Fralick v. Coeur D'Alene Bank & Trust Co.

• Decision Date: 05 August 1922
• Citation: 36 Idaho 108,210 P. 586
• Court: Idaho Supreme Court
• Parties: JOHN G. FRALICK, Commissioner of Finance, and EZRA R. WHITLA, Special Deputy of the Commissioner of Finance, Appellants, v. COEUR D'ALENE BANK & TRUST COMPANY, a Corporation, INTERSTATE UTILITIES COMPANY, and JOHN F. DAVIES, Respondents, Re Application of INTERSTATE UTILITIES COMPANY and JOHN F. DAVIES for a Preference

210 P. 586

36 Idaho 108

JOHN G. FRALICK, Commissioner of Finance, and EZRA R. WHITLA, Special Deputy of the Commissioner of Finance, Appellants, v. COEUR D'ALENE BANK & TRUST COMPANY, a Corporation, INTERSTATE UTILITIES COMPANY, and JOHN F. DAVIES, Respondents, Re Application of INTERSTATE UTILITIES COMPANY and JOHN F. DAVIES for a Preference

Supreme Court of Idaho

August 5, 1922

BANKS AND BANKING - INSOLVENCY - GENERAL DEPOSIT - SPECIAL DEPOSIT-TRUST FUND-PREFERENCE.

1. A deposit of money in a bank, in the absence of evidence to the contrary, is presumed to be general, and the burden of proof is on the depositor to prove that it is a special deposit.

2. A bank deposit is subject to any agreement which the depositor and banker may make in regard to it, so long as the rights of third parties are not violated.

3. Upon the insolvency of a bank, a party seeking preference on the ground that the amount claimed is a trust fund must show that the relation between himself and the bank is that of trustee and cestui que trust, and not that of creditor.

APPEAL from the District Court of the Eighth Judicial District, for Kootenai County. Hon. John M. Flynn, Judge.

Action to impress a trust upon the assets of an insolvent bank. Judgment for defendants. Reversed.

Judgment reversed, with costs to appellants.

R. L Black, Attorney General, Dean Driscoll, Assistant, and Ezra R. Whitla, for Appellants.

The deposits made with the Coeur d'Alene Bank & Trust Co. under all of the accounts were but general deposits and subject to withdrawal by the Utilities Co. at any time, and the fact that the company advised the bank that they were there to pay certain items and authorized the bank to charge those items to the account does not make the deposit a special deposit. (Kaesemeyer v. Smith, 22 Idaho 1 123 P. 943, 43 L. R. A., N. S., 100.)

The presumption is that the account is not a special deposit. "A deposit is presumed to be general." (Koetting v. State, 88 Wis. 502, 60 N.W. 822; State v. Carson City Sav. Bank, 17 Nev. 146, 30 P 703; Alston v. State, 92 Ala. 124, 9 So. 732; Butcher v. Butler, 134 Mo.App. 61, 114 S.W. 564; Morse on Banking, pars. 56, 57.)

The nature of agreement between the parties made it a general deposit and no trust fund proposition can be claimed. (Marine Bank v. Fulton County Bank, 69 U.S. 252, 17 L.Ed. 785; Mutual A. Assn. v. Jacobs, 141 Ill. 261, 33 Am. St. 302, 31 N.E. 414, 16 L. R. A. 516; State B. & Sav. Assn. v. Mechanics' Sav. Bank & Trust Co. (Tenn. Ch.), 36 S.W. 967.)

The fact that it was deposited for some special purpose makes no difference. (Dearborn v. Washington Sav. Bank, 13 Wash. 345, 42 P. 1107; Morse on Banking, par. 210; Warren v. Mix, 97 Ark. 374, 135 S.W. 896.)

The fact that the payment of money is to be made in a particular way or subject to a condition does not make any difference, and if the money is deposited the relation of debtor and creditor or customer making the general deposit arises. (Missouri P. Ry. Co. v. Continental Nat. Bank, 212 Mo. 505, 111 S.W. 574, 17 L. R. A., N. S., 994; Law v. Appeal of Philadelphia Finance Co. (Pa. St.), 14 L. R. A. 103.)

Potts & Wernette, for Respondents.

A deposit made in a bank for a specific purpose is a special deposit, or trust fund. (7 C. J. 631, note 10; Decatur Creamery Co. v. West Side Trust & Savings Bank, 213 Ill.App. 220; Meador v. Rudolph (Tex. Civ.), 218 S.W. 520; Dolph v. Cross, 153 Iowa 289, 133 N.W. 669; Shopert v. Indiana Nat. Bank, 41 Ind.App. 474, 83 N.E. 515; Paige v. Springfield Nat. Bank, 12 Ohio App. 196; Peak v. Elliott, 30 Kan. 156, 1 P. 499; Wilson v. Dawson, 52 Ind. 513; Whitcomb v. Carpenter, 134 Iowa 227, 111 N.W. 825, 10 L. R. A., N. S., 928; McBride v. American etc. Co. (Tex. Civ.), 127 S.W. 229; Southern Exchange Bank v. Pope, 152 Ga. 162, 108 S.E. 551; Hitt Fireworks Co. v. Scandinavian Am. Bank, 114 Wash. 167, 195 P. 13; Kies v. Wilkinson, 101 Wash. 340, 172 P. 351; Carlson v. Kies, 75 Wash. 171, 134 P. 808, 47 L. R. A., N. S., 317; Capitol Nat. Bank v. Coldwater Nat. Bank, 49 Neb. 786, 59 Am. St. 572, 69 N.W. 115; Continental etc. Bank v. Chicago etc. Co., 199 F. 704; Woodhouse v. Crandall, 197 Ill. 104, 64 N.E. 292, 58 L. R. A. 385.)

