First National Bank of Sharon, Pennsylvania v. City National Bank of Kansas City, Missouri

• Decision Date: 08 June 1903
• Citation: 76 S.W. 489,102 Mo.App. 357
• Parties: FIRST NATIONAL BANK OF SHARON, PENNSYLVANIA, Respondent, v. CITY NATIONAL BANK OF KANSAS CITY, MISSOURI, Appellant
• Court: Kansas Court of Appeals

76 S.W. 489

102 Mo.App. 357

FIRST NATIONAL BANK OF SHARON, PENNSYLVANIA, Respondent, v. CITY NATIONAL BANK OF KANSAS CITY, MISSOURI, Appellant

Court of Appeals of Missouri, Kansas City

June 8, 1903

Appeal from Jackson Circuit Court.--Hon. E. P. Gates, Judge.

REVERSED.

Judgment reversed.

Milton Moore for appellant.

(1) The evidence does not sustain the allegations of the petition that the money sued for was deposited with the defendant bank in trust for the plaintiff or in trust to pay the holder of the note claimed by plaintiff as the basis of this action. Beyond question the deposit was made by Shinn to the credit of Missouri Live Stock Commission Company. (2) Nor does the evidence show that an agreement was made between Shinn and defendant bank for the benefit of plaintiff or the holder of the note sued on. The evidence shows no contract of any kind with reference to the deposit. None with the bank, because the deposit was to the credit of the commission company. None with the commission company because the deposit was made without its knowledge. (3) The deposit was an ordinary deposit made by Shinn to the credit of Missouri Live Stock Commission Company. (4) When money is deposited in a bank it has the right to use the same as it may. Zane on Banking sec. 130, p. 204. (5) The deposit by one in the name of another passes the title of the money where it is taken without knowledge of conflicting claims. Boettcher v Bank, 15 Colo. 16; Wood v. Boynton, 129 Mass 358. (6) Money deposited to the credit of another is prima facie payment to him, and is a sufficient protection to the bank. Zane on Banking, sec. 134, p. 213; Egbert v. Payne, 99 Penn. 239; Bank v. Ins. Co., 104 U.S. 54. (7) The bank is not bound unless it appears from the evidence that it entered into an agreement to carry out the purposes of the depositor. Boettcher v. Bank, 15 Colo. 16. (8) The mortgagee has no lien on the proceeds of sale of mortgaged property even though paid on a pre-existing debt. Bennett v. Gustafsen, 54 Iowa 6; Kahler v. Henson, 53 Iowa 698; Harlan v. Ash, 84 Iowa 38-42; Smith v. Bank, 99 Iowa 282; Jones on Chattel Mortgages (4 Ed.), 464. The Missouri doctrine is that in case of sale of mortgaged property in violation of the terms of the instrument, the mortgagee's remedies are replevin or conversion. Bank v. Morris, 125 Mo. 350; Holloway v. Arnold, 92 Mo. 293; Bank v. Metcalf, 40 Mo.App. 494.

I. P. Ryland and R. E. Ball for respondent.

(1) The disputed fact as to whether Shinn told the cashier and whether the cashier knew at the time of the deposit that the fund of four thousand dollars was, in fact, the proceeds of cattle covered by the plaintiff's mortgage, is not a material fact, and under the evidence, whatever may be true about that could not change the result. Burnett v. Bank, 38 Mich. 630; Bank v. Ins. Co., 104 U.S. 54; Bank v. Farwell, 58 F. 633; Cady v. Bank, 64 N.W. 906; Alter v. Bank, 73 N.W. 667. (2) On the controverted facts, a court of equity will award the fund to the real beneficial owner and will not permit or sanction the commission of such an act as the defendant, City National Bank, has been guilty of. The defendant has parted with nothing on the faith of this deposit. The defendant is not left in any respect in a worse position by denying its arbitrary appropriation of this money. The defendant makes no claim or showing of any right or title to this fund in the commission company, the depositor, to whose credit it was placed. The defendant bank stands absolutely defenseless in law and in conscience. Stoller v. Coates, 88 Mo. 514; Bank v. Gillespie, 137 U.S. 411; Bank v. King, 57 Pa. St. 205; Clemmer v. Bank, 41 N.E. 728; Evangelical Synod v. Schoeneich, 143 Mo. 664; Pundman v. Schoeneich, 144 Mo. 155; Bank v. Brightwell, 148 Mo. 365; Tievnan's Ex. v. Security B. & L. Assoc., 152 Mo. 142; Paul v. Draper, 158 Mo. 199; Pearson v. Haydel, 90 Mo.App. 262; Meystedt v. Grace, 86 Mo.App. 183. (3) The point made by appellant, based on the dictum of Judge VALLIANT in Seafield v. Bohne, 69 S.W. 1051, has no merit. (4) There can be no reversal except for prejudicial error. R. S. 1899, secs. 659 and 865. (5) In conclusion we recall to the court's attention the remarkable fact that neither in the testimony of the officers of appellant bank, nor in the adroit and voluminous brief filed by the appellant, is there one word tending to show any right, on its part, to the money, or extenuating in any degree its outrageous action in withholding it.

