Lusk Development & Improvement Co. v. Giinther

• Decision Date: 14 January 1925
• Docket Number: 1177
• Citation: 32 Wyo. 294,232 P. 518
• Parties: LUSK DEVELOPMENT & IMPROVEMENT CO. v. GIINTHER [*]
• Court: Wyoming Supreme Court

232 P. 518

32 Wyo. 294

LUSK DEVELOPMENT & IMPROVEMENT CO. v. GIINTHER ^[*]

No. 1177

Supreme Court of Wyoming

January 14, 1925

APPEAL from District Court, Niobrara County; WILLIAM A. RINER Judge.

Action by the Lusk Development and Improvement Company against Geo H. Giinther, Receiver of the Bank of Lusk. Plaintiff sought to establish preference against funds in the hands of the Receiver. From an order refusing preference, it appeals.

Reversed and Remanded.

J. G Hartwell, and Lewis & Grant for appellant.

The deposit was for the purchase of property and special; 11 Michie on Banks and Banking, 153; Hiatt Co. v. Bank, (Wash.) 195 P. 13; Kies v. Wilkinson, (Wash.) 172 P. 351; the bank held the money in trust; Kimmel v. Dickson, 5 (S. D.) 221 58 N.W. 561; Shopert v. Bank, (Ind.) 83 N.E. 515; Lennan v. Bank, (S. D.) 110 N.W. 834; it was virtually a collection; Brown v. Bank, (Ia.) 117 N.W. 289; Foster v. Rincker, 4 Wyo. 484; Bank v. Bank, 46 N.Y. 82; Harrison v. Smith, 83 Mo. 210; Springfield Inst. v. Copland, 160 Mass. 380; Guigan v. Bank, (Mont.) 55 P. 1051; Meyers v. Bd., 51 Kans. 87; Bank v. Mining Co., 105 Ill. 103; Montagu v. Bank, 81 F. 602; Secrest v. Ladd, (Kans.) 209 P. 824; Lamb v. Ladd, (Kans.) 209 P. 825; a special deposit converted by a bank to its own use creates a trust, 3 R. C. L. 566; the assets were increased thereby, 3 R. C. L. 522; mingling of funds with general deposits of the bank did not destroy its trust character; Whitcomb v. Carpenter, (Ia.) 111 N.W. 825; Bank v. Bank, (Nebr.) 69 N.W. 115; Covey v. Cannon, (Ark.) 1409 S.W. 514; this is especially true where the bank was insolvent; 1 Michie 501; Bank v. Dennis, (N. M.) 146 P. 928; if collection not completed prior to insolvency money thereafter received is trust funds; Flaumery v. Coates, 80 Mo. 44; Bank v. Hubbell, (N. Y.) 22 N.E. 1031; Kime v. Ladd, (Kans.) 211 P. 628; Balbach v. Frelinghauysen, 15 F. 675; receiving money by an insolvent bank is a fraud; Widman v. Kellog, (N. D.) 133 N.W. 1020; St. Louis Ry. Co. v. Johnson, 133 U.S. 566; Orme v. Baker, 740 S. 337.

E. Paul Bacheller and Harold Bacheller for respondent.

The record fails to show that any directions were given the bank of Lusk as to the disposition of the funds; the Foster case involved a collection; considering the present transaction as a collection the bank acted as appellant's agent, 1 Morse 446, and acted within the scope of its agency in remitting by draft; 2 C. J. 921; the relation of debtor and creditor were thereby created; 3 R, C. L. 632; a bank deposit is presumed to be general in the absence of agreement to the contrary; Cabrera v. Thannhauser, 192 P. 45; the burden of showing a special deposit rest on the depositors; Bank v. Bank, 103 Mo.App. 357; there is no evidence of insolvency of the bank, 7 C. J. 727; Owens v. Bank, (Tex.) 81 S.W. 988; appellant failed to trace the funds into the hands of the Receiver or into the assets of the bank and cannot recover, 3 R. C. L. 552; Morse on Banks and Banking, (5th Edition) Vol. II, 589-630; appellant is not entitled to a preference.

BLUME, Justice. POTTER, Ch. J., and KIMBALL, J., concur.

OPINION

BLUME, Justice.

The appellant sued the receiver of the Bank of Lusk to have a claim filed with said receiver in the sum of $ 4316.56 declared to be a prior lien upon the assets of said bank. The court allowed the claim as a general claim, but refused to grant any preference, from which order the appellant has taken an appeal to this court.

