Mann v. Bank of Greenfield

• Citation: 46 S.W.2d 874,329 Mo. 862
• Decision Date: 17 February 1932
• Docket Number: 30868
• Parties: Frank C. Mann, Trustee of the Estate of John A. Ready, Appellant, v. Bank of Greenfield, and S. L. Cantley, Commissioner of Finance of the State of Missouri, in Charge of the Business and Assets of the Bank of Greenfield
• Court: United States State Supreme Court of Missouri

46 S.W.2d 874

329 Mo. 862

Frank C. Mann, Trustee of the Estate of John A. Ready, Appellant, v. Bank of Greenfield, and S. L. Cantley, Commissioner of Finance of the State of Missouri, in Charge of the Business and Assets of the Bank of Greenfield

No. 30868

Supreme Court of Missouri

February 17, 1932

Appeal from Greene Circuit Court; Hon. John Schmook, Judge.

Appeal from a suit to enforce a preferred claim.

Affirmed.

G W. Goad and Mann, Mann & Miller for appellant.

(1) One dealing with the trustee of an express trust, knowing him to be such, is charged with knowledge of the terms of the trust and is bound, at his peril, to know the extent and limitation of the trustee's powers. Pundmann v. Schoenich, 144 Mo. 149; Evangelical Synod v. Schoeneich, 143 Mo. 663; In re Linn County Bank, 1 S.W.2d 206; Price v. Morrison, 236 S.W. 297; Schulz v Bank, 246 S.W. 614. (2) The cash and notes transferred by Van Osdell from the Ready estate to the Dade County Bank and mingled with its assets, augmented the assets of said bank and were a trust fund, and remained so, in the hands of said Dade County Bank, and the entire assets of said bank were charged with said trust. And said trust was impressed on said assets in the hands of the Bank of Greenfield to which these assets were transferred, without the knowledge or consent of the creditors and stockholders of said Dade County Bank. Mann v. Bank of Greenfield, 323 Mo. 1000, 20 S.W.2d 502; Bartlett v. McCallister, 289 S.W. 820; Sloler v. Coats, 88 Mo. 514; Harrison v. Smith, 83 Mo. 210; Orr v. Trust Co., 291 Mo. 383, 236 S.W. 642; Tierman v. Bldg. & Loan Assn., 152 Mo. 135; Nichols v. Bank, 278 S.W. 793; Snodgrass v. Moore, 30 Mo.App. 232; 39 Cyc. 538; Smith v. Motley, 150 F. 266; Smith v. Township, 150 F. 257. A trustee will not be allowed to destroy or defeat a trust by his own act. All doubts are to be resolved in favor of the beneficiary of the trust and every effort be made to protect a trust fund from the consequences of the trustee's misconduct. Folk v. Hughs, 100 S.C. 220, 84 S.E. 713; Bright v. King, 20 Ky. 187, 45 S.W. 508; 39 Cyc. 538, 539. (3) It is the general rule that the grantee of the assets of an insolvent corporation takes subject to all liabilities of the corporation. Neither the directors of the Dade County Bank nor the Commissioner of Finance had any authority to make any transfer of the assets of said bank, either by contract or otherwise, which would result in defeating the just claim of any person against said bank. Johnson v. United Railways, 281 Mo. 164, 219 S.W. 38; Evans v. Exchange Bank, 67 Mo. 182; Hughs v. School District No. 29, 72 Mo. 643; Barthold v. Land & Lumber Co., 91 Mo.App. 233; Bank v. Brightwell, 148 Mo. 358; Bartlett v. McCallister, 289 S.W. 814; Modoc County Bank v. Ringling, 7 F.2d 535; Valley Bank v. Malcolm, 23 Ariz. 395, 204 P. 207; Williams v. Bank, 49 Ore. 500, 90 P. 1015; Schultz v. Bank of Harrisonville, 246 S.W. 614; Mann v. Bank of Greenfield, 323 Mo. 1000, 20 S.W.2d 502. (4) The transfer of the solvent assets of the Dade County Bank to the defendant bank, if valid, was for the purpose of liquidation, so far as the defendant bank was concerned, and said defendant bank took said assets, subject to such burden, charge or encumbrance, as was impressed on said assets in the hands of the Dade County Bank. Exchange Bank v. Turner, 321 Mo. 681, 14 S.W.2d 425; Citizens Trust Co. v. Tindle, 272 Mo. 681, 199 S.W. 1025; Hight v. Stewart, 220 Mo.App. 83, 278 S.W. 1091.

Farrington & Curtis, Allen McReynolds and Charles L. Henson for respondents.

