Leach v. First National Bank of Fort Dodge

• Decision Date: 07 February 1928
• Docket Number: 38503
• Parties: ROBERT L. LEACH, Receiver, Appellant, v. FIRST NATIONAL BANK OF FORT DODGE, Appellee
• Court: Iowa Supreme Court

217 N.W. 865

206 Iowa 265

ROBERT L. LEACH, Receiver, Appellant, v. FIRST NATIONAL BANK OF FORT DODGE, Appellee

No. 38503

Supreme Court of Iowa, Des Moines

February 7, 1928

REHEARING DENIED JUNE 26, 1928.

Appeal from Webster District Court.--H. E. FRY, Judge.

Action to recover the sum of $ 6,500, collected by the defendant bank, to which sum the plaintiff receiver claims that he is entitled. At the close of the evidence, both parties made motion for directed verdict. The court overruled the one made by the plaintiff, and sustained the one made by the defendant. The plaintiff appeals.

Affirmed.

John Fletcher, Attorney-general, and Price & Burnquist, for appellant.

Kelleher & Mitchell, for appellee.

WAGNER J. STEVENS, C. J., and EVANS, ALBERT, and KINDIG, JJ concur. FAVILLE, J., takes no part.

OPINION

WAGNER, J.

The defendant bank and the First Trust & Savings Bank are conjunctively operated in the same banking house,--the stock of the latter bank being owned by the former institution. The plaintiff is the receiver of the Webster County Trust & Savings Bank. On January 20, 1925, the last day that said bank was open for business, it borrowed from the First National Bank the sum of $ 8,000, and executed for said obligation its promissory note, and concurrently therewith executed what is denominated "General Guarantee and Deposit of Security as a basis of credit," which latter written instrument is as follows:

"Know All Men By These Presents, that the undersigned in consideration of financial accommodations given, or to be given, or continued to the undersigned, by the First National Bank and or the First Trust & Savings Bank, of Fort Dodge, Iowa, hereby agree with either or both of the said banks, that whenever the undersigned shall become or remain, directly or contingently, indebted to either or both of said banks for money loans, or for money paid for the use or account of the undersigned, or for any overdraft or upon any indorsement, draft, guarantee, or in any other manner whatsoever, or upon any other claim either or both of the said banks shall then and thereafter have the following rights in addition to those created by the circumstances from which such indebtedness may arise, against the undersigned, or his, or their executors, administrators or assigns namely:

"1. All securities deposited by the undersigned with either or both of said banks as collateral to any such loan or indebtedness of the undersigned to either or both of said banks shall also be held by either or both of said banks as security for any other liability of the undersigned to either or both of said banks, whether then existing or thereafter contracted; and either or both of said banks shall also have a lien upon any balance of the deposit account of the undersigned with either or both of said banks existing from time to time, and upon all property of the undersigned of every description left with either or both of said banks for safe-keeping or otherwise or coming to the hands of either or both of said banks in any way, as security for any liability of the undersigned to either or both of said banks now existing or hereafter contracted.

"2. And the undersigned hereby gives said First National Bank and or the said First Trust & Savings Bank, or either or both of their assigns, full power and authority to sell, and at such sale to bid for and purchase said collateral security, or any part thereof, or any other security which may from time to time be substituted therefor, or any portion thereof, at public or private sale, without advertising the same, or otherwise giving notice on the maturity of this note, or at any time thereafter; or before, in the event of said securities depreciating in value, at public or private sale, at the discretion of either or both of said banks, without advertising the same, or giving any notice, and to apply so much of the proceeds thereof, less all expenses, toward the payment of this note, with interest thereon; or at discretion to collect or otherwise convert said securities or either or any part of them and apply the proceeds toward such payment; and in case the proceeds thereof shall not cover the principal, with interest and the expenses incurred, the undersigned promises to pay the deficiency forthwith upon demand.

"It is further agreed that these presents constitute a continuing agreement, applying to any and all future as well as to existing transactions between the undersigned and either or both of said banks.

"Webster County Trust & Savings Bank, Fort Dodge, Iowa.

"By J. L. Hanrahan, Cashier."

