Love v. Little

• Decision Date: 05 June 1933
• Docket Number: 30606
• Citation: 167 Miss. 105,148 So. 646
• Court: Mississippi Supreme Court
• Parties: LOVE, SUPERINTENDENT OF BANKS, v. LITTLE et al

148 So. 646

167 Miss. 105

LOVE, SUPERINTENDENT OF BANKS, v. LITTLE et al

No. 30606

Supreme Court of Mississippi

June 5, 1933

Suggestion Of Error Overruled July 7, 1933.

(En Banc.)

1. BANKS AND BANKING. Proceeds of checks received on sale of cotton, and payable to plantation owner, tenant, and person furnishing supplies to tenant, and which checks bank indorsed with names of payees and credited to "rent account," held not special and trust fund for payment of which payees were entitled to preference out of bank's assets.

The facts disclosed that cotton was sold at various times through cotton co-operative association which, acting under instructions of person who furnished supplies to tenant mailed to bank checks for proceeds payable to plantation owner, tenant, and furnisher of supplies to tenant. Acting under authority specially given it by payees, bank indorsed the checks with names of the three payees and credited amount to "rent account," and when all cotton had been sold and proceeds were in bank it remitted to plantation owner rents for plantation for year, after paying taxes, and turned over balance to tenant. There was no evidence directly or circumstantially to show that it was understood that bank would hold proceeds of checks in trust, but such funds were commingled with general assets of bank, and bank was therefore mere debtor of payees.

2. BANKS AND BANKING.

Deposit is presumed general unless expressly made special or specific.

3. BANKS AND BANKING.

Where bank has right to mingle deposit with its general assets deposit is "general deposit," not "special deposit."

4. BANKS AND BANKING. Special deposit does not enter into general funds of bank and form part of its disposable capital, but is kept separate and is to be specifically returned.

This is true, even though the money deposited may be trust funds put with bank on condition that it pay a certain sum to cestui during life, in absence of evidence showing it is bank's duty by agreement, express or clearly implied to keep funds and their investment separate.

ETHRIDGE, J., dissenting.

HON. M. B. MONTGOMERY, Chancellor.

APPEAL from chancery court of Yazoo county HON. M. B. MONTGOMERY, Chancellor.

Proceeding by J. S. Love, Superintendent of Banks, for the liquidation of the Citizens' Bank & Trust Company of Yazoo City, in which L. Freeman Little and others intervened, seeking to establish their claim against bank as preferred claim. Decree for interveners, and Superintendent of Banks appeals. Reversed and rendered.

Reversed, and decree here.

Flowers, Brown & Hester, of Jackson, and R. R. Norquist, of Yazoo City, for appellant.

Neither of appellees has anything other than a common claim against the assets of the Citizens Bank & Trust Company, in liquidation, and there is nothing connected with the transaction involved in this cause entitling either of appellees to a preference over the other depositors and creditors of the bank.

Love, Superintendent of Banks, v. Fulton Iron Works, 140 So. 528; Love v. Federal Land Bank, 157 Miss. 52, 127 So. 720; Billingsley v. Pollock, 69 Miss. 759, 13 So. 828; Love et al. v. Meridian Grain & Elevator Co., 139 So. 859.

Wise & Bridgforth, of Yazoo City, for appellees.

As an agent the bank was under the duty not to mingle the trust funds belonging to its respective principals, one with the other, or with its own funds.

2 C. J. 741; 1 Am. & Eng. Ency. of Laws, 1,089.

It is settled law that the funds held by a bank as trustee when it deposits same with itself, are entitled to preference on the failure of the trustee bank.

Genesee Wesleyan Sem. v. United States F. & G. Co., 247 N.Y. 52, 159 N.E. 720, 56 A. L. R. 964; Terre Haute Trust Co. v. Scott (Ind.), 181 N.E. 369; 56 A. L. R. 966.

Seemingly, the bank recognized some special duty in regard to the funds; and, while it did mingle the respective portions belonging to appellee Little and appellee Broadaway, and these commingled, it mingled with the body of its general assets, still the deposit it made was "ear-marked"--"rent account." While a "special deposit" is really a mere bailment of the money deposited, and money so deposited must be kept separate from other funds, still "deposits in the nature of a special deposit" where made for a special purpose are well recognized in law as entitled to preference.

7 C. J. 631-633; Sawyer v. Conner, 114 Miss. 363, 75 So. 131, L. R. A. 1918A 61, Ann. Cas. 1918B 388; Armour-Cudahy Packing Co. v. First National Bank, 69 Miss. 700, 11 So. 28.

