Eifel v. Veigel

• Decision Date: 10 December 1926
• Docket Number: No. 25387.,25387.
• Citation: 211 N.W. 332,169 Minn. 281
• Parties: EIFEL v. VEIGEL, State Superintendent of Banks, et al.
• Court: Minnesota Supreme Court

211 N.W. 332

169 Minn. 281

EIFEL v. VEIGEL, State Superintendent of Banks, et al.

No. 25387.

Supreme Court of Minnesota.

December 10, 1926.

Appeal from District Court, Marshall County; Andrew Grindeland, Judge.

Action by Charles C. Eifel against A. J. Veigel, State Superintendent of Banks, and another. Judgment for plaintiff for allowance as a general claim against the assets of an insolvent bank, and plaintiff appeals from an order denying a new trial. Reversed, with directions.

Gilbert E. Harris, of St. Paul, and Julius J. Olson, of Warren, for appellant.

A. N. Eckstrom, of Warren, for respondents.

TAYLOR, C.

The defendant bank was closed in August, 1922, and its affairs are being wound up by the superintendent of banks. The question presented is whether plaintiff is simply a general creditor of the bank or is entitled to a preference right of payment.

The court found as a fact that plaintiff was the owner and holder of a promissory note for the sum of $1,700 executed by one Harold Myhre and payable to the Argyle Machine & Iron Works, or order, which note had been sold, transferred, and delivered to plaintiff by the payee in December, 1920; and that plaintiff — "deposited the said note for collection with the said Citizens' State Bank of Argyle, Minn., and that the said bank did thereupon undertake on behalf of said plaintiff to collect the note for him."

The court further found:

"That on or about the 30th day of April, 1921, the said bank did collect the amount then due on said note, to wit, $1,759.50, and that the defendant bank has failed to remit said amount, or any part thereof, to the plaintiff herein."

The court directed that judgment be rendered for plaintiff for the amount collected, and that it be allowed as a general claim in the liquidation proceedings and be paid ratably with other general claims out of the assets of the bank. Plaintiff appealed from an order denying a new trial and insists that he is entitled to have his claim allowed and paid as a preferred claim.

The bank claimed that it held the note as collateral to the indebtedness of the Argyle Machine & Iron Works, and was entitled to apply its proceeds upon that indebtedness, and, some months after the collection was made, attempted to do so; but, as the defendants have not appealed, they are bound and concluded by the findings.

Plaintiff is a resident of Chicago, Ill., and it is undisputed that the deposit of this note for collection is the only transaction which he ever had with defendant bank. It is also undisputed that the note was not indorsed either by plaintiff or by the original payee from whom plaintiff received it.

It is well settled that commercial paper deposited in a bank for collection remains the property of the depositor and that the bank is merely his agent to collect it. The law governing such deposits is stated fully and accurately in 3 R. C. L. 633, as follows:

"If it was deposited for collection merely, it is quite plain that the bank does not take title, but merely acts as agent for collection. The property in the check or draft remains in the depositor, and the relation arising from the transaction is not that of debtor and creditor, but of principal and agent. These principles must always be borne in mind in considering the question as to the title to the proceeds of collections by banks, as it necessarily follows that, if the title to the paper to be collected passed to the bank, the proceeds of the collection will belong to it, and the bank will be merely a general debtor of the customer; whereas, if the paper was deposited for collection merely, as title thereto remains in the customer, title to the proceeds will not necessarily pass to the bank. When it is finally determined that a deposit of a check or draft was for collection only and vested no title thereto in the bank, the question still remains as to the title to the proceeds of such check or draft. The question may be said to be simply one of the intention of the parties. If they intended that the proceeds should be remitted immediately upon receipt thereof, or if in any other way it can be shown that the parties intended that the proceeds of the check as well as the check itself should remain the property of the owner, such intention will control and the bank will not take title to the proceeds. On the other hand, where the understanding is that the bank, when the collection shall have been made, shall pass it to the general credit of the depositor, kept subject to check, such credit being authorized, it is the same as though the money had been deposited by the depositor to his credit; the title to the proceeds after being credited passes to the bank, and the relation becomes merely that of debtor and creditor."

Where commercial paper is deposited in a bank for collection and credit, it remains the property of the depositor until it has been collected and the proceeds thereof have been placed to the credit of the depositor, and the relation between the depositor and the bank is that of principal and agent; but when the collection has been made and the proceeds have been placed to the credit of the depositor, they then become the property of the bank and the relation between the bank and the depositor becomes that of debtor and creditor. 11 A. L. R. 1046, and cases there cited; 16 A. L. R. 1084; 42 A. L. R. 494.

Where the paper is deposited for collection and remittance, both the paper and its proceeds remain the property of the depositor, and the bank is merely his agent to collect the paper and transmit to him the proceeds thereof and does not become the owner of either. Darragh Co. v. Goodman, 124 Ark. 532, 187 S. W. 673; National Life Ins. Co. v. Mather, 118 Ill. App. 491; Messenger v. Carroll, 193 Iowa, 608, 187 N. W. 545; Griffin v. Chase, 36 Neb. 328, 54 N. W. 572; In re Bank of Cuba in New York, 198 App. Div. 733, 191 N. Y. S. 88; Thomson v. Bank of Syracuse (Mo. App.) 278 S. W. 810.

Whether the paper was deposited for collection and credit or for collection and remittance may be implied, in the absence of an express agreement, from the situation and relation of the parties, from the course of dealing between them, from the nature of the transaction, or from any other circumstances which disclose whether they intended credit or remittance. Darragh Co. v. Goodman, 124 Ark. 532, 187 S. W. 673; National Bank v. State Bank, 74 Colo. 309, 221 P. 891; Lawrence v. Lincoln County Trust Co., 125 Me. 150, 131 A. 863; Jersey Shore Trust Co. v. Owosso Savings Bank, 223 Mich. 513, 194 N. W. 588, 32 A. L. R. 714; McHenry County v. Northern Trust Co., 51 N. D. 646, 200 N. W. 888; National Bank v. Sandford, 62 Mo. App. 394; First Nat. Bank v....