City of Sturgis v. Meade County Bank
| Decision Date | 16 February 1917 |
| Docket Number | 4064 |
| Citation | 161 N.W. 327,38 S.D. 317 |
| Parties | CITY OF STURGIS, Plaintiff and Appellant, v. MEADE COUNTY BANK and J. L. Wingfield, Public Examiner of the State of South Dakota, Defendants and respondents. |
| Court | South Dakota Supreme Court |
Appeal from Circuit Court, Meade County, SD
#4064—Affirmed
Buell & Denu, A. K. Gardner
Attorneys for Appellant.
Charles D. Howe
Attorney for Respondent.
Opinion filed February 16, 1917
The defendant Meade County Bank failed, and was taken in charge by the public examiner who proceeded to collect the assets and pay the debts. At the time of the failure of the bank, there was on deposit therein a considerable sum of money belonging to the plaintiff, the city of Sturgis. This money had been deposited therein by the city treasurer, and it had been the practice of the city treasurer, for several years prior to the time of the failure, to keep the funds of the city on deposit in said bank, subject to check, and pay the same out by check as needed. This was done with knowledge of the city authorities; and the bank, through its managing officers, knew that the money so deposited by the city treasurer belonged to the city. After the failure of the bank, the city presented its claim for payment, and demanded that it be paid in full in preference to the claims of the other creditors. It is conceded that the assets of the bank were not sufficient to pay its debts in full, but the city claimed that its money constituted a trust fund. The public examiner allowed the amount of the claim, but refused to give it preference over the claims of other creditors. The city brought this action for the purpose of establishing a preference, but the trial court sustained the public examiner, and the city brings the case here on appeal.
When a bank becomes insolvent and is taken over by the public examiner, the assets of the bank become a fund for the payment of the claims of the various creditors, and, unless there is some reason recognized by law, that entitles one creditor to a preference over the others, they should all be treated alike. If the assets are sufficient in amount, the creditors can all be paid in full; but, where there are not sufficient funds to pay the just claims of all the creditors in full, then such fund as there is should be proportioned among such creditors according to the amount of their respective claims. As between the creditors of an insolvent bank, equality is equity. Cavin v. Gleason, 105 NY 256, 11 N.E. 504. This rule applies to all bank depositors.
As a rule, when money is deposited in a bank, title to such money passes to the bank. The bank becomes the debtor of the depositor to the extent of the deposit, and, to that extent, the depositor becomes the creditor of the bank. Allibone v. Ames, 33 LRA 585. Such deposit then constitutes a part of the assets of the bank, and, in case of insolvency, belongs to the creditors of the bank in proportion to the amount of their respective claims. Exceptions to this rule are: First, where money or other thing is deposited with the understanding that that particular money or thing is to be returned to the depositor; second, where the money or thing deposited is to be used for a specifically designated purpose; and, third, where the deposit itself was wrongful or unlawful.
The money involved in this case was deposited by the city treasurer subject to his...
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