Taylor v. Dierks Lumber & Coal Co.

• Decision Date: 08 June 1931
• Docket Number: 19
• Citation: 39 S.W.2d 724,183 Ark. 937
• Parties: TAYLOR v. DIERKS LUMBER & COAL COMPANY
• Court: Arkansas Supreme Court

39 S.W.2d 724

183 Ark. 937

TAYLOR v. DIERKS LUMBER & COAL COMPANY

No. 19

Supreme Court of Arkansas

June 8, 1931

Appeal from Sevier Chancery Court; C. E. Johnson, Chancellor reversed.

STATEMENT OF FACTS.

Appellee brought this suit against appellant in equity to recover judgment for the sum of $ 1,134.76 and that said sum be declared a trust fund in the hands of the State Bank Commissioner for the use of appellee, and that the same be ordered paid out of any funds in the hands of appellant. The basis of the suit was that a bank, which was irretrievably insolvent, had received from appellee, a customer of the bank, a sum for general deposit. Appellant, who, as State Bank Commissioner, had taken charge of the affairs of the insolvent bank, admitted that said bank had received the deposit at a time when its officers knew that it was insolvent, but defended the suit on the ground that there was no preference or trust fund in so doing under our banking act.

The record shows that the Bank of DeQueen became insolvent by reason of the steady withdrawal of deposits, and that early in the afternoon of the 15th day of July, 1930, L. D McCowan, the president of said bank, and Fred Venable, its cashier, realizing its insolvency, decided to put deposits thereafter received separate from the other business of the bank and to afterwards return them to the depositors. Their decision to do this was not made known to the other employees of the bank, who thereafter on the same day received general deposits in the usual course of business.

The Dierks Lumber & Coal Company was a regular customer of the bank, and late on the same day, through its agent, tendered for deposit with the bank checks and cash for the aggregate amount of $ 1,232.91. Of this amount $ 98.15 was a check on a Lockesburg bank, checks for the amount of $ 341.26 and $ 218.25 were on the Texarkana National Bank, and there was also a check for $ 488.50 on a Little Rock bank. Of the balance, $ 35 was in cash, and the remainder in small checks on a local bank. The president of the bank received the deposit and entered it upon the pass book of appellee in the usual way.

The pass book contained a printed notice which reads as follows:

"All items not payable in DeQueen, received by this bank for credit or collection, are taken at the risk of the owner or depositor. This bank will forward all paper received by it payable out of the city, to collecting agents or correspondents, but, should such collecting agents or correspondents convert the proceeds or remit in checks or drafts which are thereafter dishonored, the amount for which credit has been given will be charged back to the owner or depositor. The depositor also consents that items may be sent direct to the drawee for collection. This bank assumes no responsibility for neglect or default of collecting agents or correspondents of this bank for items lost in the mails. All checks and drafts are credited subject to payments."

The president and cashier on the same afternoon received deposits from several other customers and entered the amounts of the same on the pass books without saying anything to the customers about their intention to segregate their deposits and later return them to the depositors. On the next day the bank closed its doors and was taken charge of by the State Bank Commissioner as an insolvent bank. Appellee was then told by the directors of the bank that the deposit would be segregated and returned to it as soon as they collected the out of town checks. Appellee stopped payment on one of the out of town checks for $ 98.15. During this same time in the afternoon, other employees of the bank received a number of small deposits from other customers in checks and paid out to them a small amount of cash on such deposits.

The chancery court found that the amount sued for was not received by said bank as a general deposit and never became the property of said bank or assets of the bank in the hands of the State Bank Commissioner. Therefore, it was decreed that appellee was entitled to recover the amount sued for from appellant, and that appellant held the same as trustee for the benefit of appellee. The case is here on appeal.

Decree reversed, and cause remanded.

Steel & Edwards, for appellant.

Abe Collins and Lake, Lake & Carlton, for appellee.

OPINION

HART, C. J., (after stating the facts).

It has been uniformly held by this court that a general deposit of money in a bank passes the title immediately to the bank and establishes the relation of debtor and creditor between the bank and the depositor. The bank is bound by an implied contract to honor the checks of the depositor to the extent of his deposit and becomes liable on its refusal to do so. Himstedt v. German Bank, 46 Ark. 537; Carroll County Bank v. Rhodes, 69 Ark. 43, 63 S.W. 68; Bank of Hatfield v. Chatham, 160 Ark. 530, 255 S.W. 31; and Arkansas Valley Bank v. Kelley, 176 Ark. 387, 3 S.W.2d 53. This rule of law was also recognized and stated in Darragh Company v. Goodman, 124 Ark. 532, and other Arkansas cases were cited in support of the general rule.

The court also said that it was well settled that a bank receiving a draft for collection merely is the agent of the drawer or forwarding bank and takes no title to the paper or the proceeds when collected but holds same in trust for remitting it. The difference is that, when a bank receives a general deposit, it takes the title in itself and is in no sense the agent of the depositor for collecting the amount of the check or draft deposited. From the time of the delivery of the draft or check from the customer to the bank, the latter became the owner of the check. It might make any disposition of it that it saw fit. The bank becomes absolutely the owner of it, subject only to the condition that, in case the check or draft is dishonored and not paid, the depositor would become liable to the bank on his indorsement made on the check or draft when deposited. In such cases, the bank is collecting the check or draft for itself as owner and not as agent of the owner as in cases where the check or draft is deposited for collection. This difference is clearly pointed out in Darragh Company v. Goodman, 124 Ark. 532, 187 S.W. 673. See also, as establishing the same rule, Burton v. United States, 196 U.S. 283, 49 L.Ed. 482, 25 S.Ct. 243.

As said by Mr. Justice DAVIS in Bank of the Republic v. Millard, 10 Wall. (U.S.) 152, 19 L.Ed. 897:

"It is an important part of the business of banking to receive deposits, but when they are received, unless there are stipulations to the contrary, they belong to the bank, become part of its general funds, and can be loaned by it as...