Poweshiek Cnty. v. Merchants' Nat. Bank of Grinnell

• Decision Date: 26 June 1928
• Docket Number: No. 37754.,37754.
• Citation: 220 N.W. 63
• Parties: POWESHIEK COUNTY v. MERCHANTS' NAT. BANK OF GRINNELL ET AL.
• Court: Iowa Supreme Court

220 N.W. 63

POWESHIEK COUNTY

v.MERCHANTS' NAT. BANK OF GRINNELL ET AL.^a1

No. 37754.

Supreme Court of Iowa.

June 26, 1928.

Appeal from District Court, Poweshiek County; H. F. Wagner, Judge.

Action to recover funds alleged to be held in trust by the receiver of the Merchants' National Bank of Grinnell, Iowa.From an order and decree allowing such recovery, the defendants appeal.Reversed.J. H. Patton, of Grinnell, and Frank Bechly, of Montezuma, for appellants.

R. W. Boyd, of Montezuma, and Talbott & Talbott, of Brooklyn, for appellee.

ALBERT, J.

[1][2] Some confusion has crept into the decisions by the use of inaccurate language with reference to the terms “preference” and “preferred claims” in proceedings of this kind.That we may attempt at least to clear up this apparent inaccuracy in the use of the terms, it may be said that a preference can only arise by reason of some statutory provision or some fixed principle of common law which creates a special, superior right in certain creditors over others.It is wholly inaccurate to use the term “preferred claim” when the effort is to secure from the possession of a receiver certain funds which are claimed to be a special deposit, or where it is sought to recover a trust fund.In the latter instance, the claimantsays that the receiver has certain funds in his hands which he is holding in trust for the claimant which claimant is seeking to recover.It is quite apparent, therefore, that in the latter instance it is not a question of preference among various creditors of the insolvent estate, but an effort to secure funds which never, in law, did belong to the estate in the hands of the receiver.

[3] As applied to the case at bar, the county, claimant, is not in fact claiming that it was a depositor in the bank seeking to have a preferential right established over other depositors, but is alleging in its petition that the receiver has funds in his hands which never belonged to the estate of which he is acting as receiver, but which, in law, at all times belonged to the plaintiff.In other words, plaintiff's claim is that the receiver of the defunct bank has in his possession certain funds which he holds under the law as trustee for the plaintiff, and plaintiff asks to recover that fund.

While there is some loose talk in plaintiff's petition, the prayer therein shows that this was the thought of the pleader, for the prayer reads in part as follows:

“Plaintiff prays a decree of this court determining and establishing that the said fund of $19,889.93 belonging to Poweshiek county, Iowa, is a trust fund; that the said bank received the same and said defendant receiver holds the same as trustee, and directing the said receiver to repay the same to plaintiff in full out of moneys, accounts, bills and notes which came into his hands as such receiver,” etc.

It must be concluded, therefore, that this is not a case where a preference is sought or claimed, but an action in equity claiming that the plaintiff is the beneficiary of certain trust funds held by this receiver.

[4][5][6]The defendants, at the proper time, filed a notice and application to transfer this case to the federal court on the ground that the receiver was a federal receiver and the bank a national bank and therefore was governed by the federal law of preference.The court refused to transfer the case, and this is assigned as the first error.

There was no error in this ruling for two reasons:

First.We have settled the proposition that where the assets of a national bank are involved and it has been sued in the state courts, the federal law as to the distribution of assets and preferences controls the disposition of the case(in the state court), regardless of what the state law may be with reference thereto.We so held in the case of Palo Alto County v. Ulrich, 199 Iowa, 1, 201 N. W. 132.This was the exact holding of the United States Supreme Court in the case of Davis v. Elmira Savings Bank, 161 U. S. 275, 16 S. Ct. 502, 40 L. Ed. 700.

Second.The identical question here being the recovery of a trust fund, it was held in Capital National Bank of Lincoln, Neb., v. First National Bank of Cadiz, Ohio, 172 U. S. 425, 19 S. Ct. 202, 43 L. Ed. 502, that in an action of this character, no federal question was involved.That court said:

“The contention of plaintiff was that the Capital National Bank had money in its hands which belonged to plaintiff, did not belong to the bank, had never formed part of its assets, and was held by the bank in trust for plaintiff.The right to the money was considered by the trial court in the light of general equitable principles applicable on the facts, and the court adjudged that the money constituted a trust fund to which plaintiff was entitled.The decision did not purport to affect the assets of the bank, or attempt to direct the distribution thereof, or in any way to interfere with the disposition of assets actually belonging to the bank; nor did it affect the receiver as receiver; or his appointment or authority under the banking act.As the trial court found that certain moneys held by the bank in trust for plaintiff had come into the receiver's hands, he was directed to return them, for he had no stronger title to the trust fund as against the plaintiff than the bank had.”

Later in the opinion, it is said:

“We know of no provision of the Banking Act which assumes to appropriate trust funds in the possession of insolvent banks, or other property in their possession to which they have no title, and it is clear that the state courts had jurisdiction to determine whether this money was or was not a trust fund belonging to plaintiff.”

Under this doctrine it is apparent that the court did not err in refusing to transfer this case to the federal court.

[7] The dominating question left in the case therefore is whether or not the plaintiff has sustained its burden of establishing that the receiver has in his possession funds that he holds in trust for the plaintiff, and as this case has to do with the receiver of a national bank, this question must be determined under the federal holdings in similar cases.Lucas County v. Jamison (C. C.)170 F. 338.

The Merchants' National Bank of Grinnell was a corporation organized under the United States Banking Act, doing a general banking business.One W. C. McKee, treasurer of Poweshiek county, filed a depository bond on April 17, 1922, with the county auditor, which was later approved by the board of supervisors, in the sum of $50,000, on which the American Surety Company, was surety.On April 17, 1923, a continuation certificate of this bond was filed with the county auditor continuing the bond in force until April 15, 1924.There was no further continuation or...