First State Bank of Bristow v. O'Bannon
| Decision Date | 10 April 1928 |
| Docket Number | 18823. |
| Parties | FIRST STATE BANK OF BRISTOW et al. v. O'BANNON. |
| Court | Oklahoma Supreme Court |
Syllabus by the Court.
Before a claim can be allowed as a preferred claim against the state bank commissioner in charge of an insolvent bank, it is necessary to establish, first, that the claim in question is a trust fund; and, second that the fund in some form was a part of the assets of the bank which passed into the hands of the commissioner.
A state bank accepting, for collection, drafts expressly marked for collection and remittance handles such collection as agent and the proceeds become a trust fund in the hands of the bank, subject to be traced into the hands of the bank commissioner who takes over the bank as insolvent.
When a trustee commingles his beneficiary's money with his own and then invades the common store, he will be presumed to have used his own money first; the law presuming that he does right rather than wrong.
Where a bank accepts drafts for collection under the express conditions of "collection and remittance" and receives in payment of such drafts a check drawn upon itself by drawee of the drafts, who has ample funds in deposit to pay his chcek, and the bank has ample funds to pay the check the transaction is the same as though the bank had actually received cash in payment of the draft. The assets of the bank being thus augmented, the amount of such drafts in such sum as so collected is a trust fund and so a preferred claim.
Appeal from District Court, Creek County; Fred A. Speakman, Judge.
Action by Frank O'Bannon against the First State Bank of Bristow, O. B. Mothersead, Acting Bank Commissioner, and W. S. Simmons, Liquidating Agent. From a judgment for plaintiff, defendants appeal. Affirmed.
Erman S. Price, of Oklahoma City, Pounders & Pounders, of Bristow, and M. B. Cope, of El Reno, for plaintiffs in error.
Robson & Moreland, of Claremore, for defendant in error.
O'Bannon forwarded to the First State Bank of Bristow two drafts with bill of lading attached, totaling $1,027.70, drawn upon Gibbs, for collection and remittance. These drafts were received by the bank and in due course presented to Gibbs for payment. Gibbs paid the same to the collecting bank by checks drawn upon his account in the collecting bank-his account was adequate to pay the same. His account in due course was charged with the amount of the drafts and a corresponding credit given the bank's cashier's checks outstanding, and the bank issued its cashier's check to O'Bannon & Co. of Claremore for the amount of the collection. The bank became insolvent, and the payment on the cashier's check was refused. During the entire transaction and after insolvency there was sufficient cash on hand in the bank to the amount in controversy.
The decisive question here involved is whether the relation between O'Bannon and the bank was that of debtor and creditor or that of principal and agent, and consequently whether O'Bannon was a mere general creditor or a preferred claimant.
This question is settled in this jurisdiction by Hall v. Sullivan, 123 Okl. 233, 253 P. 45; Kansas Flour Mill Co. v. New State Bank of Woodward, 124 Okl. 185, 256 P. 43; Thomas v. Mothersead, 128 Okl. 157, 261 P. 363; Bank of Commerce v. Ingram, 33 Okl. 46, 124 P. 64; State ex rel. v. Excello Feed Co. (Okl. Sup.) 267 P. 833, decided January 10, 1928, not yet officially reported.
In affirming the decision of the trial court we are not unmindful of conflict in the decisions of other jurisdictions as well as conflict in the decisions of the federal courts. We think the status is dependent upon the intention of the parties. 3 R. C. L. 632. There must be assent of the party to whom the debt is due in order to change the admitted original relation of agency. An agent should not be permitted by its act alone to change the relation by sending its check and so convert its trust fund into a debt. Holder v. Western Ger. Bank (6th C. C. A.) 136 F. 90.
The Ninth Circuit Court of Appeals spoke in Spokane & E. Trust Co. v. U.S. Steel Products Co., 290 F. 884, and held:
"The rule as established by the weight [of] authority is that where a bank transmits negotiable paper for collection and returns, the bank which receives the check and undertakes the collection is the agent of the principal, and becomes a trustee of the proceeds for the owner, and, except where consent is given, the collecting bank cannot avoid such relationship and create that of mere debtor and creditor."
The case of Bank of Poplar Bluff v. Millspaugh, 313 Mo. 412, 281 S.W. 733, 47 A. L. R. 754, distinguishes the methods and custom of banking in the reciprocal account and remittance methods of doing business and holds that where such an item is sent for collection and remittance, the relation is that of principal and agent and the funds so transmitted are impressed with a trust by reason of the intention of the parties. Federal Reserve Bk. of St. Louis v. Millspaugh, 314 Mo. 1, 282 S.W. 706; Bank of America v. Waydell, 187 N.Y. 115, 79 N.E. 857; In re Bank of Cuba in N. Y., 198 A.D. 733, 191 N.Y.S. 88; National Life Ins. Co. v. Mathers, 118 Ill.App. 491.
The case of First Nat. Bk. v. Walker, 289 Pa. 252, 137 A. 257, holds:
"When paper is accepted for collection under express directions to collect and remit, money in hands of the collecting bank is then a trust fund for the real owner."
