Pacific States Savings & Loan Co. v. Commercial State Bank

• Citation: 269 P. 86,46 Idaho 481
• Decision Date: 10 July 1928
• Docket Number: 4966
• Parties: PACIFIC STATES SAVINGS AND LOAN COMPANY, a Corporation, Respondent, v. COMMERCIAL STATE BANK, a Corporation, and E. W. PORTER, Commissioner, Appellants
• Court: Idaho Supreme Court

269 P. 86

46 Idaho 481

PACIFIC STATES SAVINGS AND LOAN COMPANY, a Corporation, Respondent, v. COMMERCIAL STATE BANK, a Corporation, and E. W. PORTER, Commissioner, Appellants

No. 4966

Supreme Court of Idaho

July 10, 1928

BANKS AND BANKING-DEPOSITS-TRUST FUNDS.

1. Where abstract company as agent of another loaning money on real estate made collections for its principal which it deposited in bank in so-called safekeeping only, under an agreement for at least monthly remittances of the amount deposited to the principal, held such deposit was not a special deposit or trust fund, nor did it establish a fiduciary relation entitling principal to preferred claim under Laws 1921, chap. 42, sec. 13, subd. 2, of amount thereof on insolvency of bank.

2. An agreement to accept trust funds for safekeeping is not sufficient to stamp them as a special deposit entitled to preference on depositary's insolvency.

3. The essential characteristics of a trust are the separation of the legal and the beneficial interests and the existence of a fiduciary relationship.

APPEAL from the District Court of the Eleventh Judicial District for Cassia County. Hon. T. Bailey Lee, Judge.

Suit by Pacific States Savings and Loan Company, a corporation against the Commercial State Bank and another, to compel classification of a claim against the insolvent bank. Judgment for plaintiff and defendants appeal. Reversed.

Judgment reversed. Costs to appellants.

Stephan & North, for Appellants.

Whether a deposit in a bank is general or special is to be determined by the mutual intentions of the parties as evidenced by the contract and the conduct of the parties. (Fogg v Tyler, 109 Me. 109, Ann. Cas. 1913E, 41, 82 A. 1008, 39 L. R. A., N. S., 847; 7 C. J. 630, par. 306; Marine Bank v. Fulton Bank, 2 Wall. 252, 17 L.Ed. 785; People v. California Safe Deposit & Trust Co., 23 Cal.App. 199, 137 P. 1111; Fralick v. Coeur d' Alene Bank & Trust Co., 36 Idaho 108, 210 P. 586.)

A deposit in a bank is not a special deposit unless it is intended that the identical thing deposited shall be returned to the depositor. (First Nat. Bank v. Stringfield, 40 Idaho 587, 235 P. 897; Marine Bank v. Chandler, 27 Ill. 525, 81 Am. Dec. 249; Butcher v. Butler, 134 Mo.App. 61, 114 S.W. 564; People v. California Safe Deposit & Trust Co., supra; Russell v. Bank of Nampa, Ltd., 31 Idaho 59, 169 P. 180; 7 C. J. 630, par. 306; Anderson v. Pacific Bank, 112 Cal. 598, 53 Am. St. 228, 44 P. 1063, 32 L. R. A. 479.)

A deposit will be deemed to be general unless made special by agreement, and the burden of proving that it is special rests on the depositor. (Fralick v. Coeur d' Alene Bank & Trust Co., supra; Bank of Blackwell v. Dean, 9 Okla. 626, 60 P. 226; Bank of Marysville v. Brewing Co., 50 Ohio St. 151, 40 Am. St. 660, 33 N.E. 1054.)

Where deposits of checks are made in a bank with the understanding that the bank is to collect the checks and the depositor is given permission to thereafter draw upon the account by check or draft the deposits are general. (86 Am. St. 775, 782, 786, 796, 797, and cases cited in notes; 7 C. J. 616, 635; 1 Morse on Banks and Banking, sec. 248; Akin v. Jones, 93 Tenn. 353, 42 Am. St. 921, 27 S.W. 669, 25 L. R. A. 523; First National Bank of Richmond v. Davis, 114 N.C. 343, 41 Am. St. 795, 19 S.E. 280.)

C. W. Thomas, for Respondent.

It is not necessary, in order to create a trust fund, that the identical thing deposited be held intact for delivery. (Fralick v. Coeur d' Alene B. & T. Co., 36 Idaho 108, 210 P. 586; 7 C. J., pp. 631-633; In re Citizens' Bank of Gooding, 44 Idaho 33, 255 P. 300; Carlson v. Kies, 75 Wash. 171, 134 P. 808, 47 L. R. A., N. S., 317; Secrest v. Ladd, 112 Kan. 23, 209 P. 824; Kansas Flour Mills Co. v. New State Bank of Woodward, 124 Okla. 185, 256 P. 43; Hawaiian Pineapple Co., Ltd., v. Browne, 69 Mont. 140, 220 P. 1114; Goodyear Tire & Rubber Co. v. Hanover State Bank, 109 Kan. 772, 21 A. L. R. 677, 204 P. 992; Toveria & Co. v. Degnan, 27 Ariz. 539, 234 P. 821; note, 86 Am. St., pp. 582, 738.)