(1) Equity follows a trust fund through any number of hands and will allow the cestui que trust to recover the fund as long as it can be identified. Mayer v. Bank, 86 Mo.App. 422; Horigan Realty Co. v. Bank, 273 S.W. 772; Tiernan's Exr. v. B. & L. Assn., 152 Mo. 135; Phillips v. Overfield, 100 Mo. 466; Wm. R. Compton & Co. v. Farmers' Trust Co., 279 S.W. 746; Farmers' Trust Co. v. Burnes Natl. Bank, 285 S.W. 110. (2) It is also the rule that where the trustee commingles the funds of a cestui que trust with his own funds and the commingling results in augmenting the funds of the trustee, that the trust funds can be recovered from the commingled fund in the hands of a third party, only to the extent of the amount of the commingled funds shown to be on hands. 29 R. C. L. 219, pp. 1356, 1357; Stoller v. Coates, 88 Mo. 514, L. R. A. 1916C, 58, 59; Tiernan's Exr. v. Sec. B. & L., 152 Mo. 135, 53 S.W. 1072. (3) Where a trustee has commingled trust funds with his own, and afterwards takes sums from the whole common mass for his own use, it will be presumed, so long as such mass is larger than the amount of the original trust fund, that the amounts so taken were his own and not a part of the trust fund; and that what remains in the hands of the trustee contains the trust fund if larger than the trust fund or if smaller than it constitutes the trust fund pro tanto. 30 Cyc. 539; Horigan Realty Co. v. First Natl. Bank, 273 S.W. 772; Orr v. St. Louis Union Trust Co., 291 Mo. 383, 236 S.W. 642; Nichols v. Bank of Syracuse, 278 S.W. 793. (4) The right to follow trust property into the hands of a third person and impress the trust thereon, ceases when the property comes into the hands of one who stands in the position of a bona fide purchaser for value without notice, as where the legal title to the property comes into the hands of one who acquires it for a valuable consideration without notice of its trust character, including a purchaser without notice from a purchaser with notice; or where, although he has notice of the trust, he acquired it from one without notice. 39 Cyc. 559, 561; 26 R. C. L. 1351; Grove v. Heirs of Robards, 36 Mo. 523; Oliver v. Piatt, 3 How. 333, 11 L.Ed. 622, L. R. A. 482 N; Moore v. Crawford, 130 U.S. 122, 32 L.Ed. 878.

Westhues, C. Cooley and Fitzsimmons, CC., concur.

OPINION

WESTHUES

Plaintiff seeks, in this proceeding, to have declared, in his favor, preferred claims aggregating twenty thousand forty-three dollars ($ 20,043), with interest against the defendant, Bank of Greenfield, Missouri.

This is the second appeal in the case. The former opinion is reported in 20 S.W.2d 502. Plaintiff's claim arose through certain transactions of the officers of the Dade County Bank. These officers, Edwin Harrison and Floyd G. Van Osdell, were trustees and had charge of a large trust fund belonging to John Thomas Ready, cestui que trust, on whose behalf the suit was instituted. The Dade County Bank was financially embarrassed and the trustees named misappropriated the trust funds to the use and benefit of the bank. A detailed statement of these transactions and how the bank was benefited thereby will be found in the former opinion.

The Dade County Bank failed on January 1, 1924. The assets were placed in the hands of the State Finance Department for the purpose of liquidation. Subsequently the Bank of Greenfield was organized. A contract was entered into on June 30, 1924, by the Dade County Bank, through its board of directors and the president, with the defendant, the Bank of Greenfield; whereby the latter bank bought, or took over the major portion of the assets of the Dade County Bank. This agreement was approved by the finance department and also by the circuit court having jurisdiction over the liquidation. It was upon this contract that the suit was brought. The theory of recovery was, that the Bank of Greenfield had agreed to pay all of the liabilities of the defunct bank as a consideration for the assets received. Plaintiff contended, in the first trial, that his claims should be included in the liabilities and, therefore, should be paid in full by the defendant bank. This court, in the former opinion, ruled against plaintiff's contention and held that plaintiff could not recover on the contract. In remanding the case this court ordered that plaintiff should be permitted, if so advised, to amend his petition so as to state a cause of action in equity, and seek to impress the assets of the Dade County Bank with the trust fund misappropriated by the trustees to the use and benefit of that bank. Pending this litigation the defendant, Bank of Greenfield, also failed. Plaintiff amended his petition and the case was tried upon the theory, that the assets of the Dade County Bank, that passed into the hands of the defendant, Bank of Greenfield, were impressed with the aforementioned trust funds, therefore, plaintiff contended at the trial, and here asserts, that he is entitled to preferred claims to be paid out of the assets of the Bank of Greenfield. The trial court found for defendant and plaintiff appealed.

We will assume, for the purpose of this opinion only, that the assets of the defunct Dade County Bank were impressed with the trust fund and that plaintiff was entitled to preferred claims, against the Dade County Bank, to be paid out of the assets of that bank. The vital question, in this case, is whether plaintiff is entitled to follow these assets, impressed with the trust fund, and have his claim allowed against the Bank of Greenfield.

In the organization of the Bank of Greenfield, it was capitalized for fifty thousand dollars ($ 50,000). This capital stock was sold at its par value and the stockholders in addition paid fifty thousand dollars ($ 50,000), for the purpose of creating a surplus and of absorbing any loss that would be sustained by taking over a part of the assets of the Dade County Bank and assuming its liabilities. The Bank of Greenfield purchased and received, from the Dade County Bank notes aggregating ninety-three thousand three hundred twenty-one dollars and thirty-three cents ($ 93,321.33), banking house, furniture, fixtures and other items listed at eighty-two thousand...