Shull v. Beasley

• Decision Date: 17 March 1931
• Docket Number: Case Number: 20857
• Parties: SHULL, Bank Com'r, et al. v. BEASLEY.
• Court: Oklahoma Supreme Court

1931 OK 87

299 P. 149

149 Okla. 106

SHULL, Bank Com'r, et al. v. BEASLEY.

Case Number: 20857

Supreme Court of Oklahoma

Decided: March 17, 1931

Syllabus

¶0 1. Banks and Banking--Constitutional Provision as to State Banking Department--Protection of Depositors.

The public policy of the state of Oklahoma, established by section 1, article 14, of the Constitution of Oklahoma, is for the protection of depositors in state banks.

2. Same--Relation of Bank as to Proceeds of Collection.

Whether a bank, as to the proceeds of paper held by it for collection, is a debtor or a trustee, depends upon the agreement as to the disposition of the proceeds.

3. Same--Payee of Draft Representing Collection Held not Entitled to Preference Upon Failure of Bank.

The payee of a draft, drawn and remitted, pursuant to instructions, in return of the proceeds of a collection, is a creditor not entitled to preference in the assets or cash resources of an insolvent bank in the hands of its receiver.

4. Same--Relation of Debtor and Creditor Between Collecting Bank and Owner of Item--Proceeds not Trust Fund.

Where a bank receives a check for collection with directions to remit by draft, makes the collection the same day by charging the drawer's account with the amount thereof, and immediately sends the forwarding bank a draft covering the same, and the collecting bank thereafter fails, and the draft is returned to the receiver of such bank, the relation of the collecting bank to the owner of the collection item is that of debtor and creditor, and the proceeds of the item is not a trust fund.

5. Same--Test as to Whether Collection Item Is for Credit or for Remittance.

Whether an item is deposited for collection and credit, or for collection and remittance, in the absence of an express agreement, may be implied from the course of dealing between the parties, from the nature of the transaction, or from any other circumstance which discloses whether they intended credit or remittance.

6. Same--Owner and Depositor of Check Transmitted for Collection Held General Creditor of Collecting Bank Remitting by Draft, and not Entitled to Preference Upon Failure of Bank with Draft Unpaid.

When a check is indorsed without restriction by a depositor in the regular course of business with the receiving bank and is at once passed to the credit of the depositor by the bank to which he delivers it under an agreement that the depositor is to receive credit therefor and the check is to be forwarded through ordinary channels for collection and, if not collected, to be charged back to the depositor by the receiving bank, and the receiving bank sends the check to its correspondent for collection and credit and the correspondent sends the check to the bank on which it is drawn for collection and return by draft, and there is nothing in the record showing a contrary intent, the relationship is that of debtor and creditor, and the failure of the collecting bank after the collection of the item and the forwarding of the draft in settlement thereof and prior to collection of the draft, does not constitute any portion of the funds of the collecting bank a trust fund, and the owner of the check is a general creditor of the collecting bank without preference as to the assets thereof.

Error from District Court, Oklahoma County; T. G. Chambers, Judge.

Action by Corrine L. Beasley, against C. B. Shull, State Bank Commissioner, et al. Judgment for plaintiff, and defendants appeal. Reversed and remanded, with directions.

M. B. Cope, John Barry, and Tomerlin & Chandler, for plaintiffs in error.

Ames, Cochran, Ames & Monnet and H. G. Leedy, for defendant in error.

ANDREWS, J.

¶1 The defendant in error instituted an action in the district court of Oklahoma county against the plaintiffs in error to recover a judgment for $ 69.12 as a preferred claim against the assets of the defendant, Indianola State Bank, and recovered judgment therein for that amount. From that judgment an appeal was taken to this court.

¶2 The defendant in error will be hereinafter referred to as plaintiff, the plaintiffs in error, collectively, as defendants, and the Oklahoma City branch of the Federal Reserve Bank of Kansas City as the Federal Reserve Bank.

