Corporation Commission of North Carolina v. Merchants' Bank & Trust Co.

• Court: North Carolina Supreme Court
• Writing for the Court: ADAMS, J.
• Citation: Corporation Commission of North Carolina v. Merchants' Bank & Trust Co., 193 N.C. 696, 138 S.E. 22 (N.C. 1927)
• Decision Date: 11 May 1927
• Docket Number: 360.
• Parties: CORPORATION COMMISSION OF NORTH CAROLINA v. MERCHANTS' BANK & TRUST CO. GUARANTY CO. OF MARYLAND v. WACHOVIA BANK & TRUST CO.

138 S.E. 22

193 N.C. 696

CORPORATION COMMISSION OF NORTH CAROLINA v. MERCHANTS' BANK & TRUST CO.

GUARANTY CO. OF MARYLAND v. WACHOVIA BANK & TRUST CO.

No. 360.

Supreme Court of North Carolina

May 11, 1927

Appeal from Superior Court, Forsyth County; Finley, Judge.

Action by the Corporation Commission of North Carolina against the Merchants' Bank & Trust Company. In the matter of the claim of the Guaranty Company of Maryland against the Wachovia Bank & Trust Company, receiver of the Merchants' Bank & Trust Company. From judgment allowing claim of the Guaranty Company of Maryland as a general and unsecured claim only, it appeals. Partial new trial.

See also, 193 N.C. 113, 136 S.E. 362.

Where evidence conflicted, instruction equivalent to directed verdict held reversible error.

A Lamas gave to Frank L. Blum & Co. a contract for constructing a brick building in Winston-Salem and borrowed $28,200 from the Guaranty Company of Maryland, herein called the claimant for which Lamas and his wife executed to the claimant their note and deed of trust in the sum of $30,000. The claimant then deposited with the Citizens' National Bank of Baltimore to the credit of the Merchants' Bank & Trust Company its check on the Baltimore Commercial Bank for $28,200. When the Merchants' Bank & Trust Company was notified of this deposit, it opened this account on its own books, "Merchants' Bank & Trust Company and Randall Brooks, Trustee for A. Lamas," and on January 12, 1926 credited this account with $28,200.

The claimant alleged that it had an arrangement with the Merchants' Bank & Trust Company, by which Blum & Co. could obtain from the bank and trust company under the loan the amount called for from time to time in orders to be signed by Macklin, the architect, and that, up to the time the doors of the bank and trust company were closed, $14,567.93 of this fund had been drawn out by Blum & Co., leaving $13,632.07 to the credit of the Merchants' Bank & Trust Company and Randall Brooks, trustee. It was alleged by the claimant that on May 10, 1926, he deposited $13,632.07 in the People's National Bank, Winston-Salem, and that all interested parties thereupon agreed that the deposit in the Merchants' Bank & Trust Company under the name of the "Merchants' Bank & Trust Company and Randall Brooks, Trustee for A. Lamas," should become the property of the claimant.

The Wachovia Bank & Trust Company was appointed receiver of the Merchants' Bank & Trust Company, and Forrest G. Miles, acting for the receiver, made a report to which the claimant excepted, demanding a trial by jury of the issues involved. C. S. §§ 1211, 1212, 1213. By consent, the answers to the first, second, third, fifth, sixth, seventh, eighth, ninth, and tenth issues established these facts: The incorporation of the Merchants' Bank & Trust Company, its insolvency, and the appointment of the Wachovia Bank & Trust Company as receiver; the deposit by the claimant of $28,200; the unapplied balance of $13,632.07; the assignment thereof to the claimant; the sum of $28,200 deposited with the understanding and agreement that the Merchants' Bank & Trust Company was to act as trustee of the fund and disburse it according to a letter bearing date February 7, 1926, and set out in the record; the deposit not subject to check by the claimant and Lamas or of either of them; and the cash turned over to the receiver by the Merchants' Bank & Trust Company amounting to $35,583.32. The jury answered the fourth, eleventh, twelfth, and thirteenth issues as follows:

"(4) Were the assets of the Merchants' Bank & Trust Company augmented thereby to an amount equal to the liability incurred? Answer: Yes."

"(11) Did the title to the sum of $28,200 pass to the Merchants' Bank & Trust Company? Answer: Yes.

"(12) Was it the intention of the parties that the proceeds of the deposit in the Citizens' National Bank of Baltimore be commingled with the other funds of the Merchants' Bank & Trust Company, pending withdrawals, and used by the Merchants' Bank & Trust Company in the customary way and for its general banking purposes? Answer: Yes.

"(13) Was it contemplated by the parties to segregate the proceeds of the deposit in the Citizens' National Bank of Baltimore from the other funds of the Merchants' Bank & Trust Company? Answer: No."

The claimant excepted to the last three issues and to the court's refusal to submit the following:

"Was the $28,200 deposited with the Merchants' Bank & Trust Company as a trust fund to be applied by it according to the terms set forth in the letter bearing date of January 7, 1926?"

It excepted also to the denial of judgment for the claimant upon the verdict.

It was adjudged upon the verdict that the claimant is not entitled to have its claim allowed as a priority, but only as a general unsecured claim; and to the judgment the claimant excepted, assigning error.

Parrish & Deal, of Winston-Salem, for appellant.

Manly, Hendren & Womble, of Winston-Salem, for Wachovia Bank & Trust Co.

ADAMS J.

The central question turns upon the nature of the transaction between the claimant and the Merchants' Bank & Trust Company. Considered in view of the evidence and the verdict, what did the transaction amount to in contemplation of law? The answer involves preliminary inquiry into the nature of the deposit, whether it was general or special, or whether it was a deposit for a specific purpose.

A general deposit is the payment of money into a bank to be repaid upon demand; the deposit creates between the bank and the defendant the relation of debtor and creditor; the relation is legal; the money passes from the depositor to the bank and is mingled with other money, the entire amount forming a general fund from which depositors were paid. Deposits of this character are free from any "trust quality," and the depositor in the event of the bank's insolvency has no right of preference, but must share pro rata with general creditors. Boyden v. Bank, 65 N.C. 13; Lilly v. Com'rs, 69 N.C. 300; Ruffin v. Com'rs, 69 N.C. 498; Hawes v. Blackwell, 107 N.C. 196, 12 S.E. 245, 22 Am. St. Rep. 870.

A special deposit is a deposit for safekeeping, to be returned intact on demand-a naked bailment, the bank acquiring no property in the thing deposited and deriving no benefit from its use. The title remains in the depositor, who is a bailor and not a creditor of the bank. Boyden v. Bank, supra, 3 R. C. L. 517; 7 C.J. 630.

A deposit for a specific purpose is made when money or property is delivered to a bank to be applied to a designated object or for a purpose which is particularly defined, as for example the payment by the bank of a specified debt. It is neither general nor wholly...