Fred A. Boswell Post, Etc. v. Farmers' State Bank

• Decision Date: 19 June 1933
• Docket Number: No. 5032.,5032.
• Parties: FRED A. BOSWELL POST OF THE AMERICAN LEGION v. FARMERS' STATE BANK OF MT. VERNON.
• Court: Missouri Court of Appeals

61 S.W.2d 761

FRED A. BOSWELL POST OF THE AMERICAN LEGION v. FARMERS' STATE BANK OF MT. VERNON.

No. 5032.

Springfield Court of Appeals. Missouri.

June 19, 1933.

Appeal from Circuit Court, Lawrence County; Emory E. Smith, Judge.

"Not to be published in State Reports."

Suit by the Fred A. Boswell Post of the American Legion against the Farmers' State Bank of Mt. Vernon, in charge of D. R. Harrison, Commissioner of Finance. From a judgment for plaintiff, defendant appeals.

Reversed and remanded, with direction.

Harry Whaley, of Mt. Vernon, and Farrington & Curtis and Paul W. Barrett, all of Springfield, for appellant.

Rex V. McPherson and Robert Stemmons, both of Mt. Vernon, for respondent.

BAILEY, Judge.

This suit is based on a claim for preference filed by the Fred A. Boswell Post of the American Legion against the Farmers' State Bank of Mt. Vernon, which closed on August 30, 1930, and went into liquidation after being taken over by the state finance commissioner of Missouri.

The facts out of which the claim for preference arose are substantially as follows: The Fred A. Boswell Post of the American Legion, plaintiff herein, in conjunction with the business men of Mt. Vernon, have for several years held a community entertainment or exhibition known as "The American Legion Harvest Show." Certain and sundry expenses were entailed in the holding of this show, and, in order to raise the necessary funds to meet these expenses, the members of the legion sold the merchants of the city "red tickets," one-half the proceeds from such sales being devoted to payment of "drawings" held each month or two, and the other half to be held by said American Legion post and used in financing said harvest show. A committee consisting of members of the said American Legion post took care of the sale of the tickets and managed the harvest show. One Rex Johnson was a member of that committee, and at the same time was treasurer of said legion post, and also assistant cashier of the Farmers' State Bank, defendant herein. The said American Legion post had two accounts in said bank at the time it closed. One of these accounts was a general account out of which were paid the general expenses of the post. The other was a separate account deposited as the "American Legion Harvest Show Fund by Rex Johnson." Into this fund went the moneys realized from the sale of the "red tickets," aforesaid. There was no written agreement as to this latter fund, but Rex Johnson, the sole witness in the case, testified the deposit was made upon an agreement as follows: "One-half of proceeds from sale of red tickets to be deposited to credit of American Legion Post in separate or special account to be known as American Legion Harvest Show Account. The funds thus accumulated to be used for the purpose of financing the Lawrence County Harvest Show, and for no other purpose. These funds were not to be used for ordinary Post expenses, but to remain intact until the time of the Harvest Show at which time this fund was to pay the expenses of the show." The deposits were made by Johnson as treasurer of said American Legion post, and were received by him at the bank as assistant cashier thereof. The money so deposited was placed in the account as stated and mingled with the other funds of the bank. The harvest show was usually held in September of each year. The record does not show the year in which the deposits in question were made, but we may assume they were made in December, 1929, and in February, March, and April of 1930, and amounted in all to $340. There were no special notations or marks on the deposit slips. No checks were drawn against this fund before the bank failed in August, 1930. It is admitted that defendant bank had on hand sufficient funds to pay this claim if allowed as a preferred claim. Upon this state of facts the trial court allowed a preference, and defendant has appealed.

The defendant assigns as error the action of the trial court in allowing this claim as a preferred claim, for the reason, it is stated, that the deposit in question was a general deposit, for safe-keeping only, and that therefore the claimant became a general creditor and not entitled to preference. Plaintiff asserts the deposit was for a special and specific purpose, and as such entitled claimant to preference. It is well understood that upon the failure of a bank its assets are to be used in payment of the claims of its creditors and that all creditors must be treated the same, unless one or the other be entitled to preference for some reason recognized by law. Butcher v. Butler, 134 Mo. App. 61, 114 S. W. 564.

All claims for preference must stand or fall upon well-recognized principles of law or equity. Unless the deposit be special, such as a trust fund with the bank, or something kindred thereto, the deposit is general. In this connection plaintiff asserts there are three general classes of special deposits, namely: "(1) Where money or other thing is deposited with the understanding that that particular money or thing is to be returned to the depositor; (2) where the money or thing deposited is to be used for a specifically designated purpose; (3) and where the deposit itself was wrongful or unlawful." In support of this classification, we are cited to the case of City of Sturgis v. Meade County Bank, 38 S. D. 317, 161 N. W. 327. Each classification or exception to the general rule as above set forth by the Supreme Court of South Dakota, has been recognized by the courts of this state. Schulz v. Bank of Harrisonville (Mo. App.) 246 S. W. 616; Central Coal & Coke Co. v. State Bank of Bevier, 226 Mo. App. 594, 44 S.W.(2d) 188; Special Road District No. 4 v. Cantley, 223 Mo. App. 89, 8 S.W.(2d) 944.

It is probably correct that, in general, all exceptions to the rule that depositors should share equally in the distribution of the assets of an insolvent bank fall within one of the three classes above set forth, but the same general principle underlies them all. Plaintiff urges this case falls within the second class; i. e., that the deposit was to be used for a specifically designated purpose. It is quite evident that, if plaintiff be entitled to a preference at all, it must be under the latter classification. The cases cited by plaintiff in support of their theory that the facts in this case entitle it to a preference, under the second class above set forth, are Judy v. Farmers' & Traders' Bank, 81 Mo. 404; Marshall v. Farmers' & Merchants' Bank, 215 Mo. App. 365, 253 S. W. 15; Central Coal & Coke Co. v. State Bank of Bevier, 226 Mo. App. 594, 44 S.W.(2d) 188.

In the Judy Case, supra, it was held that, where a bank received certain moneys under an agreement to apply it to the payment of a debt due a designated person, it cannot divest itself from the purposes of the trust by paying it to a different and unauthorized person. There was no question about the fund...