Cox v. Metropolitan State Bank, Inc., 18230

• Decision Date: 24 February 1959
• Docket Number: No. 18230,18230
• Citation: 336 P.2d 742,138 Colo. 576
• Parties: Arthur COX, Tribune Grain, Inc., and Sullivan, Inc., Plaintiffs in Error, v. METROPOLITAN STATE BANK, INC., and William E. Rust, Defendants in Error.
• Court: Colorado Supreme Court

Page 742

336 P.2d 742

138 Colo. 576

Arthur COX, Tribune Grain, Inc., and Sullivan, Inc., Plaintiffs in Error, v. METROPOLITAN STATE BANK, INC., and William E. Rust,

Defendants in Error.

No. 18230.

Supreme Court of Colorado, En Banc.

Feb. 24, 1959.

Dissenting Opinion March 5, 1959.

Rehearing Denied March 30, 1959.

Lennart T. Erickson, Philip A. Rouse, Denver, for plaintiffs in error.

Ireland, Ireland, Stapleton & Pryor, William B. Naugle, Denver, Daniel & McCain, Brighton, for defendant in error Metropolitan State Bank, Inc.

MOORE, Justice.

This action was first presented to this court in cause No. 17877 which was decided October 8, 1956, Metropolitan State Bank, Inc. v. Cox, 134 Colo. 260, 302 P.2d 188. In that opinion the trial court was required to reconsider the evidence and to determine whether at the time the bank accepted a deed from one William E. Rust it had knowledge of the existence of a second deed of trust on the real estate conveyed to the bank by said warranty deed. Pursuant to this mandate, and consistent with the direction of this court, the trial court on December 7, 1956, disposed of the case and entered judgment in favor of the bank as against the claims of all plaintiffs in the three cases which were consolidated for trial. Writ of error directed to that judgment is now before this court for consideration upon the full record.

To properly understand the case as now presented, our opinion in the first case should be referred to, where a full statement of the pleadings and the findings of the trial court appear. Suffice it to say here that one, Rust, was a dealer in automobiles, tractors and trailers; that he had conducted his banking business with the defendant bank for several years and the bank was familiar in a general way with his method of operation; that in some instances Rust acted as an agent of the owner in disposing of such vehicles, in other instances he would buy them outright, and upon occasion he would sell trucks, cars and trailers on commission. At the time of his dealings with Cox (one of the plaintiffs in the trial court) Rust owed the bank (defendant in the trial court) approximately $8,000 which indebtedness was long past due and the bank had for some time been attempting to secure collection, without success. A warranty deed was delivered by Rust to the bank for the purpose of liquidating his debt. This deed excepted a first deed of trust of $13,000 and the bank admits knowledge of this lien. The deed covenanted that the property was free and clear of any other liens, when in fact there was a second deed of trust of record against the real estate at the time the deed was executed. The bank denied any knowledge thereof and upon discovery of the existence of this trust deed it rescinded its agreement releasing Rust from his debt and seized the sum of $6,270.94, being the balance on deposit in his checking account at the time. He had deposited to his general account a check for $6,120 the day before the seizure. This check was received by him as payment in full for a tractor which he had sold and which was owned by Cox. The arrangement between Cox and Rust was that the latter would find a purchaser for the tractor and would keep as his commission all sums received in excess of $5,000. Rust had delivered to Cox three checks totalling $5,000, but due to the seizure of the said deposit by the bank, checks representing $4,500 payable to Cox were unpaid. Cox brought his action against the bank claiming that the deposit of Rust was a special deposit for a specific purpose and that the bank knew or had reason to know that said deposit was a special one.

The $6,120 check received by Rust from the purchaser of the tractor was drawn on a bank in Vernal, Utah. In order to expedite clearance of the checks issued to Cox, Rust consulted officials of the bank and was advised to secure a telegram from the Utah bank accepting the charge against the account upon which it was drawn. Such a telegram was received by the local bank and thereupon Rust's account was credited with the amount of the deposit. An official of the bank admits that at the time the deposit was made he conferred with Rust in a private office for a period of time estimated to be between ten minutes and half an hour, and that at this conference the ledger card concerning Rust's indebtedness was on the table. Rust testified that the full nature of his dealings with Cox was told to the bank official during this conference and that the bank was informed that $5,000 of the money represented by the check belonged to Cox. Rust further testified that the bank official promised not to seize the funds for application to Rust's indebtedness and that this promise was made prior to making the deposit.