According to the stipulation of the parties, filed in the court below, the Bank of Lusk had, on December 17th, 1920, in its possession, in escrow, a warranty deed of which appellant was grantor and H. C. Snyder & Company grantee, conveying certain property in Niobrara County, Wyoming. Under the escrow agreement, the said bank was to deliver said deed to said grantee upon payment by said grantee to said bank for the benefit of appellant the sum of $ 4314.00. On December 17th aforesaid said H. C. Snyder & Company paid said sum to said bank in conformity with said agreement and received said warranty deed. On December 20th, 1920, said bank, in order to pay said amount over to plaintiff, whose principal office was in Denver, Colorado, sent to the latter its draft in said amount of $ 4314.00, drawn on the Corn Exchange National Bank of Omaha, Nebraska. The draft was presented to the latter bank in due course and payment refused for want of sufficient funds. In the meantime, and on December 22nd, 1920, the Bank of Lusk closed its doors, and as we gather from the record, the Omaha bank immediately appropriated all the money then to the credit of the Lusk bank on alleged past due indebtedness, although a sufficient amount was on deposit there on December 20th to pay said draft. In due course of time the respondent herein was appointed receiver of said Bank of Lusk. The appellant had a checking account with the latter bank from March, 1919 to the time that it closed its doors, with a balance of $ 291.05 on December 22, 1920, but the money paid by H. C. Snyder & Company by reason of said deed was not credited to said account, and we may take it for granted herein, we think, from the facts shown, that the money so paid on December 17, 1920 was mingled with the general money which the Bank of Lusk had on hand at the bank on that date. Two main points only are presented by the brief: (1) Whether or not the amount so paid by H. C. Snyder & Co. became a trust fund, and (2) whether said money has been sufficiently traced so that the claim therefor should be entitled to preference.

1. If the relation of debtor and creditor was created between appellant and the Bank of Lusk by reason of the payment made as aforesaid by H. C. Snyder & Co., then the money so paid could not be considered a trust fund. If, on the other hand, the relation was that of principal and agent or bailor and bailee, then the contrary would be true. The record does not show any specific direction by appellant as to what was to be done with the money when collected by the bank, but the only inference possible to be drawn from the acts of the bank itself, namely, from the fact that the money was not credited to appellant's general account, but was attempted to be paid over to the latter by draft on the Omaha bank, is that it was not to remain in the bank to appellant's credit, but was to be paid immediately over to the latter. We think, therefore, that the facts bring the case clearly within the holding in Foster, Receiver, v. Rincker, 4 Wyo. 484, 35 P. 470, and we must hold that the money was received by the bank in a fiduciary capacity. The cases sustaining the rule in the Rincker case are many, a few of which we cite. Wallace v. Stone, 107 Mich. 190, 65 N.W. 113; Windstanley et al v. Bank, 13 Ind.App. 544, 41 N.E. 956; Hawaiian Pineapple Co. v. Browne, (Mont.) 69 Mont. 140, 220 P. 1114 and cases cited; Dickerson v. Wason, 47 N.Y. 439, 7 Am. Rep. 455; Beal v. Somerville, 50 F. 647, 1 C.C.A. 598, 17 L.R.A. 291; Macy v. Roedenbeck, 227 F. 346; 142 C.C.A. 42; L.R.A. 1916C 12. Counsel for the receiver claim that because of the fact that a draft on the Omaha bank was sent to appellant, the situation is changed. We cannot, however, see how the bank could fully perform its duty in paying over the money, but on the contrary establish the relation of creditor and debtor between the parties, without appellant's consent, by the sending of a draft which turned out to be worthless. The authorities appear to be against respondent's contention. State Nat. Bank v. First Nat. Bank, 124 Ark. 531, 187 S.W. 673; Hawaiian Pineapple Co. v. Brown, supra; People v. Bank, 39 Hun 187; Messenger v. Bank, 193 Iowa 608, 187 N.W. 545; Brown v. Bank, 139 Iowa 83, 90, 117 N.W. 289. In the last mentioned case the money was drawn out of the drawee bank by the drawer of the draft, but it is plainly immaterial as to the manner in which the funds expected to meet the draft became exhausted. In that case the court aptly said:

"Counsel for the receiver seems to think that there is something in the fact that a draft was at once drawn and sent forward that serves to warrant the denial of preference. We do not see how this can be. It may be, as counsel suggests, that had the draft so drawn been presented for payment on the day it was drawn, or even on the following day, it would have been paid. But that cannot be accepted as ground sufficient on which to defend the decree. The Sheldon bank chose to make returns of the collection by Chicago draft. Of necessity two days, at least, must elapse before such draft could be presented. In the meantime the bank had drawn out of the Chicago bank its funds available to meet the draft. As far as claimant is concerned, therefore, the case stands precisely as if the Sheldon bank had never had any funds in the Chicago bank. It requires no citation of authorities to make it clear that settlement, as for collection made, is not accomplished by forwarding a draft, which on being presented for payment within a reasonable time, as was this, is repudiated for want of funds."

2. We come then to the next and main question in the case, that is whether or not the money has been sufficiently traced and identified in the hands of the receiver. An exhaustive note on the subject is found in L.R.A. 1916C 21-89. This court in State v. Foster, 5 Wyo. 199, 38 P. 926, 29 L. R. A. 226, 63 Am. St. Rep. 47 adopted a rule which makes it unnecessary at this time to enter into any lengthy discussion of the point under consideration. The right of a cestui que trust to pursue and reclaim trust funds and its increase rests upon the right of property. A trust creditor is not entitled to a preference over general creditors of the insolvent merely on the ground of the...