Poweshiek County v. Merchants' Nat. Bank of Grinnell

• Decision Date: 26 June 1928
• Docket Number: 37754
• Citation: 228 N.W. 32,209 Iowa 467
• Parties: POWESHIEK COUNTY, Appellee, v. MERCHANTS NATIONAL BANK OF GRINNELL et al., Appellants
• Court: Iowa Supreme Court

228 N.W. 32

209 Iowa 467

POWESHIEK COUNTY, Appellee, v. MERCHANTS NATIONAL BANK OF GRINNELL et al., Appellants

No. 37754

Supreme Court of Iowa, Des Moines

June 26, 1928

OPINION ON REHEARING DECEMBER 13, 1929.

Appeal from Poweshiek District Court.--H. F. WAGNER, Judge.

Suit in equity by Poweshiek County against Merchants National Bank of Grinnell and its receiver, to establish as a trust fund in the hands of the receiver $ 19,889.93 alleged to have been deposited by plaintiff's treasurer without authority, in that no bond to secure the deposits was in force at the time the deposits were made.Decree for plaintiff.Defendant appeals.Opinion on former submission reported in 220 N.W. 63 withdrawn.

Reversed.

J. H Patton and Frank Bechly, for appellants.

R. W Boyd and Talbott & Talbott, for appellee.

MORLING, J. ALBERT, C. J., and STEVENS, DE GRAFF, and KINDIG, JJ., concur.WAGNER, J., not participating.

OPINION

MORLING, J.

I.

The receiver petitioned for removal to the Federal court on the ground that the suit involved "matter of the distribution of the assets of a national bank, and is, in effect, one to establish a preference contrary to Federal law."Removal was denied.Plaintiff's petition alleges that $ 19,889.93 of the public funds of the plaintiff was deposited in the defunct bank by plaintiff's treasurer, and that the deposits were unlawful, in that no bond to secure plaintiff against loss on account of them was furnished, as required by statute; that the bank received and held the funds as trustee, and mingled them with its other assets, whereby they became "a part of the moneys, accounts, bills and notes which came into the hands" of the receiver.The prayer is for decree establishing that the fund of $ 19,889.93 is a trust fund, and that the bank and the receiver hold the same as trustee, and directing the receiver to repay the same to plaintiff in full out of the proceeds of moneys, accounts, and bills and notes which came into his hands as such, before any of such funds are paid to depositors or other creditors.

The right to removal at the time the petition for removal was filed depended upon the allegations of plaintiff's petition, the theory of which was that the bank had wrongfully received the plaintiff's money, and had commingled it with its assets; that in its commingled form it had come into the possession of the defendant receiver; that this fund never belonged to the bank, and consequently the receiver never got any title to it.In short, the suit, on the face of plaintiff's petition, was one to recover plaintiff's property from the possession of defendant.The fact that the defendant, as a receiver of a national bank, was an officer of the United States did not render him immune from suit in the state court to recover property to which the bank of which he was receiver and to which he, as receiver, never obtained any title.On the face of the petition, no Federal question was involved.Capital Nat. Bank v. First Nat. Bank, 172 U.S. 425(43 L.Ed. 502, 19 S.Ct. 202).

II.At the time the deposits in question were made, no bond securing their payment to plaintiff was in force.The deposits were, therefore, made without authority, and the bank got no title to funds so deposited.Leach v. Stockport Sav. Bank, 207 Iowa 478, 223 N.W. 171, and cases there cited.It devolves upon the plaintiff to prove that it had funds which were so unlawfully deposited in the bank.Having so proved, and traced its funds into the possession of the bank, and shown that the bank obtained such possession wrongfully, and that funds in the bank such as those deposited have come into the hands of the receiver, the plaintiff, in the absence of countervailing circumstances, is, in this jurisdiction, entitled to the benefit of a presumption that the bank did not dissipate or unlawfully part with the funds which it thus held in trust, but that such funds so coming into the receiver's possession included those belonging to the plaintiff.Idem.Under such circumstances, the burden of going on with the case rests with the receiver, and it is for him to show dissipation by the bank, rather than for plaintiff, under the rule adopted in this jurisdiction, to more specifically trace its funds into some particular fund or property in the hands of the receiver.The question in the final determination of this case is whether, under the evidence and applicable presumptions, the receiver is shown to have in his possession the funds or property of the plaintiff.

The Merchants National Bank finally closed its doors on the evening of October 31, 1924.Plaintiff's treasurer had kept an account with the bank.Proper bond had been given, and was in force apparently up to April 15, 1924.Prior to that date, the surety had refused to renew.The county officials apparently overlooked the absence of a renewal.The claim is for unpaid balance of deposits after April 15, 1924.The method of making these deposits was this: The bank paid taxes and automobile license fees for its customers.The deposit account in question was made up of payments made to the bank for taxes and automobile fees so paid by the bank.The county treasurer testifies:

"The Merchants National Bank, when they wanted to pay taxes, they would send me memorandum of taxes, and from that memorandum I would issue tax receipts and make a deposit slip and send with the tax receipts to the bank.For motor vehicle business, they would send an application signed by the party, and I would issue the certificate of registration and send that and the plates to the party making the application, and send a deposit slip, indicating on that deposit slip the name of the party that the registration was made in * * * I made deposits in other ways than by deposit of items of which I was notified by the bank.I sent them deposits independent and different from that procedure. * * *"

The treasurer testifies that he did not, after April 15, 1924, deposit any cash; that each check deposited was one drawn upon the (now) defunct bank.It is shown that "the great bulk" of taxes so paid were paid by checks of the bank's customers, drawn upon their own accounts in the defunct bank, though occasionally the bank (not the county treasurer) got checks on other banks, and occasionally actual money in payment of taxes.The only evidence of the amount of cash in the possession of the bank at the time the various items of taxes were thus paid and deposits made is a statement in an amendment to the abstract that:

"Exhibits 56 and 56A shows that, from September 29, 1924, to and including October 31, 1924, the least amount of cash on hand in the bank at any time was $ 12,641.49."

Exhibit 56 was merely identified as the general balance book of the Merchants National Bank.Exhibit 56A is the balance sheet of the last day on which the bank was doing business, October 31,...