In re North Missouri Trust Co. of Mexico, Mo.

• Decision Date: 02 June 1931
• Docket Number: No. 21665.,21665.
• Court: Missouri Court of Appeals
• Parties: In re NORTH MISSOURI TRUST CO. OF MEXICO, MO. FIDELITY & DEPOSIT CO. OF MARYLAND v. CANTLEY, Com'r of Finance.

39 S.W.2d 415

In re NORTH MISSOURI TRUST CO. OF MEXICO, MO FIDELITY & DEPOSIT CO. OF MARYLAND v. CANTLEY, Com'r of Finance.

No. 21665.

St. Louis Court of Appeals. Missouri.

June 2, 1931.

Appeal from Circuit Court, Audrain County; W. C. Hughes, Judge.

"Not to be officially published."

In the matter of the liquidation of the North Missouri Trust Company of Mexico, Mo. Proceeding by the Fidelity & Deposit Company of Maryland, claimant, to establish preferred claim against S. L. Cantley, Commissioner of Finance of the State of Missouri. Judgment denied claimant preference, claimant's motion for new trial was overruled, and claimant appeals.

Affirmed.

See, also, 39 S.W.(2d) 412.

A. A. Alexander, of St. Louis, and Rodgers & Buffington, of Mexico, Mo., for appellant.

Fry & Hollingsworth and Marion S. Francis, all of Mexico, Mo., for respondent.

BENNICK, C.

This is an appeal from the judgment of the circuit court of Audrain county in a proceeding looking to the establishment of a preferred claim in connection with the liquidation of the North Missouri Trust Company of Mexico, Mo.

The controversy centers around the deposit of its school moneys by consolidated school district No. 1 of Audrain county, commonly known as the Farber district. Originally its funds were kept on deposit in the Farber Bank at Farber, Mo., and later, upon a sale of that bank's assets to the Vandalia Exchange Bank, they were transferred to the latter institution.

In the month of February, 1926, the funds of the district were again transferred, this time to the North Missouri Trust Company in Mexico, Mo. It appears that there had been no advertisements for bids on the part of the district, and consequently no bids received, but that the transaction was simply handled between the treasurer of the district and the cashier of the trust company, not, however, until the district had obtained the advice of counsel in regard to the legality of the transaction.

In 1928, the district voted a bond issue for $40,000, and upon the sale of the bonds, the money derived therefrom was deposited to the district's account in the trust company. At that time the question arose as to whether the district should receive interest on its deposits, whereupon the trust company agreed to pay it 1½ per cent. on its daily balances. The question of the giving of a security bond also arose, and on February 21, 1929, a bond in the sum of $8,000 was given, with the trust company as principal, and the Fidelity & Deposit Company of Maryland as surety, conditioned upon the payment by the trust company, on demand, of all checks, drafts, and warrants properly drawn against the account. The bond provided for its own continuance, and the evidence adduced on behalf of appellant was that there was a bond in full force at the time the bank closed, which the appellant bonding company recognized.

The trust company closed its doors on June 3, 1930, and thereupon its assets were taken over by the commissioner of finance. It is admitted that on that date the district had on deposit in the bank the principal sum of $2,020.81, and that there was also due it the sum of $265.65, as interest on daily balances.

Drafts were drawn by the district upon the trust company for the amount due it, and upon their refusal, the bonding company paid the district the sum of $2,020.81, at the same time taking a written assignment from the district of all the latter's right, title, and interest in and to the claim.

In due course the claim so assigned to the bonding company was filed with the special deputy commissioner in charge of the bank, and a request for preference was made upon the theory that the trust company was not at any time a legal depositary for the funds of the district, the steps required by law for its selection not having been taken; that it had permitted the funds to be deposited and received for deposit, well knowing that it had not been legally selected as a depositary; and that it had therefore wrongfully obtained possession of the funds, and was a trustee of the same for the benefit of the district, so as to entitle the claim to a preference.

On November 6, 1930, the special deputy commissioner filed in the circuit court his report and abstract of claims of creditors of the defunct trust company, among which was the claim now in controversy, the object of the proceeding being to have the court determine the priority of payment as provided by sections 5336, 5339, Rev. St. 1929.

Thereafter the claim was heard by the court, and on December 23, 1930, it entered its judgment denying a preference. A motion for a new trial was thereupon filed by the bonding company, and upon the refusal of the same, it has duly perfected its appeal to this court.

Appellant assigns as error the action of the court in denying a preference to its claim, its argument now being, as it was in the court below, that inasmuch as the public school funds were deposited in the trust company without the full statutory steps having been taken to select such institution as a depositary, the funds became a trust fund in the hands of the bank, so as to entitle the claim to priority in payment.

We gather from the briefs and arguments of counsel that there is no disagreement between them as to the general rules of law which are applicable to cases such as this. Briefly stated, the law would seem to be that deposits by trustees, and other persons serving in fiduciary capacities, are generally to be considered simply as general deposits, with the consequence that in the event the bank fails to pay them, the beneficiaries will have no greater rights than general creditors of the bank; that in the absence of a statute to the contrary, funds belonging to political subdivisions within the state, and deposited in a bank by the public official charged with their custody, will have no priority as to preference over funds of private individuals deposited by another to whose care such funds have been intrusted; that public funds, received by a bank with knowledge, actual or constructive, that the essential statutory requirements for the deposit thereof have not been complied with, are impressed with a trust ex maleficio, if they can be traced, or if the assets of the bank have been thereby increased; that in such cases, the relation of debtor and creditor will not obtain as between...