Vermont Loan & Trust Co. v. First National Bank of Cheyenne

Decision Date01 November 1927
Docket Number1352
Citation37 Wyo. 216,260 P. 534
PartiesVERMONT LOAN & TRUST CO. v. FIRST NATIONAL BANK OF CHEYENNE, ET AL. [*]
CourtWyoming Supreme Court

APPEAL from District Court, Laramie County; WILLIAM A. RINER, Judge.

Action by the Vermont Loan & Trust Company against the First National Bank of Cheyenne and another. Judgment for plaintiff, and defendants appeal.

Affirmed.

Thomas Hunter, for appellants.

Plaintiff's evidence failed to establish a trust as to the fund in controversy; the payment was by check upon an insolvent bank and the cases of Foster v. Rincker, 4 Wyo. 484 and Lusk Co. v. Ginther, (Wyo.) 232 P. 516, would not seem to be in point. We believe that appellants' contentions are supported by the following cases from this jurisdiction: Richardson v. Co., 102 F. 785; Empire Co. v. Carroll Co., 194 F. 593; Clark, et al. v. Bank, 230 F. 738; American Can Co. v Williams, 176 F. 817; Bank v. Centralia, 240 F 92; Brewing Co. v. Clayton, 56 F. 759; Bank v Armstrong, 36 F. 684; Beard v. School District, 88 F. 675; Nyssa Drainage Dist. v. Bank, 3 F. (2nd Ser.) 648. The recent cases of Zimmerle v. Bank, 191 P. 788, Hecker etc. Co. v. Trust Co., 136 N.E. 33, and Commonwealth v. Bank, 64 A. 923 are also in point. The claimant not having shown that the transaction increased the assets of the bank available to creditors, is not entitled to preference.

Kinkead, Ellery & Henderson, for respondent.

The proceeds of the warrant augmented the assets of the receivership. Lusk Co. v. Ginther, (Wyo.) 232 P. 518; Foster v. Rincker, 4 Wyo. 484; Hawaiian Co. v. Browne, (Mont.) 220 P. 1114. Defendant bank is estopped from denying that it received cash in making the collection, Bank v. Malloy, 68 L.Ed. 617, 264 U.S. 160; Jensen v. Meat Co., (Mont.) 230 P. 1081; Bank v. Bank, 187 S.W. 673. The bank was the agent of the owner of the warrant and its receiver stands in its shoes. Rankin v. Bank, 52 L.Ed. 610; Cutler v. Frye, 240 F. 238; Smith on Receivers, Vol. 2, Section 453; Goodyear Co. v. Bank, (Kans.) 204 P. 992; Kesl v. Bank, (Kans.) 204 P. 994; Bank v. Peters, (Va.) 123 S.E. 379. The receivership assets were augmented by the transaction, Insurance Co. v. Mather, 118 Ill.App. 491; N. C. Corp. v. Bank, 50 S.E. 308; Bank v. Glanton, 92 S.E. 625; Bank v. Bank, (Ark.) 187 S.W. 673; Bank v. Millspaugh, (Mo.) 275 S.W. 583. Credit given for a check is equivalent to payment of the check in cash. Patterson v. Bank, (Nebr.) 102 N.W. 765; Shaffer v. Olson, (N. D.) 139 N.W. 983; Mortgage Co. v. Tibbals, (Ia.) 19 N.W. 319; Hare v. Bailey, (Minn.) 76 N.W. 213; