Leach v. Iowa State Savings Bank of Manning

• Decision Date: 14 December 1926
• Docket Number: 37127
• Citation: Leach v. Iowa State Savings Bank of Manning, 211 N.W. 517, 202 Iowa 894 (Iowa 1926)
• Parties: ROBERT L. LEACH, State Superintendent of Banking, Appellant, v. IOWA STATE SAVINGS BANK OF MANNING, Appellee; FIRST NATIONAL BANK OF COUNCIL BLUFFS, Intervener, Appellee
• Court: Iowa Supreme Court

211 N.W. 517

202 Iowa 894

ROBERT L. LEACH, State Superintendent of Banking, Appellant, v. IOWA STATE SAVINGS BANK OF MANNING, Appellee;

FIRST NATIONAL BANK OF COUNCIL BLUFFS, Intervener, Appellee

No. 37127

Supreme Court of Iowa, Des Moines

December 14, 1926

Appeal from Carroll District Court.--M. E. HUTCHISON, Judge.

Application for the allowance of a preference against funds of a bank in the hands of a receiver.The trial court allowed the preference, and the receiver appeals.The facts appear in the opinion.

Reversed.

Ben J Gibson, Attorney-general, and Helmer & Minnich, for appellant.

Tinley Mitchell, Ross & Mitchell, for appellee.

DE GRAFF, C. J., and EVANS, STEVENS, and FAVILLE, JJ VERMILION, ALBERT, and MORLING, JJ., concurring.ALBERT and MORLING, JJ., dissenting in part.

OPINION

PER CURIAM.

The defendantIowa State Savings Bank was located at Manning, Iowa.There was another bank in the same town, known as the First National Bank of Manning.The defendant had as its correspondent the intervener, the First National Bank of Council Bluffs, Iowa, with which bank it kept a deposit against which it issued its drafts.For a long time, it had been the custom of the intervener to forward to the defendant checks which the intervener held against both the defendant and the First National Bank of Manning.The record discloses that at one time it had been the practice of the intervener to charge the account of the defendant with the checks which it held against the said two banks in the town of Manning, and to then forward said checks to the defendant.The record discloses that, about six months before the transaction in question, this method of procedure was abandoned; that the officers of the defendant objected to this plan of doing business by having checks sent to them by the intervener first charged against their account in said bank; and that thereafter all checks received by the intervener against the two banks in the town of Manning were forwarded to the defendant, and said bank then remitted for said checks by draft, which it forwarded to the intervener.This was the oral understanding between the banks, and the method pursued.

On October 13, 1923, the said intervener sent to the defendant its cash items on each of said banks in the town of Manning.The letter of advice accompanying said cash items recited: "We inclose the following cash items for collection and returns."On October 15th, a similar letter was sent to the defendant, inclosing cash items in the form of checks drawn against said defendant and against the First National Bank of Manning, and also against the Manning Creamery Company.It was the practice of the defendant, upon receipt of such a letter inclosing cash items, to at once make out a draft payable to the intervener, and usually drawn upon the correspondent bank of the defendant in Chicago, and when the checks had all been honored, at the close of the day's business, to forward said draft to the intervener.In the transactions involved in this action, the defendant issued its draft on the First National Bank of Chicago in favor of the intervener, on October 15, 1923, and another similar draft, in a different amount, on October 16, 1923, both being for the proceeds of checks forwarded to it under a letter of instructions as above set forth.

The defendant bank was closed by order of the superintendent of banking on October 17, 1923, and each of said drafts went to protest.At the time the defendant bank was closed, it had a balance in the First National Bank of Chicago, and also a balance in the intervener bank.The balance in the First National Bank of Chicago, upon which said drafts were drawn, was applied by said bank on bills payable and rediscounts of the said Iowa State Savings Bank then in the hands of the Chicago bank.The balance in the intervener bank was paid by said bank in full to the receiver.

This case is in some respects, similar to Leach v Citizens' St. Bank (Federal Reserve Bank of Chicago, Intervener),203 Iowa 782, 211 N.W. 522--.In that case, cash items in the form of checks drawn solely against the receiving bank were forwarded to the latter "for collection and remittance."The letter of advice in the instant case was "for collection and returns."We held in that case that the relation of principal and agent was not created by the transaction; that the sending of the checks directly to the drawee bank was, in legal effect, no different than if the checks had been presented over the counter and payment demanded; and that no trust relation or agency as to such items was created by the transaction.The rule therein announced, if there were...