Hosp v. Union Indus. Trust & Sav. Bank of Flint

• Decision Date: 05 December 1933
• Docket Number: No. 88.,88.
• Citation: 265 Mich. 156,251 N.W. 363
• Court: Michigan Supreme Court
• Parties: BORGESS HOSPITAL v. UNION INDUSTRIAL TRUST & SAVINGS BANK OF FLINT et al.

265 Mich. 156

251 N.W. 363

BORGESS HOSPITAL

v.UNION INDUSTRIAL TRUST & SAVINGS BANK OF FLINT et al.

No. 88.

Supreme Court of Michigan.

Dec. 5, 1933.

Appeal from Circuit Court, Genesee County, in Chancery; James S. Parker, Judge.

Suit by the Borgess Hospital, a nonprofit corporation, against the Union Industrial Trust & Savings Bank of Flint, and Mark A. Wilson, as conservator of said bank, and another. From a decree dismissing the bill, the plaintiff appeals.

Affirmed.

Argued before the Entire Bench.

WEADOCK, J., dissenting.

Howard & Howard, of Kalamazoo, for appellant.

Guy M. Wilson and Wilson & Hoffman, all of Flint, for appellees Union Industrial Trust & Savings Bank and Mark A. Wilson.

Brownell & Gault, of Flint, for appellee Charles S. Mott.

BUTZEL, Justice.

Plaintiff, Borgess Hospital, devoted to eleemosynary purposes, was organized as a nonprofit corporation under the laws of this state. It is owned, managed, and its work carried on by the Sisters of St. Joseph, a religious community of the Catholic Church. The corporation originally maintained hospitals at Kalamazoo and Monroe, Mich. In 1920 it extended its activities to Flint, Mich., where it acquired an old residence and adapted it to hospital uses. The facilities thus afforded proved inadequate, however, and plaintiff secured the assistance of a citizens' committee and professional campaign managers, who solicited the residents of Flint to obtain sufficient funds to erect a modern hospital building on land provided by the Sisters of St. Joseph.

In order to give the project more local color and to assure subscribers that their contributions would be devoted to local uses, Grant J. Brown, one of the chief executives of the Union Industrial Bank of Flint, was made treasurer of the building campaign, and the bank was selected as depository of the campaign funds. Subsequently, the bank became the Union Industrial Trust & Savings Bank of Flint. Owing to difficulties that arose in the bank, Brown withdrew from the presidency of the institution and also gave up his post as treasurer of the campaign. Charles S. Mott of Flint, upon becoming president of the bank, was induced to become campaign treasurer upon the assurance that his position would be solely an honorary one and that the duties connected therewith were already being performed by others. His testimony to that effect is undisputed. All funds collected during the incumbencies of Brown and Mott were deposited in the accounts of the hospital at the bank. Plaintiff's officers and trustees, consisting of the Sisters, retained complete control over the bank accounts and the withdrawal of moneys therefrom, either directly or through their own agents.

An agent of the corporation testified that he suggested at one time that, instead of depositing these funds, they be invested ‘in 5 1/8 liberty bonds,’ evidently an issue of short time treasury certificates. Mr. Brown, then president of the bank, advised to the contrary. The major portion of the money was deposited in a Union Industrial Trust & Savings Bank savings account and the sum of $16,239.82 earned and credited as interest at the rate of 4 per cent. At one time, at the request of plaintiff's agent, large sums were withdrawn from the bank and deposited in other Flint banking institutions which had contributed to the fund. These amounts were eventually redeposited in the Union Industrial Trust & Savings Bank.

On the resumption of banking operations following the bank holiday proclaimed on February 12, 1933, the Union Bank was one of the large number of institutions unable to open its doors. At the time of closing, plaintiff had five different deposit accounts at the bank, each of which was identified by a distinctive name. The largest, called the ‘St. Joseph Hospital Building Fund,’ was a savings account, in which there was a balance of $106,251.87, more than nine-tenths of the total on deposit. There were also a number of commercial accounts, among them a ‘construction department’ account of $7,679.46, a ‘construction payroll’ account of $425.16, a ‘campaign expense fund’ account of $431.51 and an account known as ‘St. Joseph Hospital account No. 2 Building Fund,’ amounting to $1,115.54. Plaintiff filed a bill seeking to impose a joint and several liability upon the bank and Charles S. Mott, individually, to the extent of the funds deposited. Its claim to priority in the assets of the bank is based upon a trust fund theory.

The necessity for a hospital of the type under construction, the hardship caused by cessation of the building operations, and the embarrassment of plaintiff in not being able to meet its contractual obligations arising during the completion of the building, were obvious and conceded. Notwithstanding these factors, which could not fail to appeal to a court's sympathies, the trial judge held that under the law he was forced to find against plaintiff's contentions.

When the funds were collected on subscriptions, they were first deposited to the credit of the hospital building fund in the commercial account. As the amounts on deposit in this account reached the sum of $5,000 or more, they were automatically transferred to the savings account in accordance with arrangements made with the plaintiff or its representatives. When the trustees desired to transfer funds from the savings department to their checking accounts, requisitions were made by letter. It is significant that the Sisters exercised the sole direction and control over the transfer or withdrawal of these funds. At one time, $60,000 was transferred from the savings account to the construction account and then checked against in order to make deposits in three other banks, as hereinbefore stated, and not to meet costs of construction, an indication that the various accounts were subject to checks drawn by the Sisters for purposes not strictly consistent with the titles borne by them.

There was no agreement in regard to any of the accounts of plaintiff. The bank did not agree to treat the funds as special deposits, nor to set aside the moneys therein deposited for special purposes and refrain from commingling them with the other moneys of the bank. Inasmuch as the bank agreed to pay interest on the savings account, it must have been apparent to plai...