¶3 The facts, as disclosed by the record, are that the plaintiff was a regular depositor in the Security National Bank of Oklahoma City and carried an individual checking account in that bank. She deposited in that bank a check drawn by another on the Indianola State Bank of Indianola, Okla., for $ 69.12. In the regular course of business, the Security National Bank transmitted that check to the Federal Reserve Bank with a collection letter. The Federal Reserve Bank sent the check with its collection letter to the Indianola State Bank. The letter and check were received by the Indianola State Bank, and that bank stamped the check "paid" and charged the same to the account of the drawer of the check, who had on deposit in that bank funds more than sufficient to pay the check. That bank had in its vaults cash more than the amount of the check. That bank issued its draft for the amount of the item in question and other items on the First National Bank of Oklahoma City payable to the Federal Reserve Bank, and forwarded the same to the Federal Reserve Bank. That bank received it and presented it to the First National Bank of Oklahoma City for payment.

¶4 Payment was refused for the reason that the Indianola State Bank was insolvent and had been taken charge of by the State Bank Commissioner. The draft was protested and neither the Federal Reserve Bank, the Security National Bank, nor the plaintiff received payment thereon. The Indianola State Bank had on deposit with the First National Bank of Oklahoma City, subject to its draft, more than sufficient funds to pay the draft. Neither the Federal Reserve Bank, the Security National Bank, nor the plaintiff kept any deposit or balance with either the Federal Reserve Bank or the Security National Bank. The item of $ 69.12 was thereafter charged to the account of the Security National Bank by the Federal Reserve Bank, and the Security National Bank charged the amount thereof to the account of the plaintiff. There is no question of delay presented by the record.

¶5 In determining the issue here presented, effect must be given to the public policy of the state of Oklahoma as established by section 1, art. 14, of the Constitution of Oklahoma, which provides that general laws shall be enacted by the Legislature, which laws "shall provide for the protection of depositors and individual stockholders." Concerning that section, this court, in State ex rel. Short v. Norman. 86 Okla. 36, 206 P. 522, said that it charges the Legislature with the duty of enacting general laws embodying the two central and closely related ideas made prominent therein, to wit: "* * * Second, protection of depositors and individual stockholders." Under the public policy so announced, we deem it the duty of this court to select from conflicting decisions those that tend to protect depositors in a bank rather than those intended to protect creditors of a bank.

¶6 We are not here concerned with the liability, if any, either of the Security National Bank, the Federal Reserve Bank, or the First National Bank of Oklahoma City. The issue submitted here is limited, the question, as stated by the defendant, being "* * * whether or not the agreed statement of facts was sufficient to entitle plaintiff to judgment allowing her claim as a preference." As stated by the plaintiff, the issue is whether the relationship of debtor and creditor arose between the plaintiff and the Indianola State Bank, or whether the relationship between them was that of principal and agent.

¶7 The drawer of the check had funds in his account with the Indianola State Bank more than sufficient to pay the check and that bank had cash on hand more than sufficient to pay the check at the time it was presented to that bank for payment. Had the plaintiff presented the check, she would have been entitled to the money in payment thereof, or she could have asked the bank to give her a draft on an Oklahoma City bank in settlement of the check. In either event the transaction would have been closed in so far as the issues here are concerned. If the cash had been paid for the check, there would be no question of principal and agent or debtor and creditor. If she had been given a draft in payment thereof, there would be no question of principal and agent, but there would be a relationship of debtor and creditor. The establishment of relationship of debtor and creditor would not make the defendants liable. The plaintiff must recover, if at all, by the establishment of a trust growing out of the relationship of principal and agent.

¶8 We do not think it necessary and we will not herein set forth the various conflicting rules announced by the courts of this nation. The text-book writers do not agree as to the effect of those decisions, and the decisions are hopelessly in conflict.

¶9 Where a merchant draws a "draft" on a customer and attaches a bill of lading thereto and sends it either directly or indirectly to a bank for collection or for collection and remittance, he has the title to merchandise which he has contracted to sell and it is his intention to part with the title to his merchandise only for cash to be paid to the collecting bank and remitted to him. No such situation is presented where a check is deposited by a regular depositor in the regular course of business in a bank and credit given to the depositor under an agreement that the amount of the check will be charged back to the account in case it is not collected. There the holder of the check has an order on a bank for the payment of money. The check may be good and it may not be good. The holder wants credit in his bank against which he may check. He presents the check to his bank for credit, knowing that his bank will...