Leach v. Mechanics' Savings Bank
| Decision Date | 14 December 1926 |
| Docket Number | 37227 |
| Citation | 211 N.W. 506,202 Iowa 899 |
| Parties | ROBERT L. LEACH, State Superintendent of Banking, Appellee, v. MECHANICS SAVINGS BANK, Appellee; Iowa NATIONAL BANK et al., Claimants, Appellants |
| Court | Iowa Supreme Court |
Appeal from Polk District Court.--JOSEPH E. MEYER, Judge.
Action against the receiver, to fix the status of certain claims filed by the Iowa National Bank, McCutchen & Standring Company, and the receiver for the Commercial Savings Bank. Each of these claims was allowed as a depositor's claim but each was denied preference. The claimants appeal because the district court refused to allow their claims as preferred.-- Affirmed.
Affirmed.
E. D Perry, for Robert L. Leach, Receiver of Commercial Savings Bank, Appellant.
Clinton L. Nourse, for Iowa National Bank and McCutchen & Standring Company, Appellants.
Ben J Gibson, Attorney-general, and S. S. Faville, Assistant Attorney-general, for Robert L. Leach, Superintendent of Banking, Appellee.
John L. Gillespie, for Robert L. Leach, Receiver of Mechanics Savings Bank, appellee.
DE GRAFF, C. J.
Two primary questions are propounded on this appeal. First: Does a draft drawn in the ordinary form constitute an assignment pro tanto, in law or in equity, of the funds in the hands of the drawee to the credit of the drawer before the acceptance or certification of such draft? Second: Do the record facts, other than the mere execution and delivery of the drafts involved in this action, disclose and constitute an assignment of the funds in question so that a court of equity will recognize the holder's claim as superior to that of the receiver of the drawer, appointed after the issuance of the drafts, but before their presentation to the drawee?
The first question calls for the interpretation of Sections 127 and 189 of the Uniform Negotiable Instruments Act, adopted by the legislature of Iowa in 1902 (Sections 9588 and 9650, Code of 1924). The second question must be answered on the fact side of the instant case. If the first question is answered in the affirmative, then there is no occasion to direct our inquiry to the second question.
The instant facts are undisputed, and the issues are within narrow compass. The parties in suit are well defined, and involve only the claimants, who are payees in certain drafts, and the drawer, now represented by a receiver, whose rights, it may be conceded, are no higher or better than those of the drawer, the Mechanics Savings Bank. The dispute is to the title to a fund, and is simmered down to a controversy between the payee-holders of the drafts and the drawer thereof. In brief, the inquiry is: Does the provision of the Negotiable Instruments Law of Iowa, in the absence of special or exceptional facts or circumstances evidencing an assignment, foreclose the equity asserted and claimed by the appellants (holders) herein?
To make more understandable the legal principles hereinafter discussed, it is necessary at this point to outline the record facts.
The Mechanics Savings Bank was a banking corporation organized under the laws of the state of Iowa, doing business in the city of Des Moines. On the 3d of February, 1925, the appellee Leach, state superintendent of banking, was appointed receiver for said bank, though he had been in possession of the affairs of said bank, in his official capacity as such superintendent, since the morning of December 30, 1924, when the bank suspended.
On the 30th day of December, 1924, both the Iowa National Bank and the Mechanics Savings Bank cleared through the Des Moines clearing house, and there was found due the Iowa National Bank upon said clearance the sum of $ 7,851.51, for which, on the same day, the Mechanics Savings Bank issued a draft drawn on the Union Trust Company of Chicago, in words and figures as follows:
On the same day, the Iowa National Bank sent said draft for collection to the Continental & Commercial National Bank of Chicago, which bank immediately presented it to the Union Trust Company of Chicago. Payment was refused on the ground that said Mechanics Savings Bank had closed its doors and ceased to do active business. At the time the said draft was so presented, the Mechanics Savings Bank had upon deposit in said Union Trust Company, after allowing all credits and sums due said trust company from the Mechanics Savings Bank, and all proper set-offs, funds more than sufficient to pay said draft. In said clearance, the said draft was issued in lieu of checks drawn by customers of the Mechanics Savings Bank, and each of said customers thereof had on deposit in said Mechanics Savings Bank funds more than sufficient to pay their various checks. The Mechanics Savings Bank charged these checks to the respective depositors' accounts. The Iowa National Bank asks that its claim be allowed as preferred against the receiver, and that its be given priority over the claims of all creditors to said fund in the hands of the Union Trust Company, and, alternatively, that it be subrogated to the rights of the drawers of said checks on the Mechanics Savings Bank so cleared, and that it have preference as a depositor.
