Pethybridge v. First State Bank of Livingston

• Decision Date: 18 January 1926
• Docket Number: 5804.
• Parties: PETHYBRIDGE v. FIRST STATE BANK OF LIVINGSTON et al.
• Court: Montana Supreme Court

243 P. 569

75 Mont. 173

PETHYBRIDGE v. FIRST STATE BANK OF LIVINGSTON et al.

No. 5804.

Supreme Court of Montana

January 18, 1926

Appeal from District Court, Park County; H. J. Miller, Judge.

Action by W. H. Pethybridge, as guardian of the person and estate of Edward Champion, an incompetent person, against the First State Bank of Livingston and another, to compel the allowance of an amount on deposit at the time of the bank's insolvency as a preferred claim. From a judgment for defendants, plaintiff appeals. Affirmed.

Gibson & Smith, of Livingston, for appellant.

O'Connor & Miller, of Livingston, for respondents.

MATTHEWS J.

The plaintiff, as guardian of one Ted Champion, an incompetent person, commenced this action against the defendant bank and one Bodine, its receiver, to compel the allowance of the amount he had on deposit at the time the bank closed its doors, as a preferred claim. Issue was joined, and the evidence submitted to a referee, who made findings thereon and submitted them to the court. The court adopted certain of the findings, and rejected others, and, from the findings finally made, concluded as a matter of law that the claim of plaintiff should be allowed, but merely as that of a general creditor. Judgment was entered accordingly, and from this judgment plaintiff has appealed. There is no conflict in the evidence and no dispute as to the facts.

On June 23, 1917, plaintiff opened a "savings account" with the defendant bank, with the privilege of checking against it. No certificate of deposit was issued to him, and the account differed from the usual checking account only in that the bank agreed to pay interest on balances, and carried the account under the title "William Pathybridge, Guardian of Ted Champion." The money deposited was commingled with other funds of the bank. Thereafter the account was from time to time increased or diminished by deposits and withdrawals, until, in the latter part of the year 1921, the bank became insolvent and closed its doors, at which time plaintiff's balance amounted to $626.66.

In January, 1922, the bank reorganized by securing a creditors' agreement, which was signed by this plaintiff and under the terms of which the plaintiff agreed to accept a certificate of deposit for the amount of his balance, payable in one year, with the privilege, at the option of the board of directors of the bank, of renewing the same for a second year. Such a certificate was thereafter issued by the bank but was never delivered, as plaintiff never surrendered his original deposit book or evidence of indebtedness. Plaintiff signed the "creditors' agreement" without first obtaining authority of the court having control over the guardianship matter.

The reorganization of the bank was unsuccessful, and, on June 23 1923, it again closed its doors, and defendant Bodine was duly appointed receiver. The only cash coming into the hands of the receiver was the sum of $1,752.51.

Plaintiff makes 30 assignments of error, based upon the rejection and adoption of the several findings of the referee, upon the conclusions of law drawn therefrom, and upon the entry of judgment in favor of defendant and against plaintiff, which it is not necessary to set forth in this opinion, as they raise but the question of the nature of the deposit and the right of the plaintiff to preference. His contentions are:

(1) That, as plaintiff was a guardian dealing with his ward's money, which fact was known to the bank, the deposit was special and not general.

(2) That, as the deposit was by agreement to draw interest, it constituted a special deposit.

(3) That the deposit on time, in 1923, under the creditors' agreement, was a loan to the bank, without security, of trust funds, and without authority of court, of which facts the bank was chargeable with notice, and therefore that the guardian acted illegally with the connivance of the bank, and under such circumstances the bank is an involuntary trustee of the trust funds.

1. The trust relation, which will impress upon a deposit the character of a special deposit, is not the relation existing between the depositor of a trust fund and his cestui que trust, but that existing between the bank and the depositor. There are but two kinds of deposits-those where the bank becomes a trustee for the depositor, by special agreement or through circumstances sufficient to create a trust, and general deposits, where the bank merely becomes a debtor of the depositor, and, in the absence of such contract or circumstances, a deposit will be deemed a general deposit. Carlson v. Kies, 75 Wash. 171, 134 P. 808, 47 L. R. A. (N. S.) 317; Kies v. Wilkinson, 101 Wash. 340, 172 P. 351; Bank of Blackwell v. Dean, 9 Okl. 626, 60 P. 226; Schofield Mfg. Co. v. Cochran, 119 Ga. 901, 47 S.E. 208.

The position of guardian is one of trust and not of agency. 12 R. C. L. 1123. "The relation of a guardian, and ward is confidential, and is subject to the provisions of this code relative to trusts" (section 5882, Rev. Codes 1921), and the funds coming into the hands of the guardian are therefore, as between the guardian and the ward, trust funds, which the guardian is by law required to "keep safely" (section 5881). There is no provision in our Code for the deposit of funds coming into the hands of the guardian, but the guardian is chargeable with the care and maintenance of his ward, and the payment of just debts contracted out of the ward's personal estate and the income from real property, if sufficient (sections 10414 and 10417, Rev. Codes 1921), and for this purpose it is necessary to retain under the control of the guardian a sufficient sum to discharge these obligations as they arise, and common custom and usage, and the exercise of that degree of care required in the handling of trust funds, would dictate that money kept on hand for this purpose should be deposited in a reliable bank, and, where a trustee has exercised due care in the selection of the depository, it cannot be said that he has either violated the law or his trust. Thus, in the Matter of the Estate of William Law, a Minor, 144 Pa. 499, 22 A. 831, 14 L. R. A. 103, it is said:

"Banks of deposit are a recognized necessity in the commercial world. A trustee who would continuously keep, for any considerable length of time, a large sum of money about his person or in his house, rather than deposit it for safe-keeping in a solvent and reputable bank or trust company, where all the precautions may be exercised for its safety, might justly be regarded as derelict in dury. No one would be accredited with the exercise of common prudence who would keep his own money in this way."

In a note to the above case (14 L. R. A. 103) it is stated that "some right to deposit trust funds in bank with the accompanying freedom from liability for its loss is universally recognized." Among the cases cited in support of the above statement is that of Churchill v Hobson, 1 P. Wms. 243, holding that, if the deposit is made from...