At the time of the execution of the note and "guaranty," or collateral agreement, by the Webster County Trust & Savings Bank, it delivered as collateral security a number of promissory notes, which have been collected by the defendant bank. After the amount due on the $ 8,000 note is deducted from the collections on the collateral notes, there is a surplus of $ 6,500 and for the recovery of said sum the plaintiff receiver has instituted this action. There is no controversy over the $ 8,000 note, nor the fact that the defendant bank has withheld from the receipts on the collateral a sum sufficient to pay the same. It is the claim of the defendant that the Webster County Trust & Savings Bank is indebted to the First Trust & Savings Bank in the amount of $ 6,500, and that, within the meaning of the aforesaid collateral agreement, the collateral notes were pledged as security for indebtedness and liabilities to both the First National Bank and the First Trust & Savings Bank, and that they were entitled to hold and collect said pledged notes, and apply the proceeds to the payment of said indebtedness. At the time of the aforesaid transaction, there was on deposit in the Webster County Trust & Savings Bank, in the name of the First Trust & Savings Bank, as a depositor, the sum of $ 6,500. The plaintiff receiver denies that the Webster County Savings Bank was indebted to the First Trust & Savings Bank, claiming that said sum of $ 6,500 was money belonging to the Independent School District of Fort Dodge, and pleading res adjudicata as to said matter, and also alleging that the cashier who executed the collateral agreement had no authority to pledge the notes of the Webster County Trust & Savings Bank as security for the payment of the $ 6,500. The defendant bank claims estoppel and ratification by the Webster County Trust & Savings Bank of the act of the cashier in executing the collateral agreement.

The first question demanding our consideration is, Was the Webster County Trust & Savings Bank indebted to the First Trust & Savings Bank, and was there any liability on the part of the former bank for the payment of the $ 6,500? One Joe Nelson was the school treasurer of the Independent School District of Fort Dodge, and had been for some years. All of the money belonging to the school district was deposited by him, as treasurer, in the First Trust & Savings Bank. For many years, there had been a sort of gentlemen's agreement among the banks in the Fort Dodge Clearing House Association as to the distribution among the several banks, in proportion to their deposits, of public funds deposited in the depository bank selected by the school treasurer. The school treasurer had had nothing to do with this arrangement. His dealings were solely with the depository bank, the First Trust & Savings Bank. In accordance with this arrangement among the banks, the depository bank, by a check or draft, forwarded to the Webster County Trust & Savings Bank its proportionate share, which was received by said bank on deposit in the name of the First Trust & Savings Bank. Checks issued by the First Trust & Savings Bank upon said account were duly honored, and there were no withdrawals therefrom in any other way. In the receivership proceedings on February 19, 1925, it was decreed by the court that all claims against said bank arising out of the deposits, and all checking accounts, etc., as the same are shown on the books of the said bank, are allowed in the amounts and to the individuals as shown by the said books, said claims being allowed as claims of depositors of said bank, without further proof thereof. In August, 1926, the receiver filed his report and inventory, stating therein that it included a list of all the liabilities of said bank, as shown by the books on the 20th day of January, 1925; and listed therein as bank deposits is the sum of $ 6,500 in favor of the First Trust & Savings Bank; and the court, by order entered of record, finds that said report and inventory shows a list of all the liabilities of said bank, as shown by its books at the date of closing, and is in all matters true and correct, the order stating that said report and inventory is audited and approved.

A depositor is one who delivers to or leaves with a bank money subject to his order. And one bank may lawfully become a depositor of another bank. State ex rel. Carroll v. Corning State Sav. Bank, 136 Iowa 79, 113 N.W. 500. The relationship of debtor and creditor arises between the bank and the depositor. Hunt v. Hopley, 120 Iowa 695, 95 N.W. 205; Leach v. Beazley, 201 Iowa 337, 207 N.W. 374, and cases therein cited.

Filed in the receivership proceedings there was a claim by the school district and its treasurer, asking for a preference as to the $ 6,500 on deposit in the insolvent bank. The receiver, in his answer to the claim for preference, averred that the deposit of $ 6,500 referred to in the application is also claimed by the First Trust & Savings Bank, and asked that the owner of said deposit be determined. Upon the hearing as to said claim, the court denied the requested preference, finding that the treasurer of the Independent...