Phillips v. The Savings Trust Co.

• Decision Date: 10 September 1935
• Docket Number: No. 23755.,23755.
• Citation: 85 S.W.2d 923
• Parties: DOUGLAS ALROY PHILLIPS, BY ALROY S. PHILLIPS, HIS FATHER AND NATURAL GUARDIAN, APPELLANT, v. THE SAVINGS TRUST COMPANY OF ST. LOUIS, MISSOURI, IN CHARGE OF O.H. MOBERLY, COMMISSIONER OF FINANCE OF THE STATE OF MISSOURI, FOR LIQUIDATION, RESPONDENT.
• Court: Missouri Court of Appeals

85 S.W.2d 923

DOUGLAS ALROY PHILLIPS, BY ALROY S. PHILLIPS, HIS FATHER AND NATURAL GUARDIAN, APPELLANT, v. THE SAVINGS TRUST COMPANY OF ST. LOUIS, MISSOURI, IN CHARGE OF O.H. MOBERLY, COMMISSIONER OF FINANCE OF THE STATE OF MISSOURI, FOR LIQUIDATION, RESPONDENT.

No. 23755.

St. Louis Court of Appeals. Missouri.

Opinion filed September 10, 1935.

Appellant's Motion for Rehearing Overruled October 1, 1935.

Petition for Writ of Certiorari Denied by Supreme Court November 20, 1935.

Appeal from Circuit Court of City of St. Louis. — Hon. H.A. Hamilton, Judge.

AFFIRMED.

Alroy S. Phillips, Harry E. Wiehe, John H. Gerling, Joseph L. Simpson, Harry Pohlman, Edwin A. Smith and Bernard Greensfelder for appellant.