The McCutchen & Standring Company's claim grew out of the following facts: Being a depositor of the Mechanics Savings Bank, it drew, on the 18th of December, 1924, its check for $ 23.50, for the purpose of purchasing New York exchange; whereupon the bank issued a draft for that amount on the Mechanics & Metals National Bank of New York. On the 29th of December, 1924, the McCutchen & Standring Company drew another check for $ 640.48, with which to purchase New York exchange, and received a draft on that date for said amount, drawn on the same New York bank. The checks thus issued by the McCutchen & Standring Company were charged to its checking account with the Mechanics Savings Bank, which was in excess of the amount of said checks. The two drafts thus purchased were forwarded to the customers of the McCutchen & Standring Company, and in due time were presented to the Mechanics & Metals National Bank of New York, where payment was refused, on the ground that the Mechanics & Metals Bank had been notified by Leach, the receiver, that the Mechanics Savings Bank had been closed. There were more than sufficient funds in the Mechanics & Metals Bank to pay said drafts and all set-offs and counterclaims of the Mechanics & Metals National Bank against the Mechanics Savings Bank.
As to the claim of the Commercial Savings Bank (which bank is now also in the hands of a receiver), it appears that, in clearance between the Mechanics Savings Bank and the Commercial Savings Bank through the Des Moines clearing house, there was a balance due the Commercial Savings Bank of $ 11,046.87. The checks turned over by the Commercial Savings Bank to the Mechanics Savings Bank were the checks of customers of the Mechanics Savings Bank, all of which were good, and charged to the accounts of the respective drawers of the checks. For the payment thus found due, the Mechanics Savings Bank issued to the Commercial Savings Bank a draft or check on the Union Trust Company of Chicago for the aforesaid amount. On presentation of this draft to the Union Trust Company, payment was refused, although there were more than sufficient funds belonging to the Mechanics Savings Bank on deposit with the Union Trust Company to pay this draft and all other outstanding drafts, over and above all set-offs and claims of any kind held by the Union Trust Company against the Mechanics Savings Bank.
Plaintiff-appellee, on his appointment as receiver, withdrew and received from the Union Trust Company the amount of the deposit of the Mechanics Savings Bank, which was, in amount, in excess of all outstanding drafts issued by the Mechanics Savings Bank on the Union Trust Company.
The foregoing facts are admitted of record, and it is further stipulated that, at the time of drawing these drafts, the Mechanics Savings Bank credited said drafts on its books to the account of the Union Trust Company, and debited itself for the amount of said drafts; that none of said drafts nor any part thereof has been paid; that checks for which said drafts were issued were immediately charged to the respective accounts of the customers, and that there were sufficient funds on hand to the credit of the various customers to meet the various checks; that said drafts, when issued, were good, and continued good, and would have been paid, but for the reason that, immediately upon the appointment of the receiver, the superintendent of banking notified the drawee banks, and stopped payment of the drafts.
Generally, it may be said that, on the morning of December 30, 1924, the Mechanics Savings Bank suspended business, and was immediately taken over by the state superintendent of banking, who thereupon telegraphed the Union Trust Company of Chicago and the Mechanics & Metals Bank of New York of such suspension, and directed that no checks or drafts drawn upon the accounts in the Mechanics Savings Bank be honored. Shortly thereafter, the state superintendent of banking withdrew from the Union Trust Company and the Mechanics & Metals Bank the credit balances existing therein in favor of the Mechanics Savings Bank.
I. Does our Negotiable Instruments Act furnish an answer to the first question? The provisions material to our inquiry read as...
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Leach v. Mechanics' Sav. Bank
... ... No. 37227. Supreme Court of Iowa. Dec. 14, 1926 ... Appeal from District Court, Polk County; Jos. E. Meyer, Judge. Action against the receiver to fix the status of certain claims filed by the Iowa National Bank, McCutchen & Standring Co., and the receiver for the Commercial Savings Bank. Each of these claims were allowed as depositor's claims, but each was denied preference. The claimants appeal because the district court refused to allow their claims as preferred. Affirmed. Albert and Morling, JJ., dissenting. [211 N.W. 506] E. D. Perry, of Des Moines, for appellant ... ...