State v. Bank of Bristol

• Decision Date: 10 January 1933
• Citation: 55 S.W.2d 771,165 Tenn. 461
• Parties: STATE ex rel. ROBERTSON, Superintendent of Banks, v. BANK OF BRISTOL (MUSICK et al., Interveners).
• Court: Tennessee Supreme Court

55 S.W.2d 771

165 Tenn. 461

STATE ex rel. ROBERTSON, Superintendent of Banks, v. BANK OF BRISTOL (MUSICK et al., Interveners).

Supreme Court of Tennessee.

January 10, 1933

Appeal from Chancery Court, Sullivan County; S.E. Miller Chancellor.

Proceeding by the State, on the relation of D. D. Robertson Superintendent of Banks, against the Bank of Bristol, in which the Superintendent was appointed receiver for the bank and Mrs. Bert Musick and others intervened. From orders allowing interveners priority in distribution of bank's assets, the Superintendent appeals.

Reversed in part, and affirmed in part.

Curtin & Haynes and Keebler & Woolsey, all of Bristol, for complainant.

Caldwell Brown & O'Dell, of Bristol, for defendant.

GREEN C.J.

The main case is a proceeding by the superintendent of banks under section 5965 et seq., of the Code, under which the superintendent was appointed receiver for the Bank of Bristol and is winding up its affairs as an insolvent institution. This appeal is by the superintendent from orders of the chancellor upon three intervening petitions allowing the interveners priority in the distribution of the bank's assets.

Demurrers were filed to all the petitions by the superintendent of banks and the demurrers overruled. We first consider the petition of

Mrs. Bert Musick.

It appears that Bert Musick, a soldier in the late war, was disabled in service and later became insane. His wife, the petitioner, was appointed his guardian. There had accumulated in her hands as guardian $814 paid to her by the United States government for the benefit of Bert Musick under the World War Veteran Acts of Congress. U.S. C., title 38, § 421 et seq. (38 USCA § 421 et seq.).

The theory of the petitioner is that in receiving and holding this money for the benefit of the mental incompetent she was a mere agency or instrumentality of the United States government, that the fund due her from the insolvent bank is due to her as a government agent, and that, as such agent, she is accordingly entitled to priority of payment. The chancellor took this view, and his conclusion is sustained by two cases from Nebraska. State ex rel. Spillman v. First State Bank, 121 Neb. 515, 237 N.W. 623; State ex rel. Sorensen v. Security Bank, 121 Neb. 521, 237 N.W. 620, and one case from the Springfield Court of Appeals, Butler v. Cantley, 226 Mo.App. 1047, 47 S.W.2d 258. These decisions rest upon their construction of federal statutes.

U. S. C., title 38, § 450 (38 USCA § 450), provides:

"Where any payment under this chapter is to be made to a minor, other than a person in the military or naval forces of the United States, or to a person mentally incompetent, or under other legal disability adjudged by a court of competent jurisdiction, such payment may be made to the person who is constituted guardian, curator, or conservator by the laws of the State or residence of claimant, or is otherwise legally vested with responsibility or care of the claimant or his estate: *** And provided further, That the director, in his discretion, may suspend such payments to any such guardian, curator, conservator, or other person who shall neglect or refuse, after reasonable notice, to render an account to the director from time to time showing the application of such payments for the benefit of such minor or incompetent beneficiary."

U. S. C., title 38, § 556 (38 USCA § 556), provides:

"Every guardian, curator, conservator, committee, or person legally vested with the responsibility or care of the claimant or his estate, having charge and custody in a fiduciary capacity of money paid, under the War Risk Insurance Act *** as amended, or under the provisions of this chapter, for the benefit of any minor or incompetent claimant, who shall embezzle the same in violation of his trust or fraudulently convert the same to his own use, shall be punished by fine not exceeding $2,000 or imprisonment at hard labor for a term not exceeding five years, or both."

U. S. C., title 38, § 454 (38 USCA § 454), provides:

"The compensation, insurance, and maintenance and support allowance payable under Parts II, III, and IV, respectively, shall not be assignable; shall not be subject to the claims of creditors of any person to whom an award is made under Parts II, III, or IV; and shall be exempt from all taxation."

U. S. C., title 38, § 451 and section 514 (38 USCA § 451, and section 514), provides that, in cases where the estate of a deceased beneficiary of the legislation would escheat, the funds shall not go to the state but to the United States.

U. S. C., title 31, § 191 (31 USCA § 191), is in these words:

"Whenever any person indebted to the United States is insolvent, or whenever the estate of any deceased debtor, in the hands of the executors or administrators, is insufficient to pay all the debts due from the deceased, the debts due to the United States shall be first satisfied; and the priority established shall extend as well to cases in which a debtor, not having sufficient property to pay all his debts, makes a voluntary assignment thereof, or in which the estate and effects of an absconding, concealed, or absent debtor are attached by process of law, as to cases in which an act of bankruptcy is committed."

The reasoning of the Nebraska court is that, under the federal statutes quoted, the guardian in the first case cited and the administrator in the second case cited hold the money for a certain definite purpose only; that, if such purpose fails, the money goes back to the United States. The argument is that the guardian or administrator is a mere conduit or channel through which the money passes; that it is the money of the United States until it reaches the statutory beneficiaries. It is thought that the provision of the statute by which the guardian or other trustee may be required to render an account to the government from time to time as to his application of the funds in his hands evinces a reserved control of this fund by the government; that the provision for criminal proceedings against an unfaithful guardian or other trustee indicates that the government still retains control of the fund; and that the provision for an escheat to the government, instead of an escheat to the state, is of the same tendency. In short, that the money in the hands of a guardian or other such trustee is in his hands as a government agent, until the money actually reaches the beneficiary or is applied to the use of the beneficiary. Consequently, when the agent makes a deposit in bank, the debt of the bank to him is a debt to him as agent of the government--a debt to the government, and entitled to priority of payment.

The Missouri case refers to the Nebraska cases, the federal statutes above set out, and its reasoning is along similar lines.

In the Nebraska and Missouri cases and in the brief of counsel for petitioners reference is made to a number of decisions based upon U.S. C., title 38, § 454 (38 USCA § 454), quoted above, with reference to the assignability and exempt status of compensation, insurance, and maintenance and support allowances. We think these decisions may be left out of consideration. With all due respect to counsel and to the courts mentioned, a case like the one before us involves no effort on the part of any one to seize or lay hold of money appropriated by the government for such beneficiaries. On the contrary, the effort seems to be one in behalf of the beneficiary to seize or lay hold of money, largely at least, belonging to somebody else. The money of the beneficiary was deposited in bank, lawfully we presume, and there mingled by the banker with the money of other persons. The identity of the fund had been lost when the receiver took over the bank. There was no trust relation between the bank and the guardian of the beneficiary. The relation between the bank and the guardian was the ordinary relation of banker and general depositor--of debtor and creditor. Conquest v. Broadway National Bank, 134 Tenn. 17, 183 S.W. 160, Marine Bank of Chicago v. Fulton County Bank, 2 Wall. 252, 17 L.Ed. 785. Unless, therefore, the money deposited by the guardian can be treated as government money and priority of payment claimed under U.S. C., title 31, § 191 (31 USCA § 191), we see no basis whatever for a preference.

The language of the statute is that "the debts due to the United States shall be first satisfied." Is this debt of the insolvent bank to the guardian of the incompetent beneficiary a debt due to the United States? It seems to us that such proposition is not maintainable.

Conceding that the guardian is in a sense a government agent, he is also the agent of the beneficiary of the fund. His duties to the government consist...