McClure Garage v. Sturdivant Bank

Decision Date04 December 1934
Docket NumberNo. 23036.,23036.
Citation76 S.W.2d 438
CourtMissouri Court of Appeals

Appeal from Circuit Court, Cape Girardeau County; Frank Kelly, Judge.

"Not to be published in State Reports."

Action by the McClure Garage against the Sturdivant Bank, a corporation, in charge of O. H. Moberly, Commissioner of Finance of the State of Missouri. From a judgment in favor of plaintiff, defendant appeals.

Reversed and remanded, with directions.

R. F. Baynes, of New Madrid, for appellant.

SUTTON, Commissioner.

This is an action for the allowance of a preferred claim for $22.05 in favor of plaintiff out of the assets of the Sturdivant Bank, which is in charge of the finance commissioner for the purpose of liquidation.

The court found that plaintiff was entitled to a preference in the sum of $22.05, and gave judgment accordingly. Defendant appeals.

On November 3, 1932, plaintiff purchased a draft from the Sturdivant Bank of Cape Girardeau for $22.05, drawn on the First National Bank of St. Louis. Plaintiff paid for the draft in cash over the counter of the Sturdivant Bank. Plaintiff did not have any account at the Sturdivant Bank. In due course the draft was presented to the First National Bank. Payment was refused, and the draft was returned to plaintiff. The Sturdivant Bank was placed in the hands of the state finance commissioner for liquidation on November 7, 1932. This occurred prior to the presentation of the draft to the First National Bank for payment, and it was on this account that the draft was dishonored.

It is admitted that on the 3d day of November, 1932, the date that the draft was issued, and on the 7th day of November, 1932, the date that the Sturdivant Bank closed, there were sufficient funds on deposit with the First National Bank to the credit of the Sturdivant Bank to pay the draft.

The right or not of plaintiff to a preference for the amount of said draft is the only question for decision here.

Many cases, not just like this, but of a kindred type, have been decided by the courts of this state in recent years, among them the following: American Bank v. People's Bank (Mo. App.) 255 S. W. 943; Bank of Poplar Bluff v. Millspaugh (Mo. App.) 275 S. W. 579; Federal Reserve Bank v. Millspaugh (Mo. App.) 275 S. W. 583; Bank of Poplar Bluff v. Millspaugh, 313 Mo. 412, 281 S. W. 733, 47 A. L. R. 754; Federal Reserve Bank v. Millspaugh, 314 Mo. 1, 282 S. W. 706; May v. Bank of Hughesville (Mo. App.) 291 S. W. 170; Bank of Portland v. McCredie Bank, 222 Mo. App. 119, 300 S. W. 1018; Gentry County Drainage District v. Farmers & Mechanics Bank, 222 Mo. App. 882, 5 S.W.(2d) 1110; Farmers' Bank of Bowling Green v. Cantley (Mo. App.) 16 S.W.(2d) 642; Bank of Republic v. Republic State Bank (Mo. App.) 24 S.W.(2d) 678; Clifton City Shipping Ass'n v. French (Mo. App.) 37 S.W.(2d) 656; Bank of Republic v. Republic State Bank, 328 Mo. 848, 42 S.W.(2d) 27; Cormaney v. Wells-Hine Trust Co. (Mo. App.) 44 S.W.(2d) 172.

There is no rule of law better settled than that the relations between a bank and its depositor is one of debtor and creditor. When a deposit is made in a bank, the funds deposited become the funds of the bank, and no trust relationship whatever is established between the bank and the depositor. The deposit becomes an ordinary indebtedness, not a trust fund.