(1) A deposit of money held by an insolvent trust company in trust for the depositor is a special deposit which is entitled to preference and priority in payment over the claims of general creditors, where it can be identified or has augmented its assets in the hands of the Commissioner of Finance. 7 C.J. 751-2; Paul v. Draper, 158 Mo. 197, 200-203; State ex rel. Gentry v. Page Bank, 322 Mo. 29, 14 S.W. (2d) 597, 599; Sections 5421 (1), 5423 (8), R.S. 1929. (2) At common law, by coming into possession of appellant's savings with full knowledge of his infancy, respondent Trust Company became chargeable as trustee of appellant's savings and accountable therefor as such, and his claim therefor is entitled to preference. 28 C.J. 1064; 31 C.J. 1012; Tesene v. Iowa State Bank, 186 Iowa, 1385, 173 N.W. 918, 921, 922; Tucker v. Newcomb, 67 Fed. (2d) 177, 179; Stetina v. Bergstein, 204 Mo. App. 366, 370; State ex rel. Stetina v. Reynolds, 286 Mo. 120; Skelly v. The Maccabees, 217 Mo. App. 333, 341. (3) The derivation of Section 5465, R.S. 1929, relating to the deposits of minors in trust companies, shows that such deposits are trusts. (a) In drafting section 5465 the Legislature adopted the language of Section 5502, R.S. 1929. Section 5465, R.S. 1929, and Laws of 1915, Sec. 168, p. 190; Section 5502, R.S. 1929, and Laws of 1891, p. 86. (b) There is a difference between trust companies, banks of deposit and discount and savings banks and especially between the latter two. Sections 5344-5410, 5411-69, 5491-5522, R.S. 1929. (c) Prior to 1865 our Constitution and laws made it unlawful for any corporation to receive money on deposit or do a general banking business except the Bank of the State of Missouri, which restriction was later removed. Constitution of 1820, Article VIII; R.S. 1835, pp. 91, 95; R.S. 1845, ch. 16, Sec. 7; R.S. 1855, ch. 16, Sec. 7; Constitution of 1865, Article VIII; Constitution of 1875, Article XII, Secs. 25-27. (d) Banking institutions were first authorized to receive the deposits of minors in 1866, but this was repealed in 1879. G.S. 1865, Chap. 68, Sec. 15; Laws of 1866 (1865 adjourned session), p. 64; Wagner's Statutes of 1872, Article 6, Chap. 37, pp. 331-32; R.S. 1879. (e) In 1887 mutual savings societies were authorized to receive the deposits of minors, and these were trusts. Laws of 1887, page 86; R.S. 1889, Secs. 2853, 2858, 2864 and 2871. (f) Section 5502, R.S. 1929, is in the Savings Bank Act of 1891, which repealed and took the place of the Mutual Savings Societies Act of 1887, and under it all deposits in such savings banks are trusts. Laws of 1891, p. 86; Sections 5491-5522, 5502, 5496, 5498, 5506 and 5509, Revised Statutes 1929. (g) By adopting the language of Section 5502, Revised Statutes 1929, in Section 5465, R.S. 1929, both relating to the deposits of minors, the Legislature adopted its trust significance. 59 C.J. 1050; 59 C.J. 1065-68; Schott v. Continental Auto Ins. Underwriters, 326 Mo. 92, 31 S.W. (2d) 7, 11. (h) In 1891 trust companies were authorized to receive the deposits of minors, and such deposits created the relation of trustee and cestui que trust, and not that of debtor and creditor. Laws of 1891, p. 99; Sections 2839 and 1427, R.S. 1899, and Section 1124, R.S. 1909; State v. Reid, 125 Mo. 43, 51-52; Muth v. St. Louis Union Trust Co., 88 Mo. App. 596, 601-02; Stone v. St. Louis Union Trust Co., 150 Mo. App. 331, 342; Denny v. Jefferson County, 272 Mo. 436, 446-47. (i) As in 1915 the deposits of minors in savings banks and trust companies were trusts, in enacting Section 5465, R.S. 1929, in that year the Legislature intended to preserve the trust character of such deposits rather than remove it. (4) The words of Section 5465, R.S. 1929, impose a trust on the deposit of a minor in a trust company. Section 5465, R.S. 1929. (a) The statute authorizes a minor, by making the deposit to create a trust of which he is beneficiary, and which he may revoke at will without the consent of the trustee, and such trust are valid. 65 C.J. 234; Davis v. Rossi, 326 Mo. 911, 34 S.W. (2d) 8, 19; 65 C.J. 343-44; Stephens v. Moore, 298 Mo. 215, 226-28, 249 S.W. 601. (b) To create a trust the words "trust" or "trustee" need not be used. 65 C.J. 269; Mendenhall v. Pearce, 323 Mo. 964, 20 S.W. (2d) 670, 675; In re Estate of Soulard, 141 Mo. 642, 662, 664; Van Studdiford v. Randolph (Mo. App.), 49 S.W. (2d) 250, 253-54. (c) In adopting the words that his deposit "shall be held for the exclusive ... benefit of such minor," the Legislature used the very words used by textbook writers and our courts in defining a trust. 65 C.J. 214; Evans v. People's Bank (Mo. App.), 6 S.W. (2d) 655, 656; Corby v. Corby, 85 Mo. 371, 388; Van de Bogert v. Reformed Dutch Church, 219 App. Div. 220, 220 N.Y. Supp. 58, 64; Sections 3135, 3137 and 3138, R.S. Mo. 1929. (d) By using the words that the deposit "shall be held for the exclusive right and benefit of such minor, and free from the control or lien of all other persons," the Legislature established a separate trust estate for the minor. R.S. 1929, Sections 375, 394, 395; Halliman v. Hearst, 133 Cal. 645, 66 Pac. 17, 55 L.R.A. 216, 219. (e) By using words protecting the rights of the creditors of the minor, the Legislature provided against possible invalidity of the trust as prejudicing the rights of creditors. 65 C.J. 234, 239-40, 229, 553-54. (f) The words of the statute are sufficient to impose a trust. Sec. 5465, R.S. 1929; In re Estate of Soulard, 141 Mo. 642, 664; 65 C.J. 231-32. (5) Appellant's claim is preferred because his deposit established a trust ex maleficio. Sections 9569 and 9570, R.S. 1929; Roach v. St. Louis Public Schools, 77 Mo. 484, 486-88; Security National Bank v. Bagley, 202 Iowa, 701, 210 N.W. 947, 949; 56 C.J. 842-43; Section 9580, R.S. 1929; State ex rel. Gentry v. Page Bank, 322 Mo. 29, 35-36, 14 S.W. (2d) 597, 599; Myers v. Board of Education, 51 Kan. 87, 32 Pac. 658; State v. Midland Bank, 52 Neb. 1, 71 N.W. 1011.