Anderson, J., Ethridge, J., dissenting.

OPINION

Anderson, J.

On December 22, 1930, the Citizens' Bank & Trust Company of Yazoo City, being insolvent, was taken over by appellant for liquidation under our banking laws. The liquidation was proceeding in the chancery court of that county, as required by statute (Code 1930, section 3817). Appellees intervened in that cause by petition and set up their claim against the bank in the sum of nine hundred thirty-nine dollars and eighty-nine cents, which they alleged was a special deposit and a trust fund for which, under the law, they were entitled to payment in full as against other unsecured creditors. The petition was answered by appellant, and its material allegations denied. The cause was tried on the pleadings and on evidence, resulting in a decree granting the prayer of the appellees' petition. From that decree appellant prosecutes this appeal.

Appellee L. Freeman Little is the owner of Willowdale plantation in Yazoo county. The plantation was leased for the year 1930 to appellee J. R. Broadaway, who got his necessary "furnish" for the plantation from W. W. Nevins. The cotton raised on the plantation was sold at various times during the year through the Staple Cotton Cooperative Association of Greenwood. The cotton association, acting under instructions of appellees and Nevins, mailed the checks for the various lots of cotton sold by it to the Citizens' Bank & Trust Company of Yazoo City. The checks were made payable to "L. Freeman Little; J. R. Broadaway, and W. W. Nevins." There were several of these checks, inasmuch as there were several lots of the cotton sold at different times by the cotton association. Acting under authority expressly given it by appellees and Nevins, the Citizens' Bank & Trust Company indorsed these checks of the cotton association "with the names of all three payees" and credited the amounts to "J. R. Broadaway Rent Account." These checks were forwarded by the Citizens' Bank & Trust Company to its correspondents, and the proceeds of their collection went into the Citizens' Bank & Trust Company in the manner stated.

At the time appellant took charge of the Citizens' Bank & Trust Company there was in the "J. R. Broadaway Rent Account" the sum of nine hundred thirty-nine dollars and eighty-nine cents. Appellee Little asserted his preference claim against the assets of the bank in the sum of six hundred dollars, which he alleged was the amount of rent due him for the plantation for the year 1930, and appellee Broadaway set up a like claim for the balance, three hundred thirty-nine dollars and eighty-nine cents.

For two or three years prior to 1930 this same arrangement had been made by appellees for the handling of the plantation. J. P. Bennett was vice-president of the Citizens' Bank & Trust Company. He testified, and we understand the evidence was undisputed, that the bank would receive from the cotton association its checks representing the proceeds of the sale of cotton raised by Broadaway on Little's plantation; that by agreement of all the parties this money would be held by the bank, and, when all the cotton had been sold and the proceeds in, the bank would remit to Little the rent for the plantation for the year, after paying his taxes, and the balance would be turned over to Broadaway. The arrangement meant that neither one of the interested parties could check out his share of the deposit. On the contrary, the bank was commissioned by all the parties to dispose of it in the manner above stated.

The question is whether or not this fund so deposited and handled became a special deposit and a trust fund for the payment of which appellees are entitled to a preference out of the assets of the bank. The chancellor so held, but we think his holding was erroneous for the following reasons: A deposit is presumed to be general unless expressly made special or specific. Where the bank had a right to mingle the funds deposited with its general assets, it is a general deposit and not a special one. A special deposit does not enter into the general funds of the bank "and form a part of its disposable capital;" it is kept separate and is to be specifically returned. This is true, even though the money deposited may be trust funds put with the bank on condition that it would pay a certain sum to the cestui during life, in the absence of evidence to show that it was the bank's duty by express agreement or clearly implied to keep the funds and their investment separate. I Morse on Banks & Banking (6 Ed.), sections 186 and 205, and case notes.

However, it appears unnecessary to refer to authorities elsewhere to sustain appellant's position. The cases of Billingsley v. Pollock, 69 Miss. 759, 13 So. 828, 30 Am. St. Rep. 585; Love v. Federal Land Bank, 157 Miss. 52, 127 So. 720; and Love, Supt. of Banks, v. Fulton Iron Works, 162 Miss. 890, 140 So. 528, although not directly in point on their facts, lay down principles which sustain appellant's contention.

Appellees to sustain their contention, rely on Armour-Cudahy Packing Co. v. First National Bank, 69 Miss. 700, 11 So. 28; Sawyers v. Conner, 114 Miss. 363, 75 So. 131, L. R. A. 1918A, 61, Ann. Cas. 1918B, 388; and Love v....