St. Louis-San Francisco Ry. Co. v. Millspaugh
| Citation | 278 S.W. 786 |
| Decision Date | 08 January 1926 |
| Docket Number | No. 3840.,3840. |
| Parties | ST. LOUIS-SAN FRANCISCO RY. CO. v. MILLSPAUGH, Com'r of Finance. |
| Court | Court of Appeal of Missouri (US) |
Appeal from Circuit Court, Barton County; B. G. Thurman, Judge.
Proceeding by the St. Louis-San Francisco Railway Company against Frank C. Millspaugh, Commissioner of Finance, and in
charge of the liquidation of Thomas Egger, Private Banker, to have a demand against the bank allowed as preferred claim. From a judgment denying the preference, plaintiff appeals. Reversed and remanded.
E. T. Miller, of St. Louis, and George W. Goad and Mann & Mann, all of Springfield, for appellant.
H. W. Timmonds, of Lamar, for respondent.
For convenience we will refer to the claimant and the commissioner of finance as plaintiff and defendant.
Plaintiff had a demand against Thomas Egger, Private Banker, whose bank had failed, and sought to have this demand allowed as a preferred claim. The trial court denied a preference, and plaintiff appealed.
The facts are as follows: Thomas Egger, Private Banker, conducted a bank at Lamar, Mo., May 13, 1924. Plaintiff's station agent at Lamar bought from Egger's bank a draft in the sum of $221.18 and gave cash therefor in the sum of $66 and the balance in certain checks which plaintiff held, all of which checks were paid. The draft was drawn on the New England National Bank of Kansas City, Mo., May 14, 1924. The station agent bought another draft from Egger's bank in the sum of $97.01. The agent paid $80 cash on this latter draft and the balance in checks, all of which checks were paid. This draft was also drawn on the New England National Bank of Kansas City. These drafts were duly presented to the New England National Bank, the drawee, on May 15, 1924, and payment was refused because Egger's bank was then in the hands of the commissioner of finance.
Plaintiff was not a depositor at Egger's bank, and, so far as appears, sustained no relation with it, except that it purchased these drafts for which it in effect paid the cash. Where a bank sells a draft on another bank and receives the cash therefor, knowing or having reason to believe that it is insolvent, and that it has not sufficient funds in the drawee bank to pay the draft, it is guilty of a fraud, and the purchaser of such draft may, as a general rule, rescind the purchase and recover the money paid therefor, or will have priority over general creditors. 3 R. C. L. p. 557, § 144; Whitcomb v. Carpenter, 134 Iowa, 227, 111 N. W. 825, 10 L. R. A. (N. S.) 928; Widman v. Kellogg, 22 N. D. 396, 133 N. W. 1020, 39 L. R. A. (N. S.) 563. In Whitcomb v. Carpenter, supra, it appears that one O. E. Snyder was doing business as a private banker under the name of the Bank of Olin, and, becoming insolvent, made an assignment. A fews days prior to the assignment, and when he knew his bank was insolvent, and knew he had no funds in his correspondent bank, Snyder sold plaintiff a draft on his correspondent bank for $190, receiving full value for said draft. The draft was not paid, and Snyder failed to return the money paid therefor, and thereupon plaintiff sought to have his claim allowed as a preferred one. The lower court denied a preference, but on appeal this decision was reversed, and it was held that the claim was entitled to preference.
In Widman v. Kellogg, supra, the statement discloses that the plaintiff was agent for the Great Northern Railway Company and the Great Northern Express Company, and that it was his duty to promptly remit funds received for these companies. It was his custom in remitting such funds to purchase drafts from the People's State Bank and send the drafts in remittance. From January 21st to the 25th, 1910, he purchased four drafts from the People's State Bank aggregating $1,074.95, and these drafts were drawn on the Security National Bank, correspondent of the People's State Bank. These drafts were transmitted and presented, and payment refused because there were no funds of the People's State Bank in the drawee bank with which to pay. The People's State Bank closed on January 26th. On these facts plaintiff's claim was given preference.
We find no case in our own jurisdiction the facts of which are so similar to the facts of the cause at bar as are Whitcomb v. Carpenter and Widman v. Kellogg, supra. But in Stoller et al. v. Coates, 88 Mo. 514, the same principle of law was applied. In Stoller v. Coates it appears that one Earnest of Colorado consigned to plaintiffs Stoller & Hill of Kansas City ten cars of cattle, with instructions to sell and deposit proceeds in the Exchange Bank of Denver to the credit of the consignor, Earnest. The gross proceeds of the sale amounted to $3,769.75, and was in the form of a draft. Stoller & Hill's bookkeeper,...
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