Officials of the bank denied that they had any knowledge whatever which might charge them with notice that the check involved trust funds. They testified that Cox was not mentioned. It is admitted, however, that a check for $500 drawn by Rust in favor of Cox was cashed since Rust had a sufficient balance for the payment of this check prior to the deposit of the draft on the Utah bank.

In the other cases which were consolidated for trial, the Tribune Grain, Inc. and Sullivan, Inc. sought to recover against the bank upon checks held by them upon which payment was refused following the seizure of Rust's funds by the bank. In these transactions Rust bought grain from the corporations, giving the checks drawn on the bank in payment therefor. Unless the bank is bound by its acceptance of the deed to discharge the debt of Rust, the vendors of the grain have no remedy against it.

Following the mandate of this court in cause No. 17877 the trial court found specifically that the defendant bank had no actual or constructive notice of the existence of a second deed of trust at the time the deed from Rust was delivered to it. There is competent evidence to support this finding of fact and in such circumstances we are not warranted in disturbing it. Apart from the contention that Rust's obligation to the bank had been cancelled by acceptance of the deed, and because thereof the bank had no right to set off the deposit against the claimed indebtedness of Rust, there is no legal basis for the claims of the Tribune Grain Inc. and Sullivan, Inc. We are bound by the finding of the trial court and accordingly affirm the judgment as to these two plaintiffs.

A different situation exists with reference to the claim of Cox as between him and Rust. $5,000 of the money represented by the check for $6,120 was unquestionably received by Rust as trustee for the use and benefit of Cox.

Although the assignment of title to the tractor which was executed and delivered by Cox has the name of Rust as assignee therein, it would seem clear that it was delivered in blank by Cox since Rust acknowledges that he placed his own name on it after receiving it upon giving the last of three checks totalling $5,000 to Cox on December 20, 1954. He explained at length the reason he placed his own name as assignee on the title to the tractor and used a printed form, No. 411 Dealer's Bill of Sale, for the purpose of securing title in the purchaser. In this connection we quote the following testimony:

'Q. Now, whether you bought the tractor or whether you had it on a commission basis the transaction so far as the title is concerned would be handled the same, would it, Mr. Rust? A. If I bought it?

'Q. Yes, for resale. A. It would be handled the same to go through the dealer, to secure a title for the purchaser. It would have to be handled the same way. It wouldn't make any difference whether I owned it or not. If I transfer it on the 411, that is the way it has to be.

'Q. Well, the title could be assigned direct across to B & M, could it not? A. To B & M?

'Q. Yes, assigned to them and they could get a new title? A. It can be that way if they receive a permit to drive it to their courthouse, if they take the title from me and go to their county clerk's office without taking the truck home with them. This B & M Service is in Rangely, and it has to go from the dealer to the purchaser and then from the purchaser to the state to secure title. I had gotten instructions concerning that from the dealers association.

'Q. Regardless of whether it is a sale and a purchase of the truck you would use identically the same titles, is that right? A. That is the only title there was to the truck.'

We are satisfied that the insertion of the name of Rust as the transferee of the title under these circumstances, which are not disputed, did not in any manner change the nature of the relationship existing between Cox and Rust. The testimony of Rust in this connection is:

'A. My contract with Mr. Cox was that I was to sell his piece of equipment and all over five thousand dollars was my commission for selling that piece of equipment for him. Now, I received that piece of equipment in October, I believe, and I had several deals on it and several deals that were attempted to be financed through the Metropolitan Bank, * * *'

The testimony of Cox in this connection is as follows:

'Q. Mr Cox, I direct your attention to on or about the 20th day of December 1954. On or about that time did you have any business dealings with Mr. William E. Rust? A. Yes, Mr. Rust was selling a truck for me.

'Q. Did you at any time transfer title to Mr. Rust? A. I did on December 20th when I received the final check from Mr. Rust.

'Q. And to your knowledge was that title turned over to purchaser of the truck? A. It was turned over to the purchaser. It wasn't--Well, I signed the title over and received the check, see?

'Q. On what date? A. December 20th.

'Q. 1954? A. 1954.

'Q. And did you receive checks from Mr. Rust in payment for that tractor? A. Yes, I did. I received three checks.'

The deal for the sale of the tractor was made by Rust on December 15. He expected to receive a certified check in payment...