Robert J. Keefe for respondents.

Igoe, Carroll, Higgs & Keefe of counsel.

(1) The ultimate question here — as in every case where it is sought to justify a preference in payment of a claim out of the assets of an insolvent bank — is whether title to the money deposited by the claimant passed to the bank. In re Farmers' Exchange Bank of Gallatin (Mo. Sup.), 37 S.W. (2d) 936, l.c. 943, points 6 and 7; Mann v. Bank of Greenfield (Mo. Sup.), 46 S.W. (2d) 874, l.c. 876, point 3. (2) On the face of this contract (and of the transactions under it) the bank took title to the moneys deposited by a appellant. The deposits established a debtor and creditor relationship as between the bank and the depositor. Bank of Republic v. Republic State Bank (Mo. Sup.), 42 S.W. (2d) 27, l.c. 30, point 3 (and cases cited); State ex rel. Am. Central Ins. Co. v. Gehner, 320 Mo. 901, 906, 9 S.W. (2d) 621, l.c. 623, point 5. (3) A minor has capacity to contract. His contract is not void, but merely voidable. He has the privilege of disaffirming it; but, until he does disaffirm it, it remains valid and effective; and, in the meantime, title passed by virtue of it is good title. 14 Ruling Case Law, "Infants," Section 10, p. 223; 1 Williston on Contracts, Section 231, p. 449; Shepley v. Bunn, 125 Mo. 445, 28 S.W. 754, l.c. 755; Pinnell v. St. Louis S.F. Ry. Co. (Mo. Sup.), 263 S.W. 182; Hamlin v. Hawkins (Mo. Sup.), 61 S.W. (2d) 348, l.c. 350, points 3-4. (4) The statutes relating to deposits by minors (sections 5400 and 5465) do not make such deposits trusts. (a) They do not mention "trusts" or "trustee," nor otherwise indicate an intention to create a trust relationship. (b) One of the sections (sec. 5400), being in the same terms as the other, applies only to banks, which have no power to act as trustees.

SUTTON, C.

This is an action to establish as a preferred claim against defendant Savings Trust Company of St. Louis, in charge of O.H. Moberly, as Commissioner of Finance, for the purpose of liquidation, a balance of twelve dollars due plaintiff on a savings account as evidenced by his pass book. Plaintiff charges in his petition as a ground for a preference that he is a minor, and that his claim is based on deposits of money made by him with said Savings Trust Company with its knowledge of his minority.

The cause was tried on an agreed statement of facts, and the court gave judgment allowing plaintiff's claim as a common or general claim, and disallowing a preference. Plaintiff appeals.

The agreed statement of facts is as follows:

"A system of savings deposits by school children was instituted in the public schools of the City of St. Louis as a result of a contract entered into by and between the Board of Education and an organization known as Educational Thrift Service, Inc. The system was inaugurated on May 14, 1929.

"This contract, the original of which is hereby referred to for the exact terms thereof, contemplated that a bank of deposit should be named which would receive the deposits of the children as savings accounts carried in the names of the children and issue pass books to the children therefor.

"The Savings Trust Company was one of the depositories so named. The system followed was this:

"Pass books were issued by...