In re Riverton State Bank, 1860

• Court: United States State Supreme Court of Wyoming
• Writing for the Court: BLUME, Justice.
• Citation: 49 P.2d 637,48 Wyo. 372
• Docket Number: 1860
• Decision Date: 01 October 1935
• Parties: IN RE RIVERTON STATE BANK; v. WILDE, STATE EXAMINER MADDEN

49 P.2d 637

48 Wyo. 372

IN RE RIVERTON STATE BANK;

MADDEN
v.
WILDE, STATE EXAMINER

No. 1860

Supreme Court of Wyoming

October 1, 1935

APPEAL from the District Court, Fremont County; E. H. FOURT, Judge.

On petition for rehearing. For former opinion see 47 Wyoming 469, 38 P.2d 603.

Modified and Affirmed.

For the appellant, the case was submitted upon the brief of Ray E. Lee, Attorney General; Thomas F. Shea, Deputy Attorney General, and Wm. C. Snow, Assistant Attorney General, all of Cheyenne.

The court erred in holding that claimant John Madden was entitled to a lien on all of the assets of the Bank of Riverton, independent of whether the fund collected by the bank could be traced as being in the bank at the time of failure or not. This conclusion was apparently based on Chapter 74, Laws 1931, the validity of which had been questioned. However, the validity of the Act of 1929 (Secs. 10-530-531-532, R. S.) is attacked and the two acts are in substance identical. Plaintiff and respondent based his right to a preference upon Section 10-532, R. S., being Section 3 of the Act of 1929, which, as above noted, is identical in terms with the 1931 Act. We therefore ask for a re-consideration of both acts and urge that a preference can be established only by tracing the specific fund in question in to the bank, and its presence there at the time of closing. Both acts are in conflict with the state and federal constitutions, authorizing a taking of property without due process of law. There are but two kinds of deposit, to-wit: general and specific. In an insolvent bank, where money is deposited with the understanding that the particular money is to be returned to the depositor, or where it is to be used for a designated purpose, or was itself wrongful and unlawful, it may not be treated as a general deposit. Gray v. Evans, 37 Wyo. 7. The fund in the instant case has none of the above characteristics. The right of general creditors to share pro rata in the assets of an insolvent bank is a property right. Witt v. Bank, (S. C.) 164 S.E. 306; Noble v. Haskell, 219 U.S. 105; 36 Yale Law Journal 690; Giinther case, 32 Wyo. 299. By general assets, we mean all assets of the bank except those placed with the bank on special deposit. In re International Milling Company v. Broderick, 259 N.Y. 77. The issuance by the bank of a cashier's check, operated to create between plaintiff and the bank, the relation of debtor and creditor. Giinther case, supra; Jefferson Insurance Company v. Wisdom, 58 F.2d 565; Central Trust Company v. Bank, (W. Va.) 153 S.E. 145. The payee of commercial paper, drawn and remitted, according to instructions, is not entitled to preference on the insolvency of the bank. Michie, Vol. 6, p. 58; Valentine v. Andrews, (Ia.) 212 N.W. 674; Leach v. State Bank, (Ia.) 211 N.W. 217; Conyer v. Williams, (Calif.) 143 P. 756. The Riverton State Bank has a savings department. The judgment is that the preference or priority is on all the assets of the bank. Under Section 10-214, R. S., the preference should at least be made subject to the claims of claimants in the savings department. We also desire to cite two recent cases as yet unpublished. Jennings, Receiver v. U. S. F. & G., decided February 4, 1935, by the United States Supreme Court and Old Company's Lehigh, Inc. v. Meeker, Receiver, decided October 4, 1935, by the same court; also 12 U.S.C. A. "Banks and Banking," Sec. 194; also Rottger v. Bank, (Ind.) 164 N.E. 267; Surety Company v. Carroll, 194 F. 577; LeBaudy v. Trust Company, 154 N.Y.S. 900.

For the respondent, the case was submitted on rehearing upon the brief of F. B. Sheldon, Jr., of Riverton.

