State ex rel. Gentry v. Page Bank of St. Louis County

• Decision Date: 02 March 1929
• Citation: 14 S.W.2d 597,322 Mo. 29
• Parties: The State ex rel. North Todd Gentry, Attorney-General, Appellant, v. Page Bank of St. Louis County, S. L. Cantley, Commissioner of Finance, et al
• Court: Missouri Supreme Court

14 S.W.2d 597

322 Mo. 29

The State ex rel. North Todd Gentry, Attorney-General, Appellant, v. Page Bank of St. Louis County, S. L. Cantley, Commissioner of Finance, et al

Supreme Court of Missouri

March 2, 1929

Appeal from Circuit Court of St. Louis County; Hon. Jerry Mulloy, Judge.

Reversed and remanded (with directions).

Stratton Shartel, Attorney-General, and David P. Janes Assistant Attorney-General, for appellant; Fenton T Stockard and Howard Jennings of counsel.

(1) The State's right to priority to the payment of its debts is deeply grounded in the history of the Common Law. It has been the law of England for ten centuries. By Sec. 7048, R. S 1919, this State adopted the Common Law, except as modified by statute, as a part of the fundamental law of the Commonwealth. (a) The weight of authority sustains the proposition that the several states, by their adoption of the common law, have succeeded to the prerogative right of the British Crown to priority in payment out of the assets of an insolvent debtor as against all persons not having antecedent liens; i. e., the State is entitled to a preference over private creditors whose claims stand on the same footing as those of the State. Marshall v. New York, 254 U.S. 380; Robison v. Bank of Darien, 18 Ga. 65; Seay v. Bank of Rome, 66 Ga. 609; Booth v. State, 131 Ga. 63; Re Marathon Sav. Bank, 198 Iowa 696; Orem v. Wrightson, 51 Md. 34; State v. Williams, 101 Md. 529; Aetna Acc. Co. v. Miller, 54 Mont. 377; State ex rel. Rankin v. Bank, 68 Mont. 342; Re Carnegie Trust Co., 206 N.Y. 390; Re Neiderstein, 154 A.D. 238; Re Wesley, 141 N.Y.S. 1031; U.S. Fidelity Co. v. Bramwell, 108 Ore. 261; Fidelity Co. v. State Bank, 117 Ore. 1; U.S. Fidelity Co. v. Rainey, 120 Tenn. 357; Maryland Cas. Co. v. McConnell, 148 Tenn. 656; Woodyard v. Sayre, 90 W.Va. 295; U.S. Fidelity Co. v. Trust Co., 95 W.Va. 458. (2) The State further contends that it has a right of preference and is entitled to full payment of its claim against the Page Bank because of the fact that the circumstances connected with this deposit impress them with a trust in favor of the claimant. The money involved in this claim is the property of the State, and the party making the deposit had no personal claim nor right to it. The deposits were made without authority of law, for the law as it then existed provided that these moneys should be deposited with the State Treasurer, and gave the Secretary of State no authority to deposit them in his name, either personally or as Secretary of State. The bank officials are presumed to know of this law and to know that this deposit was made in violation of law. Consequently these moneys become a trust fund and are properly charged against the assets of the bank as a preferred claim. William R. Compton Co. v. Farmers Trust Co., 279 S.W. 746. The fact that it might have been unwisely used and insolvent loans made with it, does not affect or destroy the trust character that the manner of its deposit in the bank impressed upon it. In this case the bank becomes the trustee ex maleficio for the State. Harrison v. Smith, 83 Mo. 210; Evangelical Synod v. Schoeneich, 143 Mo. 652; Thompson v. Bank, 278 S.W. 810; Pundmann v. Schoenich, 144 Mo. 149; Tierman's Exr. v. Bldg. & Loan Assn., 152 Mo. 135; Marshall v. Bank, 253 S.W. 15.

Ralph & Baxter and John H. Haley for respondents; Harry W. Castlen of counsel.

(1) It is the contention of the Attorney-General that these funds were deposited in Page Bank without authority of law and that the State is entitled to a preference over the general creditors under its sovereign common-law right as enunciated by the provisions of Sec. 7212, R. S. 1919. In the absence of other legislative enactments and judicial utterances touching the subject, there would be but little difficulty in the adoption of this view. In re Holland Banking Company case, 281 S.W. 702, the Supreme Court denied the State's claim of priority, and in arriving at that determination directed attention to a number of different situations in which the right of a State to preference, as claimed in the proceeding at bar, was held to have been waived. Three of these having a bearing on the matter in hand will be noticed. First. The Depository Law, Art. 2, Ch. 123, R. S. 1919, providing a method for the selection of depositories for funds in the custody of the State Treasurer, and requiring the taking of securities to indemnify the State against loss, was directly involved and was held to be a waiver. Second. Our statutes, Secs. 11688, 11691 and 11714, R. S. 1919, regulating the manner of winding up the affairs of insolvent state banks, designating certain specified priorities but providing none for unpaid state deposits, are discussed in connection with the case of Cook County National Bank v. United States, 107 U.S. 445, 27 L.Ed. 537, where similar legislation was involved and deemed an abandonment of the right of the Government to preference. Third. Mention is made of Sec. 13345, R. S. 1919, a part of our Depository Law, and same is quoted at length. (a) For the State it is argued that Art. 2, Ch. 123, R. S. 1919 (State Depository Act), is designed for the control of funds in the hands of the State Treasurer only; and inasmuch as the moneys in question had not reached the Treasurer, the decision in Holland Banking Company case, supra, is without application here. It is true that in Holland Banking Company case the court was dealing with funds which had been deposited by the State Treasurer pursuant to the terms of the Depository Act, and that said act was directly involved, yet it is apparent, from a reading of the decision, that the court was not urged to the conclusion arrived at by a consideration of the Depository Act alone, but indulged in an extended resume and discussion of other legislative enactments touching public moneys, notably the second and third propositions above set out and plainly indicated its attitude had such enactments been directly involved. (b) The Secretary of State testified that it would have been impracticable to have transmitted these moneys to the State Treasurer in the form in which they were received; that he found after consulting with bankers, that it was necessary to deposit these moneys in bank locally and then check against the accounts and by this means pay it into the Treasury; that the money was moved from the banks as rapidly as it was possible for his clerks to prepare and forward lists to his department to be transmitted to the Treasurer; that checks covering the deposit in Page Bank were issued, transmitting same to the Treasurer as promptly as it was physically possible so to do; and that the bank was used as an instrumentality in the method of transmitting the moneys to the Treasurer. That this method was reasonable is evidenced by the fact that the Legislature subsequently adopted it. Laws 1927, p. 308. Inasmuch as the Secretary was its own witness, the State is not in a favorable position to escape the effect of his testimony or to assert that the moneys were deposited in Page Bank unlawfully or without authority of law. If this be a sound conclusion, then the moneys cannot be viewed as anything more or less than unpaid state deposits, and the plain import of the decision in Holland Banking Company case is that, where the Legislature has by Secs. 11691 and 11714, R. S. 1919, designated certain specific preferences, in winding up the affairs of insolvent state banks, but reserved none for such state deposits, the State's common-law right of preference is waived. (c) Again, when the facts of the instant case are considered in connection with the third phase of the same decision above indicated, it must be noted that Sec. 13345, R. S. 1919, by creating a lien in favor of the State for funds deposited by the State Treasurer in depositories selected pursuant to the Depository Law (Art. 2, Chap. 123), is also held to be a waiver of the State's right of priority under Sec. 7212. It is useful to note that the lien created by Sec. 13345 covers not only funds contemplated by the Depository Law, but "the amount of every account audited adiusted and found due the State, according to the provisions of Article 1" of the same chapter. If the creation of this lien is a waiver of the State's right of preference as to moneys contemplated by Article 2, it is certainly a waiver of the same preference as to moneys contemplated by Article 1. (2) The making of the deposit by the Secretary of State was not unlawful, but on the other hand was a necessary or convenient step in a reasonable method of transmitting the moneys to the State Treasurer. The record revealing no act or conduct on the part of the Secretary of State or the Page Bank which can be tortured into a semblance of fraud or misconduct. The essential element of a trust ex maleficio is lacking.

Davis, C. Higbee and Henwood, CC., concur.

OPINION

DAVIS

This is a proceeding by the State of Missouri at the relation of the Attorney-General, filed before the Deputy Commissioner of Finance in charge of the Page Bank and allowed by him as a common claim only, and certified to the Circuit Court of St. Louis County, under Section 11719, Revised Statutes 1919, to determine the right of the State to priority of payment from the assets of the defunct bank to the amount deposited therein. The trial court denied the claim of priority and allowed it as a general claim. The State appealed.

The facts are not in dispute. They warrant the finding that Charles U. Becker, Secretary of State, collected registration and license fees for motor vehicles, which accumulated daily through his accredited representative in the city of St Louis. The total sum deposited was $ 45,579.49, and the deposits were made at various times...