Montana-Dakota Power Co. v. Johnson

• Decision Date: 08 July 1933
• Docket Number: 7141.
• Citation: 23 P.2d 956,95 Mont. 16
• Parties: MONTANA-DAKOTA POWER CO. v. JOHNSON, Superintendent of Banks.
• Court: Montana Supreme Court

23 P.2d 956

95 Mont. 16

MONTANA-DAKOTA POWER CO. v. JOHNSON, Superintendent of Banks.

No. 7141.

Supreme Court of Montana

July 8, 1933

Appeal from District Court, Sheridan County; S.E. Paul, Judge.

Action by the Montana-Dakota Power Company against Frank H. Johnson Superintendent of Banks of the State of Montana and liquidating officer of the Farmers' & Merchants' State Bank of Plentywood, an insolvent banking corporation. From a judgment allowing the plaintiff's claim as a general claim only, the plaintiff appeals.

Affirmed.

Hildebrand & Warren, of Glendive, for appellant.

Howard M. Lewis, of Plentywood, for respondent.

MATTHEWS Justice.

The plaintiff furnishes light and power to the people of Plentywood. In November, 1930, it employed the Farmers' & Merchants' State Bank to collect its monthly bills and instructed the cashier of the bank to keep a record of daily collections made on blank "collection statements" furnished, to which the "stubs" from customers' bills should be attached as the bills were paid, and directed that each third day the collection statement should be mailed to the plaintiff's office at Williston, N. D., with a draft for the full amount collected during the period. The plaintiff was not a depositor, and neither party intended that it should become a depositor under the arrangement made. For the services rendered the plaintiff agreed to pay the bank $25 per month and postage used.

For a time after assuming its duties, the bank placed the receipts from collections, whether in the form of money, checks, or debit slips against depositors, in a cigar box, and, for the total of each day's receipts, made a cashier's check to itself as "collection agent," but, finding this method inconvenient, it was abandoned in December, 1930, and thereafter all collections were deposited and deposit slips made in the name of the plaintiff, to which was assigned a page in the bank's ledger, headed "Collection Acc't," and on which collections were entered as "deposits" and remittances as "checks and charges." The plaintiff was not advised at any time as to how the bank handled the funds, nor did it give any direction on the subject.

On July 3, 1931, the bank forwarded its draft for $19.08 and on July 6, one for $82.04; on July 7 it collected $253.76, and on July 8, $286.19. It closed its doors on July 9. The drafts mentioned were received by the plaintiff and presented in due course July 11, but were, of course, not paid. The state superintendent of banks became the liquidating agent of the bank, and, in due time, the plaintiff filed with him its claim and demanded that it be allowed as a preferred claim. Affidavits and counter affidavits as to the agreement between the parties were filed, and on the proof adduced the claim was allowed only as a general claim.

This action was instituted to compel the allowance of plaintiff's claim as a preferred claim. Evidence was introduced, and thereon the trial court made findings to the effect that the bank received payment of accounts due the plaintiff in specie, checks, and by deductions from deposits that there was no agreement that these actual collections be forwarded, but rather that the total be remitted by draft whereas the money, checks, and credits went into the general fund of the bank and were used by it in its general business. On these findings the court declared, as a matter of law, that the superintendent of banks had correctly ruled, and that the plaintiff was not entitled to preference. Judgment allowing the claim as a general claim followed. The plaintiff has appealed from the judgment. The only question presented is as to whether or not, on the undisputed facts, the court erred in its conclusion of law and judgment.

In cases such as this, "the claimant for the preference must establish three coexisting conditions: (a) That the transaction created the relation of principal and agent--not creditor and debtor ***; (b) that by the transaction the assets of the bank were augmented; (c) ability to trace the trust funds into the possession of the bank." McDonald v. American Bank & Trust Co., 79 Mont. 233, 255 P. 733, 734. As there is no question but that the bank collected the amounts claimed, and it is conceded that the money so collected was on hand and in the bank at the time it closed its doors, conditions (b) and (c) were met.

(a) In an ordinary collection transaction, the party from whom the collection is being made is the principal and the collecting bank the agent for the purpose of collecting the amount due; the former cannot expect to be credited with the amount until it is paid, and, until then, the relation of principal and agent continues. State ex rel. Rankin v. Banking Corporation, 74 Mont. 491, 241 P. 626; State ex rel. Kelly v. Farmers' State Bank, 54 Mont. 515, 172 P. 130.

"As a general rule, after the collection *** has been made, the bank becomes a simple contract debtor for the amount *** and does not hold the proceeds as agent in trust for the depositor." If the party for whom the collection is made is a depositor in the bank, the sum will be placed to his credit, in the absence of special instructions on the subject, but the fact that the party contracting for the collection is not a depositor does not alter this rule, for "if the party has no deposit account, the bank simply owes him the amount on demand." 2 Michie on Banks & Banking, 1416; Tinkham v. Heyworth, 31 Ill. 519. Whether or not this retrogression from the relation of principal and agent to that of creditor and debtor takes place, depends upon whether or not the money was deposited in the collecting bank, and, if so, on the nature of the deposit. Peters Shoe Co. v. Murray, 31 Tex.Civ.App. 259, 71 S.W. 977.

If the principal directs that the proceeds be forwarded in specie there is, of course, no deposit to be made, and if, in violation of its instructions, the bank deposits the money, the deposit is special, and the bank remains the agent holding the fund in trust. American Can Co. v. Williams, 178 F. 420, 101 C. C. A. 634; Hutchinson v. Bank, 145 Ala. 196, 41 So. 143; Continental National Bank v. Weems, 69 Tex. 489, 6 S.W. 802, 5 Am. St. Rep. 85. So also, if the fact is clear that it was the intention of the parties that the proceeds of the collection must be remitted immediately on receipt, the bank...