OPINION

ELLISON, J.

The plaintiff filed its bill in equity wherein it seeks to have a decree against defendant for the sum of four thousand dollars with interest. The trial court entered the decree accordingly and defendant has come here for relief.

In the view which we take of the case it will not be necessary to state in detail several of the points of dispute or contradictions appearing in the evidence. George W. Shinn gave a negotiable note, and mortgage on cattle to secure it, dated April 19, 1901, to the Missouri Live Stock Commission Company for $ 5,476, due in six months with eight per cent interest from maturity. Shinn retained possession of the cattle. In a few days thereafter the commission company sold and indorsed the note to plaintiff. About a month thereafter Shinn sold the cattle and deposited $ 4,000 of the proceeds with the defendant bank in the name of the commission company. That company did its banking business with the defendant and its account was overdrawn to near the amount of Shinn's deposit. The company was insolvent and the defendant, claiming to exercise the right of a bank creditor with the account of its depositor, appropriated the sum deposited by Shinn to the discharge of its claim against the commission company. The latter company was notified of the deposit by mail on the next day after it was made. It remained passive and silent concerning it until about six weeks afterwards, when upon receiving a statement of its general account with defendant, it replied as follows:

"Reporting on your statement of our account from May 1st to June 6th, will say that we note credit of $ 4,000 on May 22 against which we have no charge, and a charge of $ 156.14 on June 6th against which we have no credit. With these exceptions the account is correct."

Plaintiff knew nothing of the sale of the cattle or of the deposit. Plaintiff claims that Shinn notified the defendant's cashier when he made the deposit that it was to pay on his note to the commission company. Defendant denied that it had any notice of such purpose and claims the deposit was made generally without any direction or accompanying statement. This conflict in the testimony relates to a vitally important branch of the case. The burden is on the plaintiff to show that the defendant bank was notified of the specific purpose for which the deposit was intended. Smith v. Bank, 107 Iowa 620, 78 N.W. 238.

In view of the fact that the burden of proof is on the plaintiff, we have concluded under all the circumstances shown in evidence, that it has failed to make a case upon which we can find that defendant was notified of the purpose of the deposit. The evidence in behalf of plaintiff consisted of the statement of Shinn that he so informed the cashier at the time the deposit was made and that several days afterwards, when the transaction had become a matter of dispute, the cashier admitted to him and his attorney that he had given the notice. The attorney corroborates Shinn. The cashier denies the notice. He also denies making the admission, and is corroborated in that by the vice-president of the bank. In a few moments after he was said to have made the admission he was told of it and he immediately said he had been misunderstood; that he had not admitted it. Here we have the plaintiff supported by Shinn and his attorney, who is a lawyer of high standing and character. The defendant is supported by two witnesses unimpeached. In this balance of testimony we turn to the law of the burden of proof which, as we have stated, rests upon the plaintiff, and from that consideration must find that notice, if given, has not been shown. There are some circumstances, however, which favor the view that no notice was given. The deposit was made after banking hours when no one but the cashier and Shinn was present. Shinn was himself a banker. The "deposit slip" made out at the time by the cashier in Shinn's presence said nothing of the deposit being for any purpose. Such slip or ticket is said to be "a note to help the memory." Morse on Banking, sec. 290. The cashier stated that he gave Shinn a duplicate. Shinn does not deny this. It must in reason be true, for the deposit was not put on a pass book and it seems out of accord with business principles that Shinn would have left the bank without taking with him any evidence of the transaction. So the amount went on the books of the bank as a general deposit to the account of the commission company and that company was so notified and it remained silent, without a claim that any specific purpose was directed. In addition to these considerations is the circumstance that at the time of the deposit the note was not yet due for five months.

The money thus deposited having arisen from a sale of the mortgaged property may be assumed to be properly, the money of plaintiff as holder of the note secured by the mortgage. What, then, is the law as applied to the facts thus stated? The authorities are not in full harmony; yet, if viewed from the standpoint of principle, the question is not difficult of solution.

When Shinn sold the cattle his act constituted a conversion to his own use. The money he received for them was a commodity which passes, and may be received, from hand to hand...