Likewise, in Nebraska, Griffin v. Chase, 36 Neb. 328, 54 N.W. 572; in South Dakota, Plano Mfg. Co. v. Auld, 14 S.D. 512, 86 N.W. 21, 86 Am. St. Rep. 769; in Minnesota, Eifel v. Veigel, 169 Minn. 281, 211 N.W. 332; and in Arkansas, Rainwater v. Federal Reserve Bk. of St. Louis, 172 Ark. 631, 290 S.W. 69. So in Goodyear Tire & Rubber Co. v. Hanover State Bank et al., 109 Kan. 772, 204 P. 992, 21 A. L. R. 677; Kesl et al. v. Hanover St. Bk. et al., 109 Kan. 776, 204 P. 994; Hawaiian Pineapple Co., Ltd., v. Browne, 69 Mont. 140, 220 P. 114; Federal Reserve Bank of Richmond v. Peters et al., 139 Va. 45, 123 S.E. 379, 42 A. L. R. 742; Federal Reserve Bank of Richmond v. Bohannan, 141 Va. 285, 127 S.E. 161; Federal Reserve Bank of Richmond v. Bohannan, 141 Va. 285, 127 S.E. 161; Federal Reserve Bank v. Quigley (Mo. App.) 284 S.W. 164; Thompson v. Bk. of Syracuse (Mo. App.) 278 S.W. 810; Macy v. Roedenbeck (C. C. A.) 227 F. 346, L. R. A. 1916C, 12; American Can Co. v. Williams (C. C.) 176 F. 817; Atherton v. Green (C. C. A.) 179 F. 806; Archibald & Lewis Co. v. Banque I. De Commerce, 216 A.D. 322, 214 N.Y.S. 369; Nat. Park Bk. v. Seaboard Bank, 114 N.Y. 28, 20 N.E. 632, 11 Am. St. Rep. 612; Rock County Bank v. Hollister, 21 Minn. 385; Third Nat. Bk. v. Clark, 23 Minn. 263; Merchants' Nat. Bk. v. Hanson, 33 Minn. 40, 21 N.W. 849, 53 Am. Rep. 5; In re Seven Corners Bk., 58 Minn. 5, 59 N.W. 633; State v. Bk. of Commerce, 61 Neb. 181, 85 N.W. 43, 52 L. R. A. 858; Jones v. Kilbreth, 49 Ohio St. 401, 31 N.E. 346; People's Bk. v. Jefferson County Sav. Bk., 106 Ala. 524, 17 So. 728, 54 Am. St. Rep. 59; Boykin v. Bank, 118 N.C. 566, 24 S.E. 357; Bank v. Bank, 119 N.C. 307, 25 S.E. 971; Tyson & Rawls v. Western Nat. Bk., 77 Md. 412, 26 A. 520, 23 L. R. A. 161; Hoffman v. First Nat. Bk., 46 N. J. Law, 604; McKeon v. Meade County Bk., 37 S.D. 100, 156 N.W. 795; McLeod v. Evans, 66 Wis. 406, 28 N.W. 173, 214, 57 Am. Rep. 287; Lawrence v. Lincoln County Trust Co., 125 Me. 150, 131 A. 863; White v. Miners' Nat. Bk., 102 U.S. 648, 26 L.Ed. 250; Sweeney v. Easter, 1 Wall. (68 U. S.) 166, 17 L.Ed. 681.
We shall examine the cases quoted from by the appellant, the bank commissioner:
Goyner v. Williams, 168 Cal. 452, 143 P. 736: There the instructions were not to "collect and remit," but only "for collection." There the stipulation was that the custom was to credit the proceeds of drafts sent for collection. There the intention of the parties governed. The later case in California, Luckehe v. First Nat. Bk., 193 Cal. 184, 223 P. 547, to the contrary, held and distinguished the former case based upon custom established therein. In the case at bar no custom is established.
The next case- Young, State Bank Examiner, v. Teutonia Bk. & Trust Co., 134 La. 879, 64 So. 806: There had been a prior course of dealing between the parties.
In U.S. Nat. Bk. v. Glanton, 146 Ga. 786, 92 S.E. 625, L. R. A. 1917F, 600, the draft for collection was sent to defendant bank without any specific instructions. There was no instruction to collect and remit as herein.
Union Nat. Bk. v. Citizens' Bk. et al., 153 Ind. 44, 54 N.E. 97, cited, the court said under the facts that it was understood that upon collection the appellant was to receive a credit and that appellee might use the money in its own business.
Commercial Nat. Bk. v. Armstrong, 148 U.S. 50, 13 S.Ct. 533, 37 L.Ed. 365: This case was construed in Spokane & Eastern Trust Co. v. U.S. Steel Products Co. (C. C. A.) 290 F. 884, where it was said:
"There the contract required a settlement between the banks only upon certain days of each month, and under the facts the court concluded that the collections made were not to be placed on special deposit and held until the day for remitting, but were to be treated as a general deposit, the transmitting bank being regarded as a general depositor."
In Peters Shoe Co. v. Murray, 31 Tex.Civ.App. 259, 71 S.W. 977, it was said:
"It is the well-settled doctrine in this state as well as in a large number of the states of the Union, that in a case like the present, where a special agency is created, and the bank has no authority to hold and credit the proceeds of the draft, but is bound by the agreement to remit them immediately to its correspondent, the relation...
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