School District v. Cameron Trust Co.

• Decision Date: 07 July 1932
• Docket Number: No. 31767.,31767.
• Court: Missouri Supreme Court
• Parties: IN THE MATTER OF THE CAMERON TRUST COMPANY, etc., SCHOOL DISTRICT OF CAMERON, Appellant, v. CAMERON TRUST COMPANY ET AL.

51 S.W.2d 1025

IN THE MATTER OF THE CAMERON TRUST COMPANY, etc., SCHOOL DISTRICT OF CAMERON, Appellant, v. CAMERON TRUST COMPANY ET AL.

No. 31767.

Supreme Court of Missouri, Division 2.

July 7, 1932.

Appeal from Clinton Circuit Court. — Hon. Guy B. Park, Judge.

REVERSED AND REMANDED (with directions.)

Frank B. Klepper and Paul D. Kitt for appellant.

(1) The school district shall select depository for its funds in same manner as provided for selection of county depositories. Sec. 9362, R.S. 1929. (a) The manner and method of selecting a depository for county funds is set out in Art. 9, Chap. 85, R.S. 1929. Secs. 12184 to 12198, R.S. 1929. (b) The School District of the City of Cameron, Clinton and DeKalb Counties, Missouri, did not and had not selected the Cameron Trust Company as a depository for its funds. (2) The relation of debtor and creditor had not been created nor was such relation existing between the Cameron Trust Company and the School District of the City of Cameron, Clinton and DeKalb Counties, Missouri. The relation of debtor and creditor is one which could not have been created by the acts of the trust company alone but must be created by the acts and conduct of both parties indicating their intention to create such relation. Noel v. Bank, 11 S.W. (2d) 75; Evans v. Bank, 6 S.W. (2d) 656; Thomson v. Bank, 278 S.W. 810. (3) The moneys of the school district are legally in the hands of the treasurer of the district, who is the legal custodian thereof and is responsible therefor to the school district. The treaurer of the school district is the only person who has the right to the custody of school funds in the absence of a selection of a depository by the school board for such funds. Sec. 9335, R.S. 1929; Clearmont School Dist. v. Bank, 37 S.W. (2d) 1006; State ex rel. v. Thompson, 22 S.W. (2d) 196; Bragg City Special Road Dist. v. Johnson, 20 S.W. (2d) 24; Macon v. Trust Co., 21 S.W. (2d) 643. (4) The money belonging to a school district and deposited by its treasurer in a bank not selected as a depository, by the board of directors of the school district, does not pass title to the money to the bank but title to money remains in the school district. Gentry v. Bank, 14 S.W. (2d) 597; Trust Co. v. Noel, 12 S.W. (2d) 751; School Dist. v. Bank, 21 S.W. (2d) 781-782; Road Dist. v. Cantley, 8 S.W. (2d) 945; School Dist. v. Bank, 37 S.W. (2d) 1006. (5) There must be a legal selection of a depository and in substantial compliance with the statute in order that a bank becomes a depository. There must be an intention to select and a selection of a depository by the board of directors of the district and the giving of and acceptance of a depository bond before a depository is legally selected. The minds of both contracting parties must meet on the fact of and intention to select a depository. Secs 9362, 12184, 12187, R.S. Mo. 1929; Harris v. Langford, 277 Mo. 527; Trust Co. v. Noel, 12 S.W. (2d) 754. (6) The bond in question and offered in evidence was not given to the school district nor known to nor accepted by said school district or its board of directors and in no sense can it be said to have been a depository bond. Secs. 9362, 12184, 12187, R.S. 1929; 4 R.C.L. p. 48, sec. 5; 9 C.J. p. 18, sec. 28; 18 C.J. sec. 58, p. 586; Maryland Casualty Co. v. Pacific County, 245 Fed. 835; State v. Gaver, 80 Atl. 893; People v. Van Ness, 79 Cal. 85, 12 Am. St. Rep. 137; Commonwealth v. Caldwell, 73 Atl. 219; Board of Comm. v. Am. Loan & Trust Co., 69 N.W. 705; Martin v. State, 96 S.W. 372. (7) The school district had no control over these funds and could not interfere therewith in the possession of the treasurer of the district, unless and until it had selected a depository and bond given and approved. Bragg City Rd. Dist. v. Johnson, 20 S.W. (2d) 24; Clearmont School Dist. v. Bank, 37 S.W. (2d) 1006; State v. Thompson, 22 S.W. (2d) 196; City of Macon v. Trust Co., 21 S.W. (2d) 643 (8) The statutes of Missouri relating to the selection of depositories for public funds of the county (the same statutes being applicable for the selection of depositories for school funds) require that such depositories be selected every two years. These statutes are mandatory and the failure of the board to select at the bi-annual period leaves them without a depository and any public funds then in a previous depository or thereafter deposited therein are wrongfully and unlawfully therein and become a trust fund in the bank for the owner thereof. Secs. 9362, 12184, 12198, R.S. 1929; Macon County v. Trust Co., 29 S.W. (2d) 1097; Trust Co. v. Noel, 12 S.W. (2d) 754; Huffstuttler Treasurer v. State, 39 S.W. (2d) 721.

