Flint Road Cart Co. v. Stephens

• Citation: 32 Mo.App. 341
• Parties: FLINT ROAD CART COMPANY, Respondent, v. LON V. STEPHENS, Receiver of the FIFTH NATIONAL BANK, Appellant.
• Decision Date: 13 November 1888
• Court: Court of Appeal of Missouri (US)

32 Mo.App. 341

FLINT ROAD CART COMPANY, Respondent, v. LON V. STEPHENS, Receiver of the FIFTH NATIONAL BANK, Appellant.

Court of Appeals of Missouri, St. Louis.

November 13, 1888

Appeal from the St. Louis City Circuit Court. --HON. JAMES A SEDDON, Judge.

AFFIRMED.

Draffen & Williams and D. W Shackleford, for the appellant.

The " national bank act," in its provisions for winding up the affairs of insolvent banks, requires that the assets shall be ratably distributed among the creditors, and that no creditor shall obtain any preference over others. R. S. U. S secs. 5236, 5242; Irons v. Bank, 6 Bissel 301, 306; Bank v. Price, 22 F. 697. The plaintiff was only a creditor of the bank. Its funds were not placed on special deposit, nor is there any special equity in its claim to be treated as a preferred creditor. None of the plaintiff's money came into the receiver's hands. In re Cavin v. Gleason, 105 N.Y. 256. The proceeding against the receiver is improper. The statute points out his duty. He is required " to pay over all money collected to the treasurer of the United States, subject to the order of the comptroller." R. S. U. S. sec. 5234. The comptroller makes distribution thereof. The receiver has no control over the funds. His duty is marked out by the statute. If plaintiff is not satisfied with the distribution of the assets, his remedy is by proceedings against the comptroller. White v. Knox, 111 U.S. 784.

Mills & Flitcraft, for the respondent.

The deposit was a special deposit, and the fund a trust fund, and the respondent is not a general creditor of the bank, but entitled either to a return of the specific deposit or the equivalent. We respectfully submit that the reasoning of our supreme court in the case of Stoller v. Coats, 88 Mo. 51, and Harrison v. Smith, 83 Mo. 210, settles the law in favor of the respondent in this case. The conversion of the money does not change the character of the deposit or increase the rights of the ordinary creditors. The bank held the fund as a trustee, and the receiver is bound by the original trust. The national banking law applies to the distribution of assets belonging to the bank, and to which it had exclusive right and control. The funds of third parties are not to be distributed pro rata among the creditors of the bank. Such funds are not to be distributed at all. Why should the receiver be able to extinguish the rights of the true owner? The whole fund is to be treated as a trust fund until the beneficiary is made whole. Frith v. Cortland, 2 Hen. & M. 417; Bank v. King, 57 Pa.St. 202; Knatchbull v. Hallett, 13 Ch. D. 696; Pennell v. Deffen, 4 DeG. M. & G. 372; Tuttle v. Frelinghuysen, 38 N.J.Eq. 12. This court is justified in establishing respondent's claim as a demand to be paid in full, notwithstanding the fact that the receiver acts under the supervision of the comptroller of the currency. Bank v. Bank, 14 Wall. 383. The act of congress of March 3, 1887, amending the act of March 3, 1875, provides in section 3, that every receiver, or manager of any property, appointed by any court of the United States, may be sued in respect to any act or transaction of his, in carrying on the business connected with such property, without the previous leave of the court, in which said receiver or manager was appointed, but such suit shall be subject to the general equity jurisdiction of the court in which said receiver or manager was appointed, so far as the same shall be necessary to the ends of justice.

OPINION

PEERS J.

This is a suit by plaintiff to recover three hundred and fifty dollars deposited in the Fifth National Bank, and to have the same declared a preferred claim and entitled to be paid out of the assets before the payment of general creditors. The pleadings show that the bank was duly organized under the " " national bank act," and that in November, 1887, it became insolvent, suspended business and the defendant Stephens was appointed receiver thereof and duly entered upon his duties.

The case was submitted to the court upon the following agreed statement of facts:

" That on or about the nineteenth day of July, 1887, the plaintiff brought a certain suit by attachment in the court of Patrick Kane, a justice of the peace in St. Louis, Missouri, against one W. J. Russell, and that in that proceeding it became necessary to furnish security residing in the city of St. Louis, and to accomplish that purpose plaintiff deposited in the Citizens' National Bank of Flint, Michigan, the sum of three hundred and fifty dollars; that the said Citizens' National Bank, acting for said plaintiff and at its request, delivered to the Fifth National Bank of St. Louis, the said sum of three hundred and fifty dollars, and requested one C. C. Crecelius, cashier of said Fifth National Bank, to become surety in said cause brought against said Russell. ‘ Flint, Mich., July 19th, 1887. C. C. Crecelius, St. Louis, Mo. Will you do me the favor to become surety in a case, The Flint Road Cart Co. vs. W. J. Russell, the bond not to exceed $350.00. To secure you I herewith enclose you my draft 99854, on Chase Nat. Bank, New York, for $350. R. G. Dunn & Co. atty. will call on you. By doing this you will confer a favor that will be fully appreciated by yours very truly, H. C. VonDeusan, cashier.'

That said sum of three hundred and fifty dollars was deposited with the said Fifth National Bank to indemnify said Crecelius as surety on said bond; that said bond was given on the nineteenth day of July, 1887, by other parties and that the deposit did not arrive in the city of St. Louis until the twenty-first day of July, 1887; that upon the receipt of said money by said Fifth National Bank of St. Louis, the said Fifth National Bank opened an account with the said Citizens' National Bank and credited said Citizens' National Bank of Flint, Michigan, with the said three hundred and fifty dollars and by its cashier transmitted the following letter to said Citizens' National Bank: ‘ St. Louis, July 20th, 1887. Citizens' National Bank, Flint, Michigan. Your favor of July 19th at hand. We credit $350 to your account, subject to the bond which we will furnish. Very truly, C. C. Crecelius.'

The Citizens' National Bank was not a regular correspondent of the Fifth National Bank, the three hundred and fifty dollars deposit being the only transaction had with it. That said money was immediately mingled with the other funds of the bank, and by it paid out in the usual course of its business, and that long prior to the suspension of said bank the entire amount of said three hundred and fifty dollars had been paid out, as the funds so sent were not kept separate in any way; that said bank is insolvent and there is no certainty that said Stephens, as receiver, will be able from the assets in his hands to pay all the claims against said bank in full; that said receiver has come into possession of assets of said bank to an amount in excess of five hundred thousand dollars; that said Stephens refuses to pay said claim in full, and is proceeding to distribute the funds of said Fifth National Bank; that neither said Crecelius nor said Fifth National Bank furnished the security hereinbefore mentioned; that neither said Fifth National Bank nor said C. C. Crecelius are now, nor in any contingency can become, liable for any sum on account of said request of the Citizens' National Bank, or of plaintiff herein; that said attachment suit resulted in a judgment in favor of plaintiff, sustaining the attachment and for the recovery on the cause of action sued on, and that said judgment was not appealed from, and the time for appeal has long since expired. Mills & Flitcraft, Atty's for Pl'ff. Draffen & Williams, and D. W. Shackleford, Atty's for Def't.

In case the court should be of the opinion that the fund in question is not a trust fund, and entitled to priority of payment as a preferred claim, judgment may be entered as a general claim against the assets of the bank without prejudice, subject to the right of either party to appeal from the decision of the court. Mills & Flitcraft, for Pl'ff. D. W. Shackleford, Att'y for Def't."

The plaintiff insists that this was a special deposit and the fund a...