Skinner v. Porter

• Decision Date: 28 January 1928
• Docket Number: 4810
• Citation: 45 Idaho 530,263 P. 993
• Parties: W. I. SKINNER, Appellant, v. E. W. PORTER, Commissioner of Finance of the State of Idaho, in Charge of the Bank of Hansen, a Corporation, and the BANK OF HANSEN, a Corporation, Respondents
• Court: Idaho Supreme Court

263 P. 993

45 Idaho 530

W. I. SKINNER, Appellant, v. E. W. PORTER, Commissioner of Finance of the State of Idaho, in Charge of the Bank of Hansen, a Corporation, and the BANK OF HANSEN, a Corporation, Respondents

No. 4810

Supreme Court of Idaho

January 28, 1928

Rehearing Denied Feb. 25, 1928.

APPEAL from the District Court of the Eleventh Judicial District for Twin Falls County. Hon. Wm. A. Babcock, Judge.

Action to have sum of money declared to be a trust fund and given priority in payment of debts of insolvent bank as provided by Sess. Laws 1921, chap. 42, sec. 13, subd. 2. Judgment affirming classification of claim as contractual liability under sec. 13, subd. 4, of the act; supra. Reversed and remanded.

Reversed and remanded, with directions. Costs to appellant.

Martin & Martin, for Appellant.

Where money is left with and accepted by a bank for a specific purpose the money does not become a part of the bank's assets, but the bank is holding such funds as trustee for the owner thereof. (Hawaiian Pineapple Co. v. Browne, 69 Mont. 140, 220 P. 1114; Kimmel v. Dickson, 5 S.D. 221, 49 Am. St. 869, 58 N.W. 561, 25 L. R. A. 309; Massey v. Fisher, 62 F. 958; State v. Foster, 5 Wyo. 199, 63 Am. St. 47, 38 P. 926, 29 L. R. A. 226; Goodyear Tire & Rubber Co. v. Hanover State Bank, 109 Kan. 772, 204 P. 992, 21 A. L. R. 677; Northwest Lumber Co. v. Scandinavian-American Bank of Seattle, 130 Wash. 33, 39 A. L. R. 922, 225 P. 825; Fralick v. Coeur d'Alene Bank & Trust Co., 36 Idaho 108, 210 P. 586; Stein v. Kemp, 132 Minn. 44, 155 N.W. 1052.)

The giving of a check to a bank by a depositor thereof, who has sufficient funds to his credit in said bank to pay said check, for the purpose of taking up a deed held by the bank as trustee for third person, amounts to an augmentation of the funds in the bank. (Goodyear Tire & Rubber Co. v. Hanover State Bank, supra; Hawaiian Pineapple Co. v. Browne, supra; Northwest Lumber Co. v. Scandinavian-American Bank of Seattle, supra.)

Where money held in trust by a bank is so commingled with the bank's assets that the trust fund becomes a component part thereof, courts will impress a charge or lien against the mass to the extent that the trust fund has entered into it. (Russell v. Bank of Nampa, 31 Idaho 59, 169 P. 180; Martin v. Smith, 33 Idaho 692, 197 P. 823; Kimmel v. Dickson, supra.)

Stephan & North, for Respondents.

Where one bank collects money for another bank the relationship of principal and agent exists until the collection is made and when the collection is made that relationship is immediately changed to one of debtor and creditor. (1921 Sess. Laws, chap. 42, p. 13; 1 Morse on Banks and Banking, sec. 248; 3 R. C. L. 636; 7 C. J. 616; 24 A. L. R. 1152; Fralick v. Coeur D'Alene Bank & Trust Co., 36 Idaho 108, 210 P. 586; In re Citizens State Bank of Gooding, 44 Idaho 33, 255 P. 300; Guymon-Petro Merc. Co. v. Farmers State Bank, 120 Kan. 233, 243 P. 321; National Bank v. Porter, 44 Idaho 514, 258 P. 544.)

Where one draws a check against an account in a bank to pay a collection held by such bank the funds of that bank are not augmented by such payment. (Goodyear Tire and Rubber Co. v. Hanover State Bank, 109 Kan. 772, 21 A. L. R. 677, 204 P. 992, 24 A. L. R., p. 1157, and note.)

When a bank collects money for another bank without specific instructions to the contrary the collecting bank is presumed and is entitled to act in conformity with wellknown and established banking customs. (Bacon v. State Bank of Kamiah, 41 Idaho 518, 240 P. 194; Commercial Bank v. Armstrong, 148 U.S. 50, 13 S.Ct. 533, 37 L.Ed. 363; 3 R. C. L. 633, 636; In re Citizens State Bank of Gooding, supra.)

BUDGE, J. Givens, Taylor and T. Bailey Lee, JJ., concur. WM. E. LEE, C. J., Dissenting.

OPINION

BUDGE, J.

