The Goodyear Tire & Rubber Company v. The Hanover State Bank

• Decision Date: 12 November 1921
• Docket Number: 23,810
• Court: Kansas Supreme Court
• Parties: THE GOODYEAR TIRE & RUBBER COMPANY, Appellant, v. THE HANOVER STATE BANK et al., Appellees

204 P. 992

109 Kan. 772

THE GOODYEAR TIRE & RUBBER COMPANY, Appellant, v. THE HANOVER STATE BANK et al., Appellees

No. 23,810

Supreme Court of Kansas

November 12, 1921

Decided July, 1921

Appeal from Shawnee district court, division No. 2; GEORGE H WHITCOMB, judge.

Judgment reversed and cause remanded.

SYLLABUS

SYLLABUS BY THE COURT.

TRUST FUNDS -- Proceeds of Check -- Insolvency of Bank -- Preferred Claim. Where a bank holding a claim for collection receives in payment thereof a check upon itself drawn by the debtor against a sufficient deposit, there being enough cash on hand to meet it, charges the amount to him and attempts to remit it to the creditor by cashier's check, but passes into the control of a receiver before such cashier's check in due course of business is presented for payment, having at all times had cash on hand in excess of the amount thereof, the creditor is entitled to recover the amount of his claim from the assets of the receivership as a trust fund in preference to general creditors.

R. W. Blair, T. M. Lillard, both of Topeka, and R. L. Helvering, of Marysville, for the appellant.

Bennett R. Wheeler, S. M. Brewster, and John L. Hunt, all of Topeka, for the appellees.

Mason J. Mason, J., Burch, J., dissenting.

OPINION

MASON, J.:

The Goodyear Tire & Rubber Company, of Akron, Ohio, held a trade acceptance--in effect a draft--for $ 1,364.50, on Poell Brothers, of Hanover, Kan., which was sent for collection to the Hanover State Bank, of that place. On May 13, 1920, the bank presented the draft to Poell Brothers, who gave in exchange for it their check upon the bank, where they carried a checking account sufficient to meet it, the bank having more than enough cash on hand for the purpose. The check was at once charged to the account of Poell Brothers, and the bank mailed its cashier's check for the amount to a bank in Chicago through which the collection had been received. On May 17, 1920, and before the cashier's check in the usual course of business had been presented to the Hanover State Bank for payment, that bank was closed, being taken charge of by Dugald Spence, a deputy bank commissioner, who was afterwards appointed receiver. The rubber company brought this action against the Hanover State Bank and its receiver, asking that the receiver be adjudged to hold the amount of such draft (less a remittance charge) in trust for it, and that its claim be given preference over those of ordinary creditors. On an agreed statement of facts judgment was rendered declaring it to be a general creditor only, and it appeals.

The parties agree upon the test by which the matter is to be determined: In order for the plaintiff to have a preferred claim upon the estate in the hands of the receiver it must appear that the proceeds of the check in some form reached his hands, and that the assets brought under his control were larger by that amount than they would otherwise have been. While there has been much difference of judicial opinion on the subject, some of which still remains, that is now the generally accepted view (3 R. C. L. 638; 26 R. C. L. 1355; Notes, L. R. A. 1916C, 21, L. R. A. 1917F, 603), and the one adopted in this state. ( Investment Co. v. Bank, 98 Kan. 412, 158 P. 68, and cases there cited.) The present controversy turns upon the application to be made of that test.

When the bank was closed it had $ 6,971.95 in cash and its books showed $ 54,444.58 in sight exchange, the actual amount being less than that, but in excess of fifty per cent of it. If Poell Brothers, instead of paying the draft upon them by check, had used currency for the purpose there can be no doubt that the receiver would hold the amount in trust for the plaintiff, for the total of cash or its equivalent which came into his hands would necessarily or at all events presumptively have been that much larger by reason of such payment. The court is of the opinion that the rule applies that where a payment to a bank is made by a check drawn thereon the result is the same as though the depositor had presented his check, received the money over the counter, and then used it in making the payment. That rule has often been announced. (Washbon v. Bank, 87 Kan. 698, 125 P 17; 2 Morse on Banks and Banking, 5th ed., § 451, and cases cited in note.) In Bank v. Bank, 62 Kan. 788, 64 P. 634, a situation was presented having at least some analogy to that now under consideration. There a bank which soon after failed, held for collection a check on another bank in the same town which it used in effecting the daily clearing between the two banks, paying the difference in cash. The owner of the check sued to have his claim given a preference. The receiver urged that the failing bank had used the check merely to pay its indebtedness and therefor the estate to be administered had not been increased. His contention was denied, the court holding that the...