Leach v. Sanborn State Bank, Sanborn, Iowa
| Citation | 212 N.W. 694,203 Iowa 401 |
| Decision Date | 15 March 1927 |
| Docket Number | 37799 |
| Parties | ROBERT L. LEACH, State Superintendent of Banking, Appellee, v. SANBORN STATE BANK, Appellee, et al., Appellants |
| Court | United States State Supreme Court of Iowa |
Appeal from O'Brien District Court.--C. C. BRADLEY, Judge.
Claimants by petitions of intervention filed in the receivership of the Sanborn State Bank, insolvent, seek to establish their claims as preferred. The facts were stipulated. The trial court denied the preference in each instance, but gave the interveners the standing of general creditors. Claimants appeal.
Affirmed.
A. T Fillenwarth and Herrick & Herrick, for appellants.
Ben J Gibson, Attorney-general, and O. H. Montzheimer, for appellee.
DE GRAFF, J.
The claimants are owners of government bonds, left with the defendant Sanborn State Bank for safekeeping. These bonds were wrongfully converted by the bank.
Are the claimants entitled to a decree for preferential payment on a trust theory? It is beyond dispute that the bonds in question were held under a contract of bailment, which constituted an express trust. The bonds are now gone, and the record discloses that the receiver never had possession of them. In fact, the Sanborn bank lost control of these bonds during the year 1920. They were either sold or hypothecated by the Sanborn bank, in violation of its legal duty to these claimants.
The facts in this case were stipulated by the parties hereto, and it is stipulated by and between all the parties that, on December 17, 1919, the Sanborn State Bank, of Sanborn, Iowa, by W. A. Solon, its cashier, sent the claimants a letter, in which it was said that, by reason of numerous holdups and robberies of banks, and in particular, the looting of safety-deposit boxes by "yeggs," the bank would no longer be responsible for the contents of safety-deposit boxes, and that Liberty bonds left "in your box will be at your own risk;" that, upon the approval of the bank examiner, "we have devised a scheme to give full protection to our patrons;" and that "the plan will be explained if you will call at our bank." This plan involved the sending of the bonds on deposit to a Chicago bank for safe-keeping.
The claimants, complying with the letter and plan, shortly thereafter left with the Sanborn Bank for safe-keeping certain Liberty bonds, in the denominations and amounts as set forth in their respective petitions, and received therefor a receipt or "bond certificate" from the bank, to wit:
It is further stipulated that, within a few days after the receipt of said liberty bonds by the bank, the bonds were sent to the Corn Exchange National Bank of Chicago, for safe-keeping, and that none of said claimants have ever received back said Liberty bonds or bonds of like denomination either from the Chicago bank, the Sanborn bank, or the receiver, nor have they received the equivalent in cash therefor.
It is further stipulated that, at the time the bonds of the claimants were sent to Chicago for safe-keeping, there was also a large amount of other Liberty bonds sent to Chicago, under like conditions; that thereafter, upon advice from the Sanborn State Bank and its officers, various portions of the bonds so left with the Chicago bank for safe-keeping were, during the year 1920 and thereafter, sold, and the proceeds credited to the account of the Sanborn State Bank in said Chicago bank, and the proceeds therefrom used by the Sanborn bank, and all of said bonds not so sold were pledged to secure the payment of indebtedness of the Sanborn bank existing at said time, and thereafter all of said bonds were either so sold or pledged as collateral; that of all bonds so pledged in 1920, there was on hand with the Chicago bank, unsold and held as collateral for the indebtedness of the Sanborn bank, the sum of $ 8,642.89 on the 17th day of July, 1924, the date of closing of the Sanborn State Bank; that, on the 18th day of July, 1924, said bonds were sold by the Chicago bank, and the proceeds ($ 8,642.89) applied on the indebtedness of the Sanborn bank to the Chicago bank.
It is further stipulated that never at any time since the deposit of said original bonds with the Sanborn bank for safe-keeping did the claimants herein give their consent for the pledging of said bonds for any indebtedness of the said Sanborn State Bank, nor had they any knowledge that the bonds had been so pledged, nor did the Chicago bank know that any of these bonds belonged to claimants; that, during the time of the deposits of said bonds with the Sanborn State Bank, the interest thereon was paid to the owners; that, upon the payment of each of said interest payments, new "bond certificates" were issued by the Sanborn bank to the owners of said bonds, which certificates were similar to the ones previously held, but bore a new date; that the total amount of claims filed for Liberty bonds is $ 4,150.
It is further stipulated that, on November 24, 1919, the Sanborn State Bank sent to the Corn Exchange National Bank of Chicago Liberty bonds of the par value of $ 11,500, which bonds were similar to the bonds of the claimants herein, except that they differ as to serial number; that, on December 19, 1919, the Sanborn bank sent to the Chicago bank for safe-keeping similar Liberty bonds, of the par value of $ 12,850, and that these two shipments of Liberty bonds held by the Chicago bank for safe-keeping were afterwards handled exactly the same as the bonds of these claimants which had been sent in for safe-keeping; that during the year 1920 they were removed from safe-keeping, and some of them were sold, and the proceeds credited by the Chicago bank to the account of the Sanborn State Bank, and some of them taken from safe-keeping by the Chicago bank and placed in the collateral department, as collateral security to loans to the Sanborn State Bank; and that there is no record in the receivership or within the knowledge of the receiver identifying these bonds as to their serial number, or to determine whether the bonds that were finally in the hands of the Chicago bank on the 18th day of July, 1924, and by them sold, were bonds that originally came out of those owned by the Sanborn State Bank, or whether they included the bonds owned and deposited with the Sanborn bank by the claimants herein.
It is further stipulated that, on the date that the Sanborn State Bank finally closed its doors (July 17, 1924), and at the time the receiver took charge of said bank, the condition of said bank, as shown by its books, was as follows:
Cash on hand
$ 4,586.93
Cash to the credit of the Sanborn
State Bank in the Corn Exchange National
Bank
850.30
It is further stipulated that said sum with the Chicago bank was by it applied, on July 18, 1924, on indebtedness owed to it by the Sanborn bank, and that said sum of $ 850.30 did not reach the receiver or come into possession of the receiver; that the account of the Sanborn State Bank was overdrawn in the banks as follows: First National Bank, Council Bluffs, $ 31.80; Security National Bank, Sioux City, $ 323.76; Security National Bank, Charles City, $ 181.02.
It was also agreed that a certain exhibit constituted a correct list of loans made by the Sanborn State Bank on its funds between the dates July 1, 1920, and July 17, 1924, all of which notes have been proved to be worthless, and a loss to the bank in the aggregate of $ 96,497.95.
It is further stipulated that the claim of the county treasurer of ...
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