U.S. Fidelity & Guaranty Co. v. Home Bank for Savings
| Decision Date | 29 February 1916 |
| Docket Number | 2863. |
| Parties | UNITED STATES FIDELITY & GUARANTY CO. v. HOME BANK FOR SAVINGS. |
| Court | West Virginia Supreme Court |
Submitted February 22, 1916.
Syllabus by the Court.
When a demand, whether arising out of the relationship of principal and surety, or upon contract, express or implied, is purely a legal one, and not requiring the intervention of a court of equity for its enforcement, equity is without jurisdiction to grant relief.
But where there is no privity of contract between the parties but the demand is based upon principles of equity and justice, as for fraud or participation by defendant in a breach of trust by a fiduciary, equity will take jurisdiction at the suit of the beneficiary or cestui que trust, or at the suit of a surety of such fiduciary and by substitution grant relief against an intermeddler with the trust funds.
The mere fact that checks payable to an administrator in his fiduciary character are offered for deposit in a bank, and by direction of the fiduciary, credited to his individual account, is not sufficient to charge the bank with notice of fraudulent intent of the fiduciary to misappropriate the trust fund, or to require the bank to supervise the subsequent distribution of the funds, and to render it liable for the default of the fiduciary.
Unless there be something in the character of the account of such fiduciary to individualize it, a bank has ordinarily no right to exercise a supervisory control over the funds on deposit nor to refuse payment of the fiduciary's checks drawn against his account.
To render a bank liable in such cases for the default or misappropriation of funds by a fiduciary deposited to his individual or fiduciary account, the bank must have participated in the fraud or misappropriation, as by appropriating the funds, or receiving payment out of such fund on the individual indebtedness of the fiduciary to it or by otherwise co-operating in the fraud of the fiduciary.
Appeal from Circuit Court, Harrison County.
Suit by the United States Fidelity & Guaranty Company against the Home Bank for Savings. From a decree for defendant, plaintiff appeals. Affirmed.
Davis, Swartz & Templeman, of Clarksburg, for appellant.
Homer W. Williams, of Clarksburg, for appellee.
Plaintiff declining to amend, its bill by the decree appealed from was dismissed on demurrer.
As surety on the bond of Dever Boring, administrator of the estate of Rachael M. Boring, deceased, plaintiff seeks a recovery from defendant on equitable grounds of the sum of eight hundred and sixteen dollars and seventy-three cents, the amount which it was required to and did pay for the default of said administrator.
The grounds or theories upon which defendant's alleged liability is predicated are: First, that during the years 1909 and 1910, it received from Boring, administrator, three checks on the Empire National Bank, as follows: The first, a check of "John D. Pickens, Exr. of the estate of James Pickens," payable to the "order of Dever Boring, Admr. of R. M. Boring, decd.," for five hundred and sixty-eight dollars and fifty-four cents, endorsed "Dever Boring, Admr."; the second, a check of "John D. Pickens, Exr. of Ann M. Pickens, decd." payable to the "order of Dever Boring, administrator of R. M. Boring, Decd." for "four hundred and seven dollars and seven cents," "for estate of R. M. Boring, Decd." and endorsed, "Dever Boring, Admr."; the third, a check of said "John D. Pickens, Exr. of Ann M. Pickens, Decd." to the "order of D. Boring, Admr. of R. M. Boring," for three hundred and twenty-two dollars and six cents, "From the Estate of Ann Pickens, decd.," and endorsed "Dever Boring"; and that instead of carrying the same to his credit as administrator, credited the amount thereof, as directed by him, to his individual account; Second, that having so credited said checks to Boring's individual account, and not to him in his fiduciary capacity, defendant permitted him, on checks signed by him as administrator, to disburse sums aggregating four hundred and sixty-seven dollars and eight cents, and the residue thereof, with other moneys deposited by him individually, to be drawn out on his individual checks and to be thereby appropriated to his own use, in violation of and in breach of his trust, and that he thereafter died insolvent and indebted to said estate in the sum which plaintiff as his surety on his bond had been required to pay for his defalcation as aforesaid; Third, that defendant, at the times it so received said checks and credited the same to the individual account of Dever Boring, had notice that the same represented funds belonging to the estate of Rachael M. Boring, deceased, and were not the individual funds of said administrator; and, moreover, that if defendant did not have actual knowledge of the fiduciary character of said funds, it was chargeable with notice thereof upon the face of the checks, and that it was its duty to have placed the same to the credit of said Dever Boring, as administrator, and not to his individual account; and furthermore should not have permitted him to withdraw the same or any part thereof upon his individual checks, and thereby to appropriate the said money to his own use, and whereby defendant, along with said Dever Boring, was guilty of the unlawful conversion and misappropriation of said money, and liable with him to the said estate and to the heirs of said Rachael M. Boring, and that plaintiff as surety and by right of subrogation or substitution is now entitled to recover from it the amount paid in discharge of said liability; and the prayer of the bill is for a decree against defendant for the amount so paid by it on account of its liability on said bond.
The first proposition urged on behalf of defendant in support of the decree, but controverted by appellant's counsel, is, that if entitled to any relief a court of law is competent and able to give full and adequate relief, and that on familiar principles a court of equity is without jurisdiction to grant the relief prayed for. The law undoubtedly is, as many times decided here, that when the demand, whether arising out of the relationship of principal and surety or otherwise, or upon contract, express or implied, is purely a legal one, and does not require the intervention of a court of equity upon some principle or rule of equity cognizance to afford full relief, a court of equity is without jurisdiction in the premises, and that the parties will be relegated to the legal forum. Bartlett v. Armstrong, 56 W.Va. 293, 49 S.E. 140; Teter, Admr., v. Teter, 65 W.Va. 167, 63 S.E. 967; Maxwell, Trustee, v. Davis Trust Co., 69 W.Va. 276, 71 S.E. 270; Conrad v. Buck, 21 W.Va. 396.
But in the case at bar the right claimed...
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