State ex rel. v. Farmers' Exc. Bank of Gallatin

• Decision Date: 14 December 1932
• Docket Number: No. 30501.,30501.
• Citation: 56 S.W.2d 129
• Parties: STATE EX REL. CHARLES U. BECKER, Secretary of State, by DON C. McVAY, for and in Their Behalf, Appellants, v. THE FARMERS' EXCHANGE BANK OF GALLATIN, in Liquidation, S.L. CANTLEY, Commissioner of Finance, and JOSEPH N. MARTIN, Deputy Commissioner of Finance, in Charge.
• Court: Missouri Supreme Court

56 S.W.2d 129

STATE EX REL. CHARLES U. BECKER, Secretary of State, by DON C. McVAY, for and in Their Behalf, Appellants, v. THE FARMERS' EXCHANGE BANK OF GALLATIN, in Liquidation, S.L. CANTLEY, Commissioner of Finance, and JOSEPH N. MARTIN, Deputy Commissioner of Finance, in Charge.

No. 30501.

Supreme Court of Missouri, Division 2.

December 14, 1932.

Appeal from Daviess Circuit Court. — Hon. Ira. D. Beals, Judge.

REVERSED AND REMANDED (with directions).

Stratton Shartel, Attorney-General, Smith B. Atwood, Walter E. Sloat, Assistant Attorneys-General, and Dudley & Brandom for appellant.

(1) At the time this case was tried the Act of 1921, First Extra Session, was in force and effect. The decision in the case of State v. Page Bank of St. Louis County had not been rendered. This case is decisive of the right of the plaintiff to have its claim declared a preference. State v. Page Bank of St. Louis County, 14 S.W. (2d) 597, cases cited; Harrison Imp. Vernon Co. v. Peoples' State Bank, Bronaugh, 46 S.W. (2d) 165. (2) The plaintiff brought itself within every requirement of the law relating to the tracing of a trust fund in that the evidence shows that at the time the bank closed it was insolvent. That it had on hands in cash and on deposit in other solvent banks, subject to check, a sum much in excess of the plaintiff's claim. That on each and every day from the date of the first deposit, February 1, 1926, down to the date of the closing of the bank, that said bank had in its vaults and on deposit in other solvent banks, subject to check, cash in excess of the plaintiff's claim, besides other assets, and that all of these assets passed into the hands of the Commissioner of Finance on the closing of the bank. This is a sufficient tracing of the trust funds to entitle the plaintiff to recover out of the assets in the hands of the Commissioner of Finance. Clark v. Natl. Bank, 230 Fed. 722; Richardson v. Company, 52 L.R.A. 67; Hoagan Realty Co. v. First Natl. Bank, 273 S.W. 773; Compton v. Farmers' Trust Co., 279 S.W. 746; In re Farmers' Bank of Gallatin, 37 S.W. (2d) 936, and cases cited; Johnson v. Farmers' Bank, 11 S.W. (2d) 1092. (3) The Commissioner of Finance holds the title and the right of possession of the property of a bank which he is taking charge of by the same right and title as the bank, subject to all liens, priorities and equities existing at the time he took charge thereof. The title which he acquires to the property is no other, greater or paid interest, right or equity than the bank had and he can set up no right against the claim which the debtor, the bank, could not have maintained. City of Willston v. Ludoweese, 208 N.W. 82. (4) Much incompetent evidence was admitted, and competent evidence excluded but being an equity case this court can consider the whole record and make its finding upon such evidence as is competent. Webb v. Salisbury, 39 S.W. (2d) 1051; Noel v. Remmert, 30 S.W. (2d) 1013. (5) This court has held, and the statutes provide, that a claim due the State of Missouri when the bank is insolvent is a prior claim and the State is entitled to payment before any individual claimant is paid even though they have a preferred claim over the common creditors. Sec. 3152, R.S. 1929; In re Holland Banking Co., 313 Mo. 317.

Ed. C. Hyde and Earle W. Frost for respondents.