On October 20, 1922, appellant contracted to sell to one Summitt a certain tract of land, for $ 6,000. The agreement, in writing, called for the payment by Summitt of $ 500 in cash on the execution of the contract, which was paid; $ 2,000 in cash to be paid within ten days after receipt of abstract showing good title to the land; $ 500 on or before one year from date; and $ 500 on or before two years from date, said two payments of $ 500 each to be evidenced by notes and secured by a mortgage on the premises; and the remaining $ 2,500 of the purchase price to be paid by Summitt assuming a first mortgage on said premises in that amount.

At the time the contract was entered into, appellant was a resident of Kuna, Ada county, and the purchaser, Summitt, resided at or near Hansen, Twin Falls county, and it was agreed between them that appellant should have deed to the property prepared and abstract continued and send the same to Summitt for examination, and that if the title as shown by the abstract was good, Summitt was to pay the $ 2,000 in cash and give a mortgage on the premises to secure the payment of the two $ 500 notes to be executed by him. Deed conveying the property to Summitt was prepared and duly executed, and abstract made, and on December 1, 1922, appellant, through the Kuna State Bank, doing business in Kuna, forwarded to the Bank of Hansen, doing business in Hansen, said deed, with instructions to the Bank of Hansen to deliver the same to Summitt upon the payment of said sum of $ 2,000 in cash and the execution of the two notes for $ 500 each, and mortgage, as above stated, and instructed the Bank of Hansen to remit the said $ 2,000 to the Kuna State Bank, together with the two notes for $ 500 each and mortgage securing the same.

On December 12, 1922, the purchaser of the property, Summitt, paid to the Bank of Hansen the sum of $ 2,500 and also delivered to said bank his promissory note in the sum of $ 500, together with a mortgage upon the premises securing the note. Summitt made the $ 2,500 payment by delivering to the Bank of Hansen his check, drawn upon said bank, in the sum of $ 2,494.90, and $ 5.10 in cash. In order to have sufficient funds to his credit in the Bank of Hansen with which to make the payment as above set out, Summitt did, on December 6, 1922, deposit with the Bank of Hansen a check for $ 425, drawn on the First National Bank of Twin Falls, and on December 12, 1922, he deposited in the Bank of Hansen a check for $ 639.85, drawn on the Twin Falls Bank & Trust Company, and on the same date deposited a check of the Utah Construction Company for $ 100. These three checks were collected by the Bank of Hansen, and by their collection and deposit Summitt had sufficient money in the Bank of Hansen to pay the said sum of $ 2,500. Summitt was a regular customer of the Bank of Hansen and had carried a checking account with the bank for at least six months.

On December 15, 1922, Summitt made a further payment on his contract with appellant by delivering to the Bank of Hansen a check for $ 300, drawn on said bank, which the Bank of Hansen credited upon the note for $ 500. For the purpose of having sufficient funds in bank to pay this $ 300 check, Summitt, on December 16, 1922, deposited with the Bank of Hansen a check of the Utah Construction Company for $ 100, which check was collected by the Bank of Hansen.

On December 13, 1922, the Bank of Hansen mailed its cashier's check in the sum of $ 2,494.90 to the Kuna State Bank to cover the $ 2,500 payment made by Summitt on the contract, and on December 16, 1922, the Bank of Hansen mailed its cashier's check, in the sum of $ 300, to the Kuna State Bank, to cover the $ 300 payment made by Summitt on the note for $ 500.

Both the Kuna State Bank and the Bank of Hansen were members of the Federal Reserve system, and, immediately upon receipt by the Kuna State Bank of the two cashier's checks above referred to, they were indorsed and forwarded for collection through the Salt Lake City branch of the Federal Reserve Bank of San Francisco. This was the usual method of clearing such checks by members of the Federal Reserve system in southern Idaho. The Bank of Hansen was during this time the only bank in the town of Hansen, and the Kuna State Bank had no correspondent bank in Twin Falls county. The two banks had no business connections whatever. Neither had appellant ever had any business dealings with the Bank of Hansen. The acts of the Kuna State Bank in the matter were done as the agent of appellant.

Before the two cashier's checks had been returned to the Bank of Hansen, it had suspended business and had been taken in charge by the Commissioner of Finance, who, when the checks were presented, refused payment thereon. On the day the Bank of Hansen suspended business and was taken in charge by the Commissioner of Finance, December 19, 1922, it had on hand in cash the sum of $ 2,046.01, which was among the assets delivered over to the Commissioner of Finance.

Appellant thereafter duly filed a claim with the Commissioner of Finance requesting that the amount of the two cashier's checks of the Bank of Hansen, aggregating $ 2,794.90, be classified and paid as a trust fund, under the provisions of Sess. Laws 1921, chap. 42, sec. 13, subd. 2. The Commissioner of Finance refused to allow the claim as a trust fund, but did allow the same under subd. 4 of sec. 13 of the act, supra, as a contractual liability. Feeling himself aggrieved at the refusal of the Commissioner of Finance to allow the claim as requested, appellant brought an action in the district court to have the said sum of $ 2,794.90 declared and decreed to be a trust fund and paid to him as of the priority provided under subd. 2 of sec. 13 of chap. 42, supra. The cause was submitted to the trial court on the facts as outlined above, most of which were stipulated, and after its submission the trial court made findings and conclusions affirming the classification of appellant...