School Dist. No. 61 of Platte County v. Railey & Bro. Banking Co.

• Decision Date: 21 November 1932
• Citation: 55 S.W.2d 699,227 Mo.App. 543
• Parties: SCHOOL DISTRICT NO. 61 OF PLATTE COUNTY, MISSOURI, RESPONDENT, v. RAILEY & BROTHER BANKING CO., S. L. CANTLEY, COMMISSIONER OF FINANCE ET AL., APPELLANTS
• Court: Kansas Court of Appeals

55 S.W.2d 699

227 Mo.App. 543

SCHOOL DISTRICT NO. 61 OF PLATTE COUNTY, MISSOURI, RESPONDENT, v. RAILEY & BROTHER BANKING CO., S. L. CANTLEY, COMMISSIONER OF FINANCE ET AL., APPELLANTS

Court of Appeals of Missouri, Kansas City

November 21, 1932

Appeal from Circuit Court of Platte County.--Hon. Guy B. Park Judge.

AFFIRMED (conditionally).

Judgment affirmed.

C. A Leedy, Jr., for respondent.

Brown Douglas & Brown for appellant.

BOYER, C. Campbell, C., concurs.

OPINION

BOYER, C.

This is an appeal from a judgment of the circuit court by which a priority demand in the sum of $ 5456.14 was allowed and ordered paid out of the assets of a failed bank in the hands of the commissioner of finance and his special deputy commissioner. Railey & Brother Banking Company, hereinafter referred to as the bank, passed to the hands of the commissioner of finance in July, 1930, for liquidation. The claimant is a town school district governed by the provisions of the statute set forth in Article 4, Chapter 57, Revised Statutes 1929. At the time the bank failed, and for an indefinite period prior thereto, one E. M. Hardesty was the president of the bank and also the selected treasurer of the school district. He was re-elected to the position of treasurer of the district on July 8, 1929, which was the last election of officers prior to the time the bank closed. Certain moneys of the district were deposited from time to time by said treasurer in the bank and said deposits were received and treated by the bank as general deposits and like the deposits of any other customer. The account on the ledger of the bank was in the name of "Treasurer, School District No. 61." When the bank closed this account showed a balance to the credit of the district in the sum of $ 3956.14, and within time the succeeding treasurer of the school district filed a claim with the liquidator for said sum and demanded preference thereon. The liquidator allowed the claim as a common claim and certified it to the circuit court for disposition on the question of preference. When the claim came on to be heard in the circuit court and at the close of the evidence, the claimant requested and the court allowed, over the objection of defendants, an amendment of said claim increasing the amount thereof in the sum of $ 1500, which made the total claim $ 5456.14. The amendment to the claim was not requested or made until after the lapse of time for filing claims designated by the notice of the liquidator and by statute. The claim was allowed for the full amount and ordered to be paid prior to the payment of general creditors.

It is conceded by appellants, and the evidence shows, that Hardesty, as treasurer of the school district did not give any bond as required by law, section 9335, Revised Statutes 1929; and the board of education of said district did not at any time advertise for bids for the deposit of school funds and did not select the bank in question as a depository of its funds as required by section 9362, Revised Statutes 1929. Under such circumstances it is agreed that whatever funds of the school district were in the bank at the time it closed and passed to the commissioner of finance were trust funds, and that claimant is entitled to recover for that amount, and such is the law. [In re Cameron Trust Co., 51 S.W.2d 1025.] It is contended, however, by appellants that the true amount is that shown by the books of the bank at the time it closed, being the sum of $ 3956.14, while respondent contends that the amount should be increased by the sum of $ 1500 and that it is entitled to the full award made by the court. The chief contention at the trial and here is over the item of $ 1500. The facts now to be stated give rise to the controversy.

Shortly after the bank closed the newly elected treasurer of the district called at the bank to obtain the book and records of the former treasurer of the district. Among the papers found by him was a debit slip in the handwriting of Hardesty. It reads as follows:

"DEBIT

Tr. School Dist No. 61--

1500.00

Loan E. M. Hardesty

PAID

3--19--28

80.504."

An item of $ 1500 was posted on the bank ledger as a charge against the account of the treasurer of the school district under date of March 29, 1928, and on the same day there was a credit of $ 1500 to the personal account of E. M. Hardesty on the books of the bank. The evidence is that the directors had never authorized or made a loan to Hardesty or ratified such a loan, and that it was not discovered by them that the $ 1500 was not in the account of the school money until after the bank closed. There is no evidence that any officer of the bank, other than Hardesty, knew anything about that situation.

In the finding and judgment of the court it is recited:

"The court further finds that on or about March 29, 1928, the said E. M. Hardesty, treasurer of said school district and president of said bank, as aforesaid, without the knowledge or consent of claimant district, and the other officers thereof, did, by means of a debit slip, make a certain entry upon the books of said bank, and the individual ledger sheet showing, or purporting to show the account of claimant therein, by which there was attempted to be withdrawn $ 1500 of such school funds so remaining in said bank, and belonging to claimant, and at the same time credited the sum of $ 1500 to his personal account in said bank, and personally withdrew and had the benefit thereof, . . .

"The court further finds that the act of said Hardesty in attempting to withdraw said sum of $ 1500 from said account, and in crediting that amount to his personal account, was not an act as treasurer of claimant district, but was his act as an officer of said bank, and that such acts on his part did not operate to withdraw any sum whatever from the funds of claimant so held by said bank, and did not have the effect of relieving said bank of liability to said school district for the aforesaid sum of $ 1500 so attempted to be withdrawn."

It is admitted that assets reaching the hands of the liquidator are more than sufficient to pay preferred claims.

The deposit of school money in a bank which has not been legally designated as a depository is illegal and a bank receiving the deposit under such circumstances becomes a trustee ex maleficio. When such deposits pass into the general assets of the bank and said assets so enhanced pass to its assignee or liquidator, there is no question but that said funds may be recovered in full as against the general creditors. It is appellants' position, however, that while the bank received the total amount of $ 5456.14 as a trust fund, it returned $ 1500 of said sum to the treasurer of the district, who was the only person authorized to receive it, and that the trust was thereby...