Perry Bank & Trust Co. v. Riggins

• Decision Date: 28 February 1930
• Citation: 25 S.W.2d 386,233 Ky. 257
• Parties: PERRY BANK & TRUST CO. et al. v. RIGGINS et ux.
• Court: Kentucky Court of Appeals

25 S.W.2d 386

233 Ky. 257

PERRY BANK & TRUST CO. et al. v. RIGGINS et ux.

Court of Appeals of Kentucky

February 28, 1930

Appeal from Circuit Court, Perry County.

Suit by Dr. N. G. Riggins and wife against the Perry Bank & Trust Company and another. Judgment for plaintiffs and defendants appeal. Reversed, with directions.

J. W Craft, of Hazard, for appellants.

Jesse Morgan, of Hazard, for appellees.

GRIGSBY J.

On November 13, 1928, appellee Dr. N. G. Riggins had on deposit in savings account in Perry Bank & Trust Company $8,310, and in addition had on deposit in his checking account sixty or seventy dollars. This savings account deposit originated in the Perry County State Bank on December 31, 1925, by a deposit of $4,000 being made. The Perry County State Bank was merged with the Perry Bank & Trust Company about May 15 1928, and appellee Dr. N. G. Riggins continued to deposit in the Perry Bank & Trust Company until on the 13th day of November, 1928. On that day, and during banking hours, Dr. N G. Riggins obtained a cashier's check for $8,000. This check was made payable to his wife, Mrs. N. G. Riggins, the check is in words and figures as follows:

"73--379 No. 12375--Perry Bank & Trust Co.

Hazard, Ky. 11/13/28.

Pay to the order of Mrs. N. G. Riggins, $8,000.00 eight thousand and 00 cts. dollars

Cashier's Check.

J. I. Dempsey, Cashier."

The transaction is fully explained in the deposition of appellee, Dr. N. G. Riggins in the following questions and answers:

"Q. Now if you had a transaction with the Perry Bank & Trust Company on the 13th day of November 1928 tell the court just what it was? A. I got a cashier's check of $8,000.00 from that bank which left a balance in the savings account of $310.00 shown by the savings account book which I hold in my hand. This check was made payable to my wife, Mrs. N. G. Riggins. ***

Q. Now will you tell the court just what you did to obtain this check of $8,000.00 payable to your wife from the cashier? A. I took my savings account with me to the bank and told Mr. Dempsey that I wanted a cashier's check for $8,000.00 and gave him my savings account book. He took my book and in the withdrawal column put $8,000.00 and then wrote me a cashier's check for $8,000.00 and gave me the check and the bank book."

The record discloses that this cashier's check was sent to appellee Mrs. N. G. Riggins by United States mail to Knoxville, Tenn., and was on November 15, 1928, deposited to her credit in the East Tennessee National Bank. The East Tennessee National Bank in turn sent it to the National Bank of Kentucky in due course and on November 16, 1928, the National Bank of Kentucky returned it with the notation, "Bank reported closed." It appears that on November 16, 1928, the Perry Bank & Trust Company did not open for business and on that day was placed in the hands of F. L. Cisco, special banking commissioner and liquidating agent for that bank. The appellee Mrs. N. G. Riggins presented her claim properly verified to the special banking commissioner, claiming the cashier's check of $8,000 was a preferred claim. The banking commissioner rejected this preference. Suit was instituted in the Perry circuit court by appellees, Dr. N. G. Riggins and Mrs. N. G. Riggins, as plaintiffs, to recover of the defendants, Perry Bank & Trust Company and F. L. Cisco, as special banking commissioner, for the sum of $8,000, with interest thereon from the 13th day of November, 1928, until paid, and it was further sought to have this sum adjudged a preferred claim against the assets. On final submission of the case the trial court sustained the plaintiffs' contention and rendered judgment in favor of plaintiffs, who are appellees here, for the sum of $8,000, with interest from the 13th day of November, 1928, until paid, and further adjudged and decreed same to be a preferred claim. From his judgment defendants appeal.

It is shown that, at the time F. L. Cisco took charge of said bank as special banking commissioner there was cash in vault $25,023.18, and also other cash items of $3,808.79, and that the other resources of the bank, including cash in vault and cash items, amounted to $1,384,986.71. The liabilities of the bank, including capital stock and surplus, equaled the resources, and included the cashier's checks of $18,249, $8,000 of which is the cashier's check of appellees. It is claimed by appellee Dr. N. G. Riggins that the $8,000 represented by the cashier's check all or a part of it was to be used by his wife as she saw fit in buying a home in Knoxville, Tenn. However, the record does not show that the cashier, J. I. Dempsey, or any of the officials of the Perry Bank & Trust Company, was told the purpose for which the $8,000 was to be used. It further appears from the record that no written notice was given of the intention to withdraw this $8,000 from the savings account nor had any written notice been given the bank when previous withdrawals were made from this savings account. It is testified to by Dr. Riggins that he told Prentice Baker, who was working at the bank, that he would need probably most of the money, but does not claim that he told him the purpose for which it was to be used, and that Baker said, "O. K."

This case is well and exhaustively briefed by the attorneys for appellants and appellees respectively, yet no case exactly in point from Kentucky has been called to our attention. Also, after an exhaustive examination of the authorities by this court, independent of the briefs, we have been unable to find a Kentucky case exactly in point. The appellees earnestly insist that the case of First National Bank of Hazard v. Barger et al., 115 S.W. 726, 728 (there being no Kentucky report), is authority in this case. In the above-cited case, S. C. Colwell was indebted to the Hazard Bank in the sum of $535, and while owing this amount to the bank, he issued checks against the Hazard Bank amounting to $1,144.15. He had no money on deposit there, and on the next day went to Irvine, Ky. and there obtained a check for $1,144.15. This check was payable to himself, and was the exact amount of the total of the checks he had issued. While in Irvine, he saw C. G. Bowman, president of the Hazard Bank, gave the check to him, with direction to place to his credit in the Hazard Bank, at the same time telling him that he had drawn some checks on the Hazard Bank and that this deposit was to meet these checks. The Hazard Bank gave Colwell credit for the $1,144.15 and charged him with the balance on their judgment, to wit, $535. After this deduction, there was not enough to pay all the checks issued against the fund of $1,144.15. In that case the court held: "The law is that, if a bank receives a general deposit from one who is indebted to it, the bank has the right to charge the depositor's account with such indebtedness; but if the bank receives a deposit with notice that it is made for the purpose of meeting outstanding checks drawn by the depositor, it has no right to charge the depositor's account with sums due it by the depositor, and thus defeat the person holding the outstanding claims from collecting their checks. This rule applies only when the bank has notice of the previous appropriation of the sum deposited, or, in other words, that it is a special deposit to meet outstanding checks issued by the depositor."

It will be observed that in the Hazard Bank Case the bank had notice of the purpose for which this deposit was made, that the deposit of the check increased the assets of the Hazard Bank to the amount of $1,144.15, and that the Hazard Bank, through its president, received this deposit with the knowledge that it was to be used for a specific purpose; that is, to pay the outstanding checks recently given. It will be further noted that the question in that case was between the bank who held the judgment and the holders of this specific check, and was not a question of preference between the creditors of the bank. While in the instant case the Perry Bank & Trust Company, while it knew that the cashier's check was issued, yet it was not notified of any specific purpose for which this fund was to be used.

Appellees also rely on Farmers' Bank of White Plains et al. v Bailey et al., 221 Ky. 55, 297 S.W. 938. In that case W. N. Bailey et al. were the owners of bonds in varying amounts aggregating about $19,500, which they deposited with the bank for safe-keeping. When the bonds were deposited, the bank delivered to each of the owners a certificate reciting that the bond or bonds would be returned to the depositors on the surrender of the certificate properly indorsed. The bank, without authority from any of the owners, sold the bonds and placed the proceeds in the fund known as the "emergency fund." However, the proceeds were not kept separate from the other funds of the bank. In that case the court held that, inasmuch as the particular bonds were to be returned to the owners, this was a special deposit and that the relation between the bank and each of the bondholders was that of the bailee and bailor and not that of debtor and creditor; hence, when the bank fraudulently sold the bonds and converted the proceeds to its own use, a constructive trust in favor of the bondholders was created. The facts in the Bailey Case were so dissimilar to the facts in the case under...