Kies v. Wilkinson

• Decision Date: 24 April 1918
• Docket Number: 14467.
• Citation: 172 P. 351,101 Wash. 340
• Court: Washington Supreme Court
• Parties: KIES v. WILKINSON.

172 P. 351

101 Wash. 340

KIES v. WILKINSON.

No. 14467.

Supreme Court of Washington

April 24, 1918

Department 2. Appeal from Superior Court, Clarke County; Wm. T. Darch Judge.

Action by M. B. Kies, as receiver of the Commercial Bank of Vancouver, against John Wilkinson. Judgment for defendant and plaintiff appeals. Reversed and remanded, with directions.

McMaster, Hall & Drowley, of Vancouver, for appellant.

Miller & Wilkinson, of Vancouver, and A. E. Clarke, for respondent.

HOLCOMB J.

On December 17, 1910, the state bank examiner took charge of the Commercial Bank, a state bank doing business at Vancouver acting under the authority of section 3305, Rem. & Bal. Code now repealed.

Respondent was then county clerk of Clarke county, and maintained an ordinary checking account with the bank under the name of John Wilkinson, county clerk of Clarke county, and when the bank was taken in charge the balance to his credit was $3,502.48.

Up to December 17th the respondent had never been given any security of any kind, but on or within two or three days after that date the bank turned over to respondent a promissory note for $11,000 given to the bank by one Harvey. This seems to have been done at the instance of the president of the bank, and he and the cashier seem to have led the deputy state bank examiner in charge to believe that the possession of this note belonged to respondent as collateral security for his account. Respondent accepted the collateral offered and retained it as security for his account for a little over two weeks, at the end of which time he was called upon to surrender it, and received payment from the deputy bank examiner of his account in full.

The examiner continued his possession of the bank and investigation of its affairs for about two months longer, and, being then convinced that the bank was insolvent, caused proceedings for the appointment of a receiver to be carried through by the attorney general. The bank was then duly adjudged insolvent, and appellant was appointed its receiver in March, 1911. Upon his appointment the receiver investigated the matter, and, being convinced that the payment of respondent's account in full was without authority and an illegal preference, he demanded repayment of the same. Repayment being refused, he began this action in tort to recover as damages the sum of $3,502.48 paid over to respondent, alleging that the respondent and the other defendants named, co-operating and participating together, caused to be assigned, set over, transferred, and delivered to respondent the note heretofore mentioned, and the respondent participating with them received the note as and for collateral security for the payment of his account. It was alleged also that the note was a part of the general assets of the bank, and was given and received as above stated with the intent and for the purpose on the part of all the parties to the transaction of wrongfully preferring the respondent, Wilkinson, over other general creditors of the bank. It is also alleged that, in pursuance of the above intent and purpose, the defendants all co-operating and participating, on about January 7, 1911, the other defendants caused to be paid over to respondent the sum of $3,502.48 in full payment of his account and deposit, and that thereupon respondent surrendered the pretended collateral security above mentioned; that it was the intent and purpose on the part of all the defendants parties to the above transaction that respondent should be wrongfully preferred to the other general creditors of the bank; that by reason of the foregoing acts and doings of all the defendants the Commercial Bank of Vancouver was damaged in the sum so taken and the funds and assets of the bank depleted by that amount. Judgment was demanded for the sum so taken, with interest at the legal rate from January 7, 1911.

A demurrer to the complaint on the part of one of the defendants was sustained by the court. The defendant Mohundro died during the pendency of the action, and the action continued against respondent alone.

Respondent demurred to the complaint for insufficient facts. His demurrer after consideration by the court was overruled. Respondent then answered, denying part of the complaint, and admitting the remainder. There was no affirmative defense. On the issues thus made the court tried the cause without a jury, and made findings of fact in which all the material allegations of the complaint were found true. Conclusions of law and judgment were nevertheless rendered for the respondent.

There was no allegation in the complaint that the assets in the hands of the receiver were insufficient to satisfy the claims of all creditors. The appellant did, however, after the trial of the cause by the court, ask that the proceeding be reopened, and that he be permitted to introduce proof to the effect that the assets of the defunct bank were insufficient to pay any more than 20 per cent., or 25 per cent. in all, of the claims of general creditors. This application was denied by the court for the reason that the court was of the opinion that it would be immaterial to make such proof, because of his conclusion that in any event the respondent was not liable, since the deposit was a deposit by a public officer as such of the public funds coming into his hands as county clerk; the deposit thereby constituting a trust fund which upon the failure of the bank respondent was entitled to receive back intact.

There is no statute requiring county clerks to deposit funds in their hands as such in any bank or requiring any bank to be designated as depositary for such fund. While it is true that the funds deposited by respondent as county clerk of Clarke county implied a notice to the depositary that the funds were public funds, and not private funds of the depositor, nevertheless the funds were deposited subject to check as an ordinary account, and as such constituted a general, and not a special, deposit. It is contended by respondent that the deposit by the county clerk as such created it a deposit of county funds, or of public funds belonging to litigants in the court of which respondent was clerk. There is a conflict of opinion among authorities as to whether, in the absence of statute, there exists in any political subdivision a common-law right to have its debts paid to it in preference to other creditors when the debtor is insolvent. But, as applied to insolvent banks in which deposits of public money have been made, the better rule seems to be that, in the absence of statute or a showing of facts sufficient to create a trust, a claim for public money has no preference over the claims of the general creditors of the bank, but stand on the same footing with them. 3 R. C. L. § 182; note to Page County v. Rose, 8 Ann. Cas. 116, and cases there cited. Ordinarily public money in the hands of its official custodian without special authority to deposit the same in a bank is a trust fund, and when a bank accepts such money knowing its trust character, the bank becomes a quasi trustee, and the trust character attaches to the fund in the hands of the bank, making it a preferred claim if it has not been so commingled with the other funds of the bank as to have lost its identity. Note, same case, and cases cited therein.

In this case the funds were deposited by the county clerk from time to time and checked against from time to time, and were not one special deposit of a trust character other than that they constituted a trust fund in the hands of the clerk himself. They were evidently carried in the bank commingled with all its other funds, until the bank was closed for liquidation.

When a bank becomes insolvent and is taken over by the public examiner, the assets of the bank become a fund for the payment of the claims of the various creditors, and unless some reason is shown, recognized by law, that entitles one creditor to a preference over the others, they should all be treated alike. If the assets are sufficient in amount, the creditors can be paid in full; but where there are not sufficient funds to pay the just claims of all of the creditors in full, then such fund as there is should be proportioned among such...