Peterson v. Porter

• Decision Date: 29 March 1928
• Docket Number: 4971
• Citation: 266 P. 429,46 Idaho 43
• Parties: J. A. PETERSON, Respondent, v. E. W. PORTER, Commissioner of Finance of the State of Idaho, Appellant
• Court: Idaho Supreme Court

266 P. 429

46 Idaho 43

J. A. PETERSON, Respondent, v. E. W. PORTER, Commissioner of Finance of the State of Idaho, Appellant

No. 4971

Supreme Court of Idaho

March 29, 1928

BANKS AND BANKING - CASHIER'S CHECKS - ACTION TO RECOVER PROCEEDS FROM INSOLVENT BANK.

In claim against bank based on cashier's check, evidence held not to show that cashier took claimant's money for a cashier's check which he knew to be worthless or which he had no assurance would be honored when presented for payment and hence claim is classifiable as a "contractual liability," under Laws 1921, chap. 42, sec. 13, subd. 4 and not as a "trust fund," under subdivision 2, on theory that money was obtained by fraud and misrepresentation resulting in trust relation.

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

Claim against insolvent bank. From judgment of district court reversing his classification, the commissioner of finance appeals. Reversed.

Reversed and remanded, with directions. Costs to appellant.

Stephen & North, for Appellant.

A claimant seeking a preference under 1921 Sess. Laws, chap. 42, sec. 13, subd. 2, must establish the trust relationship before he can have his claim preferred. (Cox v. St. Anthony Bank & Trust Co., 41 Idaho 776, 242 P. 785; Fralick v. Coeur d'Alene Bank & Trust Co., 36 Idaho 108, 210 P. 586.)

In the absence of a "trust" relationship a claim against an insolvent bank based on a cashier's check must be classified and paid under 1921 Sess. Laws, chap. 42, sec. 13, subd. 4. (1921 Sess. Laws, chap. 42, secs. 13, 19; In re Citizens' State Bank of Gooding, 44 Idaho 33, 255 P. 300; People v. California Deposit & Trust Co., 23 Cal.App. 199, 137 P. 1111, 1115; Fralick v. Coeur d'Alene Bank & Trust Co., supra.)

S. T. Lowe, for Respondent.

The bank undertook to deliver the respondent cash for the warrant. The cashier's check was accepted by the respondent as cash, and the property in the warrant did not pass from the respondent until he received cash, or its equivalent. (In re Citizens' State Bank of Gooding, 44 Idaho 33, 25 P. 300; Hawarian Pineapple Co., Ltd., v. Browne, 69 Mont. 140, 220 P. 1114; Musco v. United States Surety Co., 132 A.D. 300, 117 N.Y.S. 21; People ex rel. Zotti v. Flynn, 135 A.D. 276, 120 N.Y.S. 511.)

When the bank received the warrant it undertook to assist the respondent in transmitting the money from Burley to Rupert, became the agent of the respondent and the money represented by the warrant was held by the bank in trust for the respondent until the money was actually transmitted to Rupert. (Fralick v. Coeur d'Alene B. & T. Co., 36 Idaho 108, 210 P. 586; In re Citizens' State Bank of Gooding, supra; Peak v. Elliott, 30 Kan. 156, 46 Am. Rep. 90, 1 P. 499; Hubbard v. Alamo Irr. & Mfg. Co., 53 Kan. 637, 36 P. 1053, 37 P. 625; Ryan v. Phillips, 3 Kan. App. 704, 44 P. 909; First Nat. Bank v. State Bank of Portland, 110 Ore. 601, 222 P. 1079; St. Louis v. Johnson, 5 Dill. 241, F. Cas. No. 12,235.)

HARTSON, Commissioner. Babcock, Adair, CC., Wm. E. Lee, C. J., Givens and Taylor, JJ., concurring. Budge, J., dissents. T. Bailey Lee, J., disqualified.

OPINION

HARTSON, Commissioner.--

Respondent filed claim against the Commercial State Bank, an insolvent bank of Burley, Idaho, under Sess. Laws 1921, chap. 42, sec. 13, subd. 2, as a trust fund. The commissioner of finance classified the claim as a contractual liability under subd. 4. The claimant appealed to the district court, where the classification made by the commissioner was reversed and the claim classified as a trust fund. From this judgment the commissioner has appealed.

The record discloses, in substance, that on the afternoon of December 5, 1921, after banking hours, and after the bank's cash had been locked up, the respondent, who was not a depositor of the bank, received from the Burley Highway District its warrant payable to him, in the sum of $ 450. Respondent, being anxious to secure the cash, the secretary of the highway district, by way of assistance, telephoned the bank, where it had an account, and asked if the bank would cash the warrant. The cashier agreed to do so if respondent would come immediately to the bank This he did, presenting the warrant, and telling the cashier he wanted the cash or its equivalent. The cashier sought to induce claimant to deposit the money, but he refused saying he desired the money to take to the First National Bank at Rupert. Then the cashier, of his own motion, delivered to him a cashier's check, which respondent accepted, believing it to be the equivalent of money. Before the check cleared, after deposit the following day in the Rupert bank, the bank at Burley closed. The latter bank, on the day following its receipt of the warrant, received from the highway district its treasurer's check on the Commercial State Bank, in exchange for the warrant, which was canceled paid. The check of the highway district was in turn charged against its account at the bank, and marked paid on that day.

The claimant alleged (a) that there was a deposit for a special purpose, namely, to be transferred to the bank at Rupert, and (b) that the money was obtained by fraud and misrepresentation as to the equivalency of the cashier's check to money, resulting in a trust relation. The evidence does not bear the construction, and the trial court did not find, that there was a special deposit. But the court did find, in effect, that there was a fraud by the bank, and that...