State ex rel. Carroll v. Corning State Sav. Bank

• Decision Date: 24 October 1907
• Citation: 113 N.W. 500,136 Iowa 79
• Parties: STATE OF IOWA EX REL B. F. CARROLL, Auditor of State, v. CORNING STATE SAVINGS BANK, AND C. F. ANDREWS, Receiver, Appellees, and THE DES MOINES NATIONAL BANK, Intervener, Appellant
• Court: Iowa Supreme Court

113 N.W. 500

136 Iowa 79

STATE OF IOWA EX REL B. F. CARROLL, Auditor of State, v. CORNING STATE SAVINGS BANK, AND C. F. ANDREWS, Receiver, Appellees, and THE DES MOINES NATIONAL BANK, Intervener, Appellant

Supreme Court of Iowa, Des Moines

October 24, 1907

Appeal from Adams District Court.-- HON.H. K. EVANS, Judge.

THIS is a proceeding to establish a claim against the receiver of the Corning State Savings Bank upon two certificates of deposit issued by that bank, and now held by the intervener. The trial court denied the claim on each certificate, and intervener appeals.

Appeal Reversed in part and affirmed in part.

Hager & Powell, for appellant.

Maxwell & Maxwell, W. E. Miller, and Arthur R. Wells, for appellees.

OPINION

DEEMER, J.

The Corning State Savings Bank was a corporation organized under the savings bank law of this State. Upon proper proceedings instituted by the Auditor of State, C. F. Andrews was appointed receiver of said bank, and is now acting as such. March 24, 1904, the Des Moines National Bank filed with the court and receiver its claim upon what purports to be two certificates of deposit in the sum of $ 5,000 each, issued by the Corning State Savings Bank, and upon a protested sight draft indorsed by said savings bank. The claim upon the sight draft was dismissed, and the case was tried upon the two certificates of deposit. The receiver pleaded that the intervener was not a depositor; that the savings bank never received any money from intervener; that whatever money it did receive was, in fact, a loan, prohibited by the laws of this State; and that the money received from intervener went to one La Rue, upon his personal account, and that the savings bank was under no obligation to return the same. Intervener denied these claims, and further pleaded an estoppel upon the part of the savings bank and of the receiver. The trial court having dismissed the claim intervener appeals, and presents the following questions for review: (1) Was it a depositor in the savings bank? (2) If not a depositor, is it entitled to have its claim established as a loan? (3) If the transaction was a loan, was it illegal and, if so, will this illegality defeat its claim? Other questions incident to these main propositions will be considered during the course of the opinion.

One of these incidental questions is this: May the receiver show that, although certificates of deposit were issued by the savings bank, the transaction was, in fact, a loan? Intervener contends that this may not be done, for the reason that the contract is in writing, and that parol evidence is inadmissible to show the nature of the transaction. There is no merit in this contention. The issuance of a certificate of deposit does not in and of itself indicate the true nature of the transaction. Such an instrument may be issued, although a loan was intended, and parol evidence is admissible to show the true nature of the transaction. Estate of Law, 144 Pa. 499 (22 A. 831, 14 L. R. A. 103); Hotchkiss v Mosher, 48 N.Y. 478; First Bank v. Myers, 83 Ill. 507. A certificate of deposit is for many purposes, treated as a promissory note, and parol evidence to show that it was given as evidence of a loan is admissible. We are not to be understood as holding that it is a mere receipt, and as such subject to be defeated by parol evidence showing that there was, in fact, no promise on the part of the bank issuing it. Our holding is that the nature of the transaction for which it was given -- that is as to whether it was a loan or a deposit of money -- may be shown by proper parol evidence. Johnson v. Barney, 1 Iowa 531; Huse v. Hamblin, 29 Iowa 501. The bank issuing such an instrument is in any event a debtor, but whether as to a depositor or a lender is subject to explanation by parol. None of the cases cited and relied upon by appellant are in point upon this proposition.

Appellee argues that one bank cannot be a depositor in another; but this is manifestly unsound. There is no provision of law and no reason growing out of public policy which forbids such a deposit. Elmira Bank v. Davis, 73 Hun 357 (26 N.Y.S. 200); Same case, 142 N.Y. 590 (37 N.E. 646, 25 L. R. A. 546); Davis v. Elmira Bank, 161 U.S. 275 (16 S.Ct. 502, 40 L.Ed. 700).