John Muster and Culver, Phillip & Voorhees for respondent.

(1) If the court erred in permitting respondent to prove by parol evidence that the trust company was selected as a local depository, the error was waived, since it is not preserved in the motion for new trial. Spaulding v. Edina, 122 Mo. App. 69. It was the ministerial duty of the secretary to record the proceedings of the board, and the court could have compelled him to perform that duty if he had not died. State ex rel. v. Walter, 324 Mo. 290. And, since the secretary is dead, the court, when called upon as a court of equity to determine the equities between a preferential claimant and general creditors, had the right to consider that done which should have been done. Johnson v. Farmers Bank, 11 S.W. (2d) 1092. (2) A formal order of acceptance and approval of the bond was not essential. The sureties intended that the trust company should become a legal depository and receive the school funds from the treasurer. The trust company did receive such moneys at and after the bond was filed, and acted as a depository after that time. There was thus evidence of an actual acceptance of the bond and it became effective. State v. McKay, 30 S.W. (2d) 90; School District v. Securities Bank, 26 S.W. (2d) 791; Farmers & Traders Bank v. Harrison, 12 S.W. (2d) 755; Wright County v. Farmers Bank, 30 S.W. (2d) 34. (3) The school board is estopped to claim that the trust company was not a legal depository. Cole County v. Central Mo. Trust Co., 302 Mo. 222, 257 S.W. 774; North Mo. Trust Co. v. Cantley, 39 S.W. (2d) 415. (4) In the absence of a prohibiting statute a trustee, including the treasurer of a school district, has the legal right to deposit funds in his custody in a bank of his own choosing. 26 R.C.L. 1314; In re Law's Estate, 22 Atl. 831; 24 C.J. 50, sec. 467; Officer v. Officer, 94 N.W. 947; State v. Ruby, 77 Mo. 610; Incorporated Town of Conway v. Conway, 180 N.W. 677; State v. Gramm, 52 Pac. 533; School Tp. v. Stevens, 138 N.W. 928; Northwestern Mfg. Co. v. Bassett, 218 N.W. 933; Atterberry v. McDuffee, 31 Mo. App. 603; Cantley v. City of New Madrid, 30 S.W. (2d) 782. (5) A deposit of public funds stands on the same footing as a deposit of private funds and does not give rise to a preference save only when those funds belong to the State. 3 R.C.L. p. 555, sec. 182; Compton v. Farmers Trust Co., 220 Mo. App. 1082; Special Road District v. Cantley, 8 S.W. (2d) 944; Town of Conway v. Conway, 180 S.W. 677. (6) The fact that the school moneys were trust funds in the hands of the treasurer does not make them trust funds in the hands of the bank in which they may be deposited, though the bank has knowledge of the facts; but the deposit makes the bank the owner of the money in its own right and creates the relation of debtor and creditor between it and the depositor. Paul v. Draper, 158 Mo. 197; Butcher v. Butler, 134 Mo. App. 61; Compton Co. v. Farmers Trust Co., 220 Mo. App. 1085; Andrew v. State Bank, 216 S.W. 1; Officer v. Officer, 94 N.W. 947. (7) There is no statute in this State relating to the right or duty of a treasurer of a school district to deposit school funds in his hands when there is no legal depository in which he can put it. The one applicable section creates the duty on the part of the treasurer to deposit the money in a legal depository only when such a depository has been legally designated. Sec. 12188, R.S. 1929; State ex rel. Cravens v. Thompson, 22 S.W. (2d) 198.

WESTHUES, C.

The appellant, School District of the City of Cameron, Clinton and DeKalb Counties, Missouri, seeks in this proceeding to have allowed in its favor a preferred claim in the sum of $19,238, against the assets of the Cameron Trust Company, a banking corporation, of Cameron, Missouri. The trial court denied appellant a preferred claim. From such judgment it appealed.

It is admitted in this case that appellant is a city school district, organized and operating as such under the laws of Missouri; that the Cameron Trust Company was for many years prior to January 31, 1931, a trust company engaged in the general banking business in Cameron, Missouri; that it ceased to do business on January 31, 1931, on account of insolvency and its assets were placed in the hands of the Commissioner of Finance for liquidation; that appellant school district had on deposit with the trust company on that date, in the name of the "Board of Education, R.S. Brown, Treasurer," the sum of $19,238; that the officers of the trust company knew that this money was the property of the school district; that the sum of $19,238 was commingled with the property of the trust company and the assets of the trust company were augmented to that extent, and so augmented passed into the hands of the Commissioner of Finance; and that the Commissioner of Finance took over property and money of the trust company amounting to about $400,000.

The theory upon which appellant claims a preference is that the trust company was not the legal depositary of the school district funds and therefore the deposit was illegal rendering the trust company a trustee ex maleficio of the funds for the benefit of appellant.

Respondent contends, first, that the trust company was the depositary of the funds of the school district;...