Danbury State Bank of Danbury v. Leach

• Decision Date: 16 February 1926
• Docket Number: No. 37171.,37171.
• Citation: 207 N.W. 336,201 Iowa 321
• Parties: DANBURY STATE BANK OF DANBURY v. LEACH, STATE SUPERINTENDENT OF BANKING.
• Court: Iowa Supreme Court

201 Iowa 321

207 N.W. 336

DANBURY STATE BANK OF DANBURY

v.LEACH, STATE SUPERINTENDENT OF BANKING.

No. 37171.

Supreme Court of Iowa.

Feb. 16, 1926.

Appeal from District Court, Woodbury County; C. H. Kelley, Judge.

Application by a claimant against the receiver of an insolvent bank for a preference, and that his claim be established as a preferred one, on the ground that it represents a trust fund which became intermingled with the estate of the insolvent, and came into the hands of the receiver to the augmentation of such estate. The preference was allowed by the district court to the extent of the amount of cash in the insolvent bank at the time of the transaction, which amount was slightly less than the claim. An order was entered accordingly, from which the receiver appeals. Reversed.Ben. J. Gibson, Atty. Gen., S. S. Faville, Asst. Atty. Gen., and Naglestad, Pizey & Johnson, of Sioux City, for appellant.

Henderson, Fribourg, Hatfield & Fribourg, of Sioux City, for appellee.

EVANS, J.

The Danbury State Bank and the Danbury Trust & Savings Bank were each engaged in the banking business in the town of Danbury on and prior to June 3, 1924. The first named is the claimant herein, and the second named is the insolvent bank of which the appellant is the receiver. The latter closed its doors on the evening of June 3, 1924. The transaction upon which the plaintiff's claim is predicated involved the clearance of checks between the two banks had at 11:30 a. m. on June 3, 1924. At the time of such clearance, the plaintiff held and presented checks against the Danbury Trust & Savings Bank to the amount of $2,028. The latter held and presented against the plaintiff checks against it to the amount of $690. In the clearance, a balance was struck in favor of the plaintiff for $1,338, as the amount due the plaintiff from the Trust & Savings Bank. The amount of cash on hand in the Trust & Savings Bank at that hour was less than the amount of such balance, such amount being about $1,100. At the same hour, the Trust & Savings Bank had on deposit with its correspondent, the First National Bank of Sioux City, the sum of $3,000 or $4,000. In payment of the balance due the plaintiff, it issued its draft to the plaintiff for the amount of such balance on said First National Bank of Sioux City. Though the plaintiff forwarded the draft in due course, it was not paid for want of funds; the drawing bank having closed its doors on the night of June 3, owing an overdraft to its correspondent, the First National Bank of Sioux City.

The claim for the plaintiff is that, upon the foregoing facts, the plaintiff became entitled to impress a trust upon the money in the hands of the bank at the hour of the clearance, and that it is entitled to follow such money as a fund passing into the hands of the receiver as an augmentation of this insolvent estate. The plaintiff, as appellee, plants his case exclusively upon the authority of Brown v. Sheldon State Bank, 117 N. W. 289, 139 Iowa, 83, and Messenger v. Carroll Trust & Savings Bank, 187 N. W. 545, 193 Iowa, 608. It is apparent that the appellee has quite misconceived the nature and scope of the holding in the cited cases.

[1] In order to impress a trust upon an alleged fund, and to assert a preferential claim therefor in the hands of a receiver, two requisites are essential: (1) That the transaction out of which the claim arose must have involved a trust relation, whereby the wrongdoer stood in the relation of trustee to the injured party; (2) that the fund claimed should be traceable into the hands of the receiver to the augmentation of the estate.

The...