(1) Respondents concede that appellant is entitled to a preference under the authority of State v. Page Bank of St. Louis County, 322 Mo. 29, 14 S.W. (2d) 597, as against the assets of the Farmers' Exchange Bank coming into the hands of the Commissioner of Finance which were acquired and went into said bank after February 1, 1926. However, such preference should not be allowed against or paid out of any assets reaching the hands of the Commissioner which came into said bank and were held by it prior to February 1, 1926, as obviously such assets could not have been acquired with the money for which this claim is made, all of which was deposited after February 1, 1926. As a practical matter such date or time will have to be set back to January 1, 1926, since under the evidence the sources of the bank's assets are only shown by years, which action would not be detrimental to appellant but rather would be to appellant's advantage. Slater v. Oriental Mills, 27 Atl. 443; Nonotuck Silk Co. v. Flanders, 87 Wis. 237, 58 N.W. 383; State v. Bank of Commerce, 75 N.W. 28; Jones v. Chesebrough, 75 N.W. 97; Bradley v. Chesebrough, 82 N.W. 472; Reeves v. Pierce, 67 Pac. 1108, L.R.A. 1916C, 88, note; Drovers Natl. Bank v. Roller, 37 Atl. 30, 36 L.R.A. 767; Farmers Bank of White Plains v. Railey, 297 S.W. 938; Paul v. Draper, 158 Mo. 197, 59 S.W. 77; Bircher v. Walther, 163 Mo. 461, 63 S.W. 691; Pierson v. Haydel, 90 Mo. App. 253; Horigan Realty Co. v. Flynn, 213 Mo. App. 591, 253 S.W. 403; State v. Page Bank of St. Louis County, 322 Mo. 29, 14 S.W. (2d) 597; Wm. R. Compton Co. v. Farmers' Trust Co., 220 Mo. App. 1081, 297 S.W. 746; Farmers' Trust Co. v. Burnes Natl. Bank, 285 S.W. 110; Federal Reserve Bank v. Quigley, 284 S.W. 164; Summers v. Farmers' Bank of Callao, 282 S.W. 757; Nichols v. Bank of Syracuse, 220 Mo. App. 1019, 278 S.W. 793; In re Linn County Bank, 222 Mo. App. 84, 1 S.W. (2d) 206; Mann v. Bank of Greenfield, 46 S.W. (2d) 874. (2) Appellant's claim as presented in its brief is based upon a trust theory and its claim to a preference is by reason of the respondent bank holding the funds deposited as a trustee ex maleficio and the tracing of said funds into the hands of the Commissioner. The General Priority Statute, Sec. 3152, R.S. 1929, has nothing to do with the right to a preference under this theory and a preference thereunder to the State cannot be differentiated from a preference to an individual or private party. State v. Page Bank of St. Louis County, 322 Mo. 29, 14 S.W. (2d) 597. The General Priority Statute, Sec. 3152, R.S. 1929, merely provides for priority to the State amounting to a preference on obligations arising out of a debtor and creditor relationship and which ordinarily and otherwise would constitute simply a general claim entitled to no preference over other general creditors. There is no right in the State under said statute to a preferred preference as contended by appellant or to payment before any individual claimant is paid even though said claimant has a preferred claim over common creditors. Butler v. Cantley, 47 S.W. (2d) 259; People v. Farmers' State Bank, 355 Ill. 617, 167 N.E. 804; State ex rel. v. Trust Co., 209 Mo. 472, 108 S.W. 97; Woodyard v. Sayre, 90 W. Va. 295, 110 S.E. 689; United States v. Oklahoma, 261 U.S. 253, 43 Sup. Ct. 295; United States v. First State Bank, 14 Fed. (2d) 543; United States v. Porter, 24 Fed. (2d) 139; State Bank of Commerce v. U.S.F. & G. Co., 28 S.W. (2d) 184; Miss. Valley Trust Co. v. Oregon-Washington T. Co., 213 Fed. 988; United States v. Guaranty Trust Co., 33 Fed. (2d) 533.

COOLEY, C.

The State of Missouri and Charles U. Becker, Secretary of State, filed petition in the liquidation of an insolvent bank asking preference on account of money belonging to the State which was in the bank when it closed. The circuit court allowed the demand as a common claim but denied it preference. From this judgment the claimants appealed. The appeal was allowed to the Kansas City Court of Appeals which transferred the cause to this court on the ground that it was without jurisdiction because a State officer is a party to the action but without designating whether it referred to the Secretary of State or the State Commissioner of Finance. [1, 2] It has been decided that in proceedings of this character the relation of the Commissioner of Finance to the controversy does not give this court appellate jurisdiction. [Bank of Darlington v. Atwood, 325 Mo. 123, 27 S.W. (2d) 1029; City of Doniphan v. Cantley, 330 Mo. 639, 50 S.W. (2d) 658; Consolidated School District No. 2 of Clinton County v. Gower Bank (Mo.), 53 S.W. (2d) 280.] We take jurisdiction because a State officer, the Secretary of State in his official capacity, is a party to the proceeding. [See Butler v. Board of Education of Cons. Sch. Dist. (Mo.), 16 S.W. (2d) 44.]

The determinative facts were either formally admitted or sufficiently proved, as follows: The Farmers' Exchange Bank of Gallatin, Missouri, an incorporated state bank, was engaged in a general banking business until March 4, 1926, when, having become insolvent, it closed its doors and placed itself in the hands of the State Commissioner of Finance who proceeded to liquidate it. In due time claims were filed and allowed aggregating an amount greatly in excess of the collectible assets of the bank.

Claimants' demand was for money collected by Mr. Becker, as Secretary of State, through his agent, Don C. McVay, for sale of automobile licenses, that is, license fees collected from owners of motor vehicles, and was all deposited by Mr. McVay in said Farmers' Exchange Bank at various times between February 1, 1926, and March 4, 1926. The deposits were made in an account styled "Gallatin Motor Company License Account," in which no money was deposited except that so derived and upon which no checks were drawn except to transmit the money to the State Treasurer or to a depository for such funds which Mr. Becker had established at Trenton. The bank at all times knew the source from which the money was derived and that it belonged to the State. The bank had not been designated as a depository for such funds and had given no bond as such. [The statute then in force did not provide for the deposit in banks of moneys so collected by the Secretary of State and the taking of bonds from the depositories as is now provided, but required that such fees should be made payable to the State Treasurer and promptly transmitted to that officer.] The amount of such money so on deposit when the bank closed was $2157.86. At all times from February 1, 1926, to March 4,...