Under the statute Section 10-713, R. S., the fund need not be traced into a specific fund, but the claimant is given a lien on all assets of the bank. The question of tracing funds was not before the court. The suggestion that the Act of 1931 is unconstitutional is unsupported by authority. The right of the legislature to create a preference, even as among general creditors, is well settled. 12 C. J. 1113; In re Brown, (Mass.) 53 N.E. 998; Fitch v. Applegate, (Wash.) 64 P. 147. An example of statutory preference is found in our agistor and labor lien acts. Sec. 66-102, R. S. and Sec. 66-114, R. S., also as to savings depositors, Sec. 10-130, R. S. See also Sorenson v. Bank, 240 N.W. 747. The original opinion pointed out that the bank collecting code adopted by some eighteen states, including South Carolina, was passed upon by the court of that state in Witt v. Bank, 164 S.E. 306, and there upheld. See also State v. Kingston, 254 N.W. 126, and Denkicki Inyi v. Moody, 23 P.2d 403. The federal cases cited by appellant do not declare the Bankers Collecting Code unconstitutional, but simply hold that such legislation is in conflict with the federal statute and that the latter is supreme as to national banks, whereas the bank here concerned is subject to state remedial statutes. Upon the trial and at the close of claimant's case, appellant moved for judgment, maintaining that claimant, not having traced or identified the money, could not recover, citing Lusk Company v. Giinther, 32 Wyo. 294; Gray v. Elliott, 37 Wyo. 7. To this claimant cited Section 10-532, R. S. and Section 10-713, R. S., as having abolished the necessity of tracing the money in question. As both sides overlooked these statutes at the trial, it seems proper that the court should affirm the judgment below. All plaintiff's alleged errors were met and disposed of below. It is clear that the legislature intended to change the common law as to collection items. Bank Collection Code, Section 15. The rule as to the determination of relationship after collection is made is well stated in 3 R. C. L. 633. The principle of agency continues after collection. Vermont Company v. Bank, 37 Wyo. 216; see also 90 A. L. R. 6. The funds available for paying the preference is not an issue before this court; creditors have no property rights in the assets of a defunct bank within the meaning of the due process clause of the constitution; that Section 10-710, R. S., was overlooked by appellant, is not ground for a reversal. The Riverton State Bank did not receive the proceeds of the Madden check, which are conceded to have been received in the form of a credit with some forwarding bank. No authorities have been cited by appellant showing the statute to be unconstitutional.

BLUME, Justice. KIMBALL, Ch. J., and RINER, J., concur.

OPINION [49 P.2d 638]

[48 Wyo. 376] BLUME, Justice.

In this case Madden, as the evidence shows, deposited in the Riverton State Bank a check for collection, $ 8000 of the proceeds to be sent to Wisconsin. The bank, after collection, and on August 9, 1932, sent to Wisconsin a cashier's check in payment. Prompt attempt to collect that check through the regular channels was made, but before it was paid, the Riverton bank became insolvent, and the appellant herein, the State Examiner, has now charge of the bank. Madden claimed that he should have a preferred claim on the [48 Wyo. 377] assets of the bank, and brought suit herein to have that established. The trial court held with him, though the money was not traced to any of the bank's funds. The case was appealed, and we affirmed the judgment. 47 Wyo. 469, 38 P.2d 603. Our holding was based mainly on the provisions of the Bankers' Collection Code, enacted into law in this state, which gives to claimants such as Madden a preferred claim against the assets of the bank and dispenses with the rule of tracing the money. Subdivision 3 of Section 13 of the Code (Sec. 10-713, Rev. St. 1931) which gives such preference reads as follows:

"Where an agent collecting bank other than the drawee or payor shall fail or be closed for business as above, after having received in any form the proceeds of an item or items entrusted to it for collection, but without such item or items having been paid or remitted for by it either in money or by an unconditional credit given on its books or on the books of any other bank which has been requested or accepted so as to constitute such failed collecting or other bank debtor therefor, the assets of such agent collecting bank which has failed or been closed for business as above shall be impressed with a trust in favor of the owner or owners of such item or items for the amount of such proceeds and such owner or owners shall be entitled to a preferred claim upon such assets, irrespective of whether the fund representing such item or items can be traced and identified as part of such assets or has been intermingled with or converted into other assets of such failed bank."

Appellant filed a petition for rehearing, based principally on the ground that the law just mentioned is unconstitutional. That point was not presented upon the former hearing, and on that account we should ordinarily have refused a rehearing. Brewer v. Folsom Brothers, 43 Wyo. 517, 7 P.2d 224; Bank v. Ennis, 44 Wyo. 497, 14 P.2d 201. Because of the public interest involved, however, we deemed it best [48 Wyo. 378] to make an exception in this case, and the petition for rehearing was granted. The case is now again before us, after full presentation by counsel for the respective parties of the points deemed by them to be pertinent herein.

1. Our attention has been called to the provisions of Section 10-214, Rev. St. 1931, to the effect that in case of insolvency of any savings bank or association, the savings depositors thereof shall be entitled to preference in payment over the shareholders and all other creditors of such bank or association. Counsel for the plaintiff concede, as we understand it, that the claims of the depositors in the savings department, if any, of the Riverton Bank, are prior and superior to that of the plaintiff herein as to the assets of that department. We are accordingly saved the trouble of investigating the point, and the judgment herein will...