In the American Bank Case, supra, this court declined to rule that, where a depositor of a bank by his check orders the bank to pay to the person named in the check as payee all or a portion of the bank's indebtedness to the depositor, and the holder of the check applies to the bank for payment of the amount of its indebtedness called for in the check, he thereby constitutes the bank his agent to collect from itself for him such amount of its own indebtedness and to pay over to him such amount when collected, and that the bank, having as such agent of the holder of the check collected from itself such amount of its indebtedness, thereby becomes a trustee of the amount collected for the use and benefit of the holder of the check. We accordingly held that, when the American Bank as the holder of checks drawn on the People's Bank presented such checks to the People's Bank for payment and accepted a draft for the balance due thereon after deducting checks held by the People's Bank drawn on the American Bank, the relationship of debtor and creditor, not of trustee and cestui qui trust, arose between the American Bank and the People's Bank, and that the American Bank was therefore not entitled to a preferential payment out of the assets of the People's Bank for the amount of such draft. We cited in support of this view the following cases: Utley v. Hill, 155 Mo. 232, loc. cit. 259, 55 S. W. 1091, 49 L. R. A 323, 78 Am. St. Rep. 569; Allen Grocery Co. v. Bank of Buchanan County, 192 Mo. App. 476, loc. cit. 487, 182 S. W. 777; People v. Merchants' & Mechanics' Bank of Troy, 78 N. Y. 269, loc. cit. 272, 34 Am. Rep. 532; People v. City Bank of Rochester, 93 N. Y. 582; Bowman v. First National Bank, 9 Wash. 614, 38 P. 211, 43 Am. St. Rep. 870; Akin v. Jones, 93 Tenn. 353, 27 S. W. 669, 25 L. R. A. 523, 42 Am. St. Rep. 921; United States National Bank v. Glanton, 146 Ga. 786, 92 S. E. 625, L. R. A. 1917F, 600; Legniti v. Mechanics' & Metals National Bank, 230 N. Y. loc. cit. 419, 130 N. E. 597, 16 A. L. R. 185; Midland National Bank v. Brightwell, 148 Mo. 358, 49 S. W. 994, 71 Am. St. Rep. 608; Harrison v. Smith, 83 Mo. 210, 53 Am. Rep. 571.

Other cases of like tenor have come to our attention, as follows: First National Bank v. Farmers' State Bank, 120 Kan. 706, 244 P. 1039, 44 A. L. R. 1531; Citizens' Bank v. Bradley, 136 S. C. 511, 134 S. E. 510; Hecker-Jones-Jewell Milling Co. v. Trust Co., 242 Mass. 181, 136 N. E. 333, 24 A. L. R. 1148; Commercial Nat. Bank v. Armstrong, 148 U. S. 50, 13 S. Ct. 533, 37 L. Ed. 363; Cronheim v. Postal Telegraph-Cable Co., 10 Ga. App. 716, 74 S. E. 78; Billingsley v. Pollock, 69 Miss. 759, 13 So. 828, 30 Am. St. Rep. 585; McCormick Harvesting Machine Co. v. Bank, 15 S. D. 196, 87 N. W. 974; Gordon v. Rasines, 5 Misc. 192, 25 N. Y. S. 767; Union Nat. Bank v. Citizens' Bank, 153 Ind. 44, 54 N. E. 97; Hallam v. Tillinghast, 19 Wash. 20, 52 P. 329; Peters Shoe Co. v. Murray, 31 Tex. Civ. App. 259, 71 S. W. 977; Sunderlin v. Bank, 116 Mich. 281, 74 N. W. 478; Westfall v. Mullen (In re Seven Corners Bank), 58 Minn. 5, 59 N. W. 633; Bank v. Davis, 114 N. C. 343, 19 S. E. 280; Ober & Sons Co. v. Cochran, 118 Ga. 396, 45 S. E. 382, 98 Am. St. Rep. 118; N. C. Corp. Com. v. Bank, 137 N. C. 697, 50 S. E. 308, 2 Ann. Cas. 537; Bank v. Coffin, 22 Idaho, 210; 125 P. 816; Sherwood v. Milford State Bank, 94 Mich. 78, 53 N. W. 923; Anheuser-Busch Brewing Ass'n v. Clayton (C. C. A.) 56 F. 759; Citizens' National Bank v. Haynes, 144 Ga. 490, 87 S. E. 399; Lippitt v. Thames Loan & T. Co., 88 Conn. 185, 90 A. 369; Gonyer v. Williams, 168 Cal. 452, 143 P. 736; Schofield Mfg. Co. v. Cochran, 119 Ga. 901, 47 S. E. 208; Young v. Teutonia B. & T. Co., 135 La. 65, 64 So. 983.

First National Bank v. Farmers' State Bank, supra, is practically identical on its facts with the American Bank Case.

We have examined a number of cases which hold that, where the owner of a check gives it to a bank for collection and the bank collects the check, a trust relation arises between the bank and the owner of the check, and the proceeds of the check become a trust fund in the hands of the bank, as to which the owner of the check is entitled to a preference; but in each of these cases the collection was made by the bank not from itself as drawee of the check, but was made from another bank as drawee, thus bringing into the assets of the collecting bank from the other bank the proceeds of the check, and thereby to that extent augmenting the assets of the collecting bank. But even in that sort of cases the courts very generally hold that no trust relation arises, and accordingly deny a right of preference. The reasoning on which the courts proceed in such cases is forcefully stated in Bowman v. First National Bank, supra, as follows:

"It is admitted that when the bank, after having made the collection, placed the money in its vaults as its own and remitted therefor its draft on its New York correspondent, it acted in accordance with the general custom of banks in such transactions,...

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