 Ill.App. 123. These cases are of no help to appellant. In the First State Bank case, supra, the claim for preference was also based on the fact that the money paid to the conservatrix came from the government on a policy of war risk insurance, that fact being known to the cashier of the bank. The court held that the deposit was a general deposit in the savings account, that no special agreement was made, that no special circumstances attended the making of the deposit, on which any trust arose in favor of the appellant, and denied the petition for preference. In the Hampton case, supra, the conservatrix of a World War veteran received from the United States Government moneys for the support of the disabled veteran which she...