A trust fund for a specific purpose may be checked against and still retain its trust character. (Smith v. Sanborn State Bank, 126 Iowa 640, 140 Am. St. 340, 126 N.W. 779, 30 L. R. A., N. S., 517; Morton v. Woolery, 48 N.D. 1132, 24 A. L. R. 1107, 189 N.W. 232; Secrest v. Ladd, supra; Lamb v. Ladd, 112 Kan. 26, 209 P. 825; Central Bank & Trust Co. v. Ritchie, 120 Wash. 160, 206 P. 926; Hitt Fire Works Co. v. Scandinavian Am. Bank, 114 Wash. 167, 195 P. 13, 196 P. 629; Dolph v. Cross, 153 Iowa 289, 133 N.W. 669.)

GIVENS, J. Wm. E. Lee, C. J., and Taylor, J., concur. T. Bailey Lee, J., disqualified. BUDGE, J., Dissenting.

OPINION

GIVENS, J.--

Respondent brought action against the Commercial State Bank, insolvent, and the state commissioner of finance in charge thereof, to compel classification of a claim against the bank as a trust fund under 1921 Sess. Laws, chap. 42, sec. 13, subd. 2, instead of classification as a general deposit under subd. 3.

Respondent was engaged in loaning money on city property in Burley and was represented in 1921 by the Title Abstract Company of Burley, which acted as its agent in making collections of money and checks and depositing them in the bank. On or about July 15, 1921, the abstract company and the bank entered into the following agreement:

"To Commercial State Bank:

"This is to certify that the account in your Bank carried in the name of the Pacific States Savings and Loan Company of San Francisco, Title Abstract Company, Trustee, is a collection account, being the amount collected by us for the above named Company, and is the property of said Company.

"That said sum will be checked out by us in full on or before the 20th of each month.

"That all money so placed with your bank is for safekeeping only--shall not be considered as entitling us or the Pacific States Savings and Loan Company to any commercial credit.

"Furthermore, in case of our absence or inability to act, you are authorized and instructed to forward to the Pacific States Savings and Loan Company, 550 California street, San Francisco, California, on the 23rd of each month, or at any other time on their written request, any balance standing to the credit of this account, less one per cent (1%) collection charges.

"(Signed) TITLE ABSTRACT COMPANY,

"Trustee for Pacific States Savings and Loan Company.

"By E. C. DAVIS.

"Approved this 15th day of July, 1921.

"COMMERCIAL STATE BANK.

"By M. A. ROSS,

"Cashier."

At the time the bank closed there was a balance in the deposit of $ 396.37. The individual ledger sheet shows that the account was opened August 10, 1921, under the name, "Title Abstract Company, Trustee for Pacific States Savings and Loan Company," with a balance of $ 252.92. Other deposits were made from time to time and all, or within a few cents of each month's deposit, remitted monthly by check drawn by the Title Abstract Company to the Pacific States Savings and Loan Company.

The bank collected all checks deposited. The withdrawal checks were drawn by the abstract company, payable to respondent and forwarded to it by the abstract company. A one per cent collection charge was paid to the abstract company but the bank did not receive any compensation for handling the account. When money was deposited, it was not set aside as a special deposit, but the funds were mingled with the general funds of the bank. At the time remittances were made to respondent, the specific money deposited was not forwarded, nor was any demand made upon the bank to do so. The cash in the bank, at all times during its existence, and at the time of its suspension, was largely in excess of respondent's balance.

The trial court found for the respondent and ordered the claim classified as a trust fund.

The Title Abstract Company, in making the deposits, was acting as agent for the respondent, the Pacific States Savings and Loan Company. The transaction, in effect, involved simply the transfer of funds from the local office of the Pacific States Company to its main office in California. The Pacific States Company, through an agent, deposited the funds and the Pacific States Company withdrew them.

It is quite clear from the agreement of the parties that no special deposit was intended and the record establishes that no such deposit, in fact, was effected. The identical money deposited was not kept separate from the general funds of the bank but was freely commingled. An agreement to accept funds for "safekeeping" is not sufficient to stamp them as a special deposit. In Mississippi Central R. R. v. Conner, 114 Miss. 63, 75 So. 57, a case very similar to the case at bar, it was held that deposits by an agent for safekeeping to be regularly remitted to the principal were not to be classified as special deposits or entitled to preference as a trust fund.

It is urged, however, that the deposit was for a specific purpose and hence should receive preference as a trust fund. The essential characteristics of a trust are the separation of the legal from the beneficial interest and the existence of a fiduciary relationship. We fail to find either in this instance.

When the Pacific States Company deposited its funds in appellant bank for the purpose of safekeeping and immediate withdrawal, to be remitted to itself in California, it became a general depositor, and a simple creditor of the bank. It may be said that all funds are deposited in banks for a specific purpose, namely, to be kept safely and eventually withdrawn. But this is not sufficient to impress on them the character of a trust. Title to funds so deposited passes to the bank and that title draws with it the legal and equitable ownership of them. It was so in this case.

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