A general deposit may be converted into a special deposit by agreement without actual delivery to the customer, and a redeposit by him for a special purpose. (State v. Grills, 35 R. I. 70, 85 A. 281; People v. City Bank, 96 N.Y. 32; First Nat. Bank v. Hall, 119 Ala. 64, 24 So. 526.)

RICE, C. J., BUDGE, J. Budge and Dunn, JJ., concur in the conclusion, Rice, C. J., and Dunn, J., concur. McCarthy, J., and Lee, JJ., dissenting.

OPINION

RICE, C. J.

The Interstate Telephone Company, a corporation, issued its negotiable bonds in the amount of $ 500,000, to secure which it executed and delivered to respondent Coeur d'Alene Bank & Trust Company, as trustee, a mortgage and deed of trust covering all of its properties. Thereafter, respondent Interstate Utilities Company purchased all the property and assets of the said telephone company, subject to said bond issue and the mortgage or deed of trust securing it, and guaranteed the payment of said bonds at maturity. Thereafter, said respondent Interstate Utilities Company issued $ 1,000,000 of its own negotiable coupon bonds, to secure which it executed and delivered to respondent Coeur d'Alene Bank & Trust Company, as trustee, a mortgage and deed of trust of all its properties. By the terms of these bonds and trust deeds the respondent Interstate Utilities Company was required to pay at the Hanover National Bank, New York, or at respondent Coeur d'Alene Bank & Trust Company, on April 1st and October 1st of each year, six per cent interest on the amount of the outstanding bonds. Said respondent Utilities Company deposited certain funds in the said Coeur d'Alene Bank & Trust Company, which, it claims, constituted special deposits or trust funds, which did not become general assets of the bank, and could be used only for the purpose of paying the interest coupons on said bonds. By the terms of the agreement under which respondent Interstate Utilities Company took over the assets of the telephone company it was provided that the bonds of the latter might be exchanged for bonds of the former. The Interstate Utilities Company deposited certain funds in the respondent Coeur d'Alene Bank & Trust Company, which, it claims, were deposited as a special fund for the adjustment of interest on the two issues of bonds when such exchanges were made. It claims that funds so deposited did not become a part of the assets of the bank, but constituted a special deposit or trust fund, which could be used only for the purpose of adjusting interest on exchange. Subsequent to such deposits the said bank became insolvent, and was taken in charge by appellants John G. Fralick, Commissioner of Finance, and Ezra R. Whitla, his special deputy, in accordance with the statutes of this state, and an order of court based thereon. Respondent John F. Davies holds some of the bonds in question. He and the Interstate Utilities Company filed a petition, asking that all the deposits above mentioned be decreed to be special deposits or trust funds to be used only for the purpose of paying interest coupons on the bonds, and that a trust be declared and enforced upon all the assets of said insolvent bank in favor of said applicants to the extent of said deposits. The trial court found that the moneys so deposited were special deposits and trust funds, received and held by said bank for the sole purpose of paying the interest coupons or paying interest on exchange of bonds, and by its judgment impressed upon all the assets of said bank in the hands of appellants a trust to the amount of said funds so deposited, ordering that the appellants pay to the Interstate Utilities Company the amount of said funds, to wit, $ 12,258, to be held by it in trust for the use and benefit of the owners and holders of the interest coupons on outstanding bonds. Appellants' many assignments of error amount simply to this, that the court erred in finding that said deposits were special deposits or trust funds in giving applicants a preference over the other depositors and creditors of the bank.

The president and cashier of the bank, and the president of the Utilities Company, all testified that the only agreement is such as is to be gathered from the letters, vouchers and receipts which passed between the bank and the company.

On April 30, 1920, the Interstate Utilities Company wrote the following letter to the bank:

"Enclosed find check for $ 11,400 to cover Interest Coupons due May 1, 1920, on bonds of this company, second issue, in hands of public.

"Please open a special fund for this purpose and report to us at the end of each month on coupons paid from such fund, and oblige."

In reply, on May 1, 1920, the cashier of the bank sent the following letter to the Interstate Utilities Company:

"We have your letter of April 30th, enclosing copy of letter from Lewis Williams and check for $ 11,400, for which accept our thanks.

"At present we have an Interest Coupon Bond Account through which payment is made of interest coupons presented for payment. Is that the account to which the $ 11,400 is to be credited or should another account be opened to take care of the May 1st, second issue coupons. . . ."

On May 4, 1920, the Interstate Utilities Company replied as follows:

"Replying to your favor of the 1st inst., we would ask that you open a new account to take care of the Interstate Utilities Company Bond Coupons payable May 1st and November 1st.

"This will make four accounts with your bank--the General Account the Interstate Telephone Company, Ltd., Bond Interest Fund the Fund for...