St. Louis-San Francisco Railway Company v. Millspaugh

• Decision Date: 08 January 1926
• Parties: ST. LOUIS-SAN FRANCISCO RAILWAY COMPANY, APPELLANT, v. FRANK C. MILLSPAUGH, COMMISSIONER OF FINANCE, AND IN CHARGE OF THE LIQUIDATION OF THOMAS EGGER, PRIVATE BANKER, RESPONDENT.
• Court: Missouri Court of Appeals

278 S.W. 786

220 Mo.App. 110

ST. LOUIS-SAN FRANCISCO RAILWAY COMPANY, APPELLANT, v. FRANK C. MILLSPAUGH, COMMISSIONER OF FINANCE, AND IN CHARGE OF THE LIQUIDATION OF THOMAS EGGER, PRIVATE BANKER, RESPONDENT.

Court of Appeals of Missouri, Springfield

January 8, 1926

Appeal from the Circuit Court of Barton County.--Hon. B. G. Thurman Judge.

REVERSED AND REMANDED.

Judgment reversed and cause remanded.

E. T Miller, of St. Louis, George W. Good, and Mann & Mann, all of Springfield, for appellant.

(1) Thomas Egger, Banker, at the time he received plaintiff's money in payment for the drafts, knew that he was insolvent and that said drafts would not be paid, and he will be held to have received said money wrongfully and to hold same as trustee. Whitcomb v. Carpenter, 134 Iowa 227, 10 L. R. A. (N. S.) 928, 111 N.W. 825; Wedman v. Kellogg, 22 N.D. 396, 133 N.W. 1020, 39 L. R. A. (N. S.) 563; Stoler v. Coates, 88 Mo. 514; Cragie v. Hadley, 99 N.Y. 131, 52 Am. R. 9, 1 N.E. 537; Richardson v. Debenture Redemption Co., 102 F. 780, 52 L. R. A. 67; Capital National Bank v. Coldwater National Bank, 49 Neb. 786, 69 N.W. 116; St. Louis & S. F. R. Co. v. Johnson, 133 U.S. 566, 33 L.Ed. 683; Peak v. Ellicott, 30 Kan. 156, 46 Am. R. 90, 1 P. 499. (2) The Egger Bank held the money received by it in payment of the two drafts in question in trust for their payment, and the money went into the hands of respondent impressed with the trust. The Egger Bank could only have become the owner of these funds as and when the New England National Bank, on which the drafts were drawn, placed the money to the credit of appellant. Stoler v. Coates, 88 Mo. 514; Federal Reserve Bank of St. Louis v. Millspaugh; Bank of Poplar Bluff v. Millspaugh and cases cited. (Both of the foregoing cases were decided by this court recently, but are not yet reported); Stasiak v. Kalucki, 255 S.W. 987. (3) It is admitted that the payments made by plaintiff augmented to the amount thereof the assets of said banker that passed into the hands of defendant, and, although the amount of said payments were commingled with other assets of said bank and not susceptible of identification, still plaintiff is entitled to recover full amount of same. Harrison v. Smith, 83 Mo. 210; Stoler v. Coates, 88 Mo. 514; Snodgrass v. Moore, 30 Mo.App. 232; Flint Road Cart Co. v. Stephens, 32 Mo.App. 341; Bank v. Sanford, 62 Mo.App. 394; Brick Co. v. Schoeneich, 65 Mo.App. 283; Insurance Co. v. Kimbel, 66 Mo.App. 370; Leonard v. Latimer, 67 Mo.App. 138; Evangelical Synod v. Shoeneich, 143 Mo. 652; Poundman v. Schoeneich, 144 Mo. 149; Tierman's Ex. v. Security B. & L. Ass'n, 152 Mo. 135; Tufts v. Latshaw, 172 Mo. 359; Orr v. St. Louis Trust Co., 291 Mo. 383; Schultz v. Bank of Harrison, 246 S.W. 614.

H. W. Timmonds, of Lamar, for respondent.

(1) Appellant's first point is based upon a conclusion not warranted by the record when it assumes when the banker received the appellant's money for these drafts he knew he was insolvent, and thereby became a trustee. There is no evidence that the banker knew at the time of the purchase of the drafts he was insolvent, nor that the bank was actually insolvent; these are questions yet to be determined by the courts and upon which juries have not agreed as yet. (2) The statutes of this State give various grounds and reasons for the Finance Department of the State taking possession of the business and property of a bank. In the absence of proof no one ground, such as insolvency, can be assumed or presumed. Sec. 11700, R. S. 1919. (3) The transaction between the appellant and the banker when the appellant bought the two drafts in question was one of purchase and sale, not one of trust; the draft is not a credit, it is only a direction to the correspondent bank to pay the amount designated, to the payee therein named. Legnti v. Mechanics & Metals Natl. Bank, 230 N.Y. 415, 16 A. L. R. 185; Tanssig v. Trust Co., 213 N.Y. 627; Harrison v. Wright, 100 Ind. 515, 50 Am. Rep. 805. (4) The bank's depositors deposited their money relying upon the credit of the bank that the amounts would be repaid when called for. The appellant purchased the drafts relying upon the credit of the bank also; there should be equality among the creditors, nor preference to one. Harrison v. Wright, 100 Ind. 515, 50 Am. Rep. 805. (5) Until the two drafts were presented to the bank upon which they were drawn and paid, the relations of appellant and the bank issuing the drafts was that of creditor and debtor, and the appellant is only entitled to pro rata distribution among the creditors of the Egger Bank, and not to a preference or priority. Dickinson v. Coates, 70 Mo. 250. (6) The receipt of the money paid for these two drafts did not swell the assets of the bank, even if they did pass into the Finance Commissioner's possession, because the issuing of these two drafts to the appellant created a debt of the bank equal to the amount received. Spiroplos v. Bank (Wash.), 199 P. 997; Rugger v. Hammond, 95 Wash. 85, 163 P. 408.

BRADLEY, J. Cox, P. J., and Bailey, J., concur.

OPINION

BRADLEY, J.--

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, sec. 184; Whitcomb v. Carpenter, 111 N.W. 825, 10 L. R. A. (N. S.) 928; Widman v. Kellogg, 133 N.W. 1020, 39 L. R. A. (N. S.) 363.] 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 few 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 $ 1074.95, 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 claimed 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...