Another collateral question is this: May the receiver show that the savings bank never received any money from intervener? In so far as the action is upon the certificates of deposit, it is manifest, we think, that it cannot be heard to so affirm. But, if recovery is to be had upon an implied contract for money had and received, it may show that it did not receive any. Scow v. Farmers Bank, 136 Iowa 1, 111 N.W. 32.

We are now brought down to the pivotal question in the case, to wit: Was intervener a depositor in the savings bank as distinguished from a general creditor on account of a loan or loans made to that bank? Determination of this question is important, for two reasons: First, because, if it is a depositor, it is entitled to a preference over general creditors; and, second, if a mere lender, there may be some doubt of the validity of its claim on account of a statute providing what kind of loans may be made by a savings bank. As to this latter proposition, we shall have something to say hereafter. A depositor is one who delivers to or leaves with a bank money subject to his order. These may be either time deposits or open ones subject to check. As said by the Connecticut court: "One whose money is intermingled with the general funds of a bank to an ascertained amount, who is acknowledged by the bank to be a creditor to that amount, and who is under no obligation to permit the money to remain there, is a depositor." Catlin v. Savings Bank, 7 Conn. 487. In Hunt v. Hopley, 120 Iowa 695, 95 N.W. 205, citing State v. McFetridge, 84 Wis. 473 (54 N.W. 1, 998, 20 L. R. A. 223), we said:

The transaction differs essentially from a loan. That is for the benefit of the borrower, while a deposit is for the benefit of the depositor. The depositary may obtain an incidental advantage, but that is seldom the original object contemplated. In a loan the borrower promises to return the money at a future time, in a deposit, whenever the money is demanded. True, the technical relation of creditor and debtor springs from the making of deposits, but few of the many people who daily leave money with banks for safe-keeping, and exact the return of an equivalent amount, ever think of the transaction as a loan, or ever speak of it as such. . . . In Law's Estate, 144 Pa. 499 (22 A. 831, 14 L. R. A. 103), the difference was pointed out: 'Deposit is where a sum of money is left with a banker for safe-keeping, subject to order, and payable, not in the specific money deposited, but in an equal sum. It may or may not bear interest, according to the agreement. While the relation between the depositor and his banker is that of debtor and creditor simply, the transaction cannot, in any proper sense, be regarded as a loan unless the money is left not for safe-keeping, but for a fixed period, at interest, in which case the transaction assumes the characteristics of a loan.' The Supreme Court of Wisconsin applied the same principle in State v. McFetridge, 84 Wis. 473 (54 N.W. 1, 998, 20 L. R. A. 223), in adjudging general deposits not investments, within the meaning of the statute of that State forbidding such by the State Treasurer, saying: 'By such deposit the depositor does not lose control of the money, but may reclaim it at any time. True, he loses control of the specific coin or currency deposited, but not of an equal amount of coin or currency having the same qualities and value, which, as we have seen, is all that is required of him. But, if funds in the treasury are invested in United States or State bonds, or in loans on time to counties, cities, etc., the treasurer loses control thereof, and the same cannot be replaced in the treasury until the bonds are paid or sold, or such loans become due, and are collected by due course of law. The retention by the treasurer of substantial control over the funds in the one case, and his loss of such control in the other, make the leading distinction between a mere deposit of the funds and an 'investment' thereof, as those terms are used in the statutes.' See also opinion by Post, C. J., in State v. Hill, 47 Neb. 456 (66 N.W. 541); City of Lansing v. Wood, 57 Mich. 201 (23 N.W. 769); Allibone v. Ames, 9 S.D. 74 (68 N.W. 165, 33 L. R. A. 585); Norwood v. Harness, 98 Ind. 134 (49 Am. Rep. 739).

Having distinguished as best we may between a deposit and a loan, we now go to the evidence to see whether intervener was a depositor as to either of the certificates in question. On the 19th day of October, 1899, while the savings bank was a going concern and when no business relations of any kind existed between it and intervener, Beaumont Apple, an employe of intervener, wrote the savings bank that he had made unexpected collections, and would be pleased to place with the savings bank the sum of $ 5,000 for six months at 6 per cent. interest, and asked if it could use the same. To this the savings bank responded, through its cashier, that with its present outlook for loans it could use the money on a straight time certificate for one year at 6 per cent. Thereupon Apple sent a draft payable to the savings bank for the sum of $ 5,000, with a request for the certificate. On October 21, 1899, the savings bank sent Apple an ordinary time certificate of deposit for $ 5,000. This was made payable to Beaumont Apple, on return of the certificate properly indorsed, with 6 per cent. interest from date; and by Apple was indorsed to intervener. This certificate was renewed from time to time, and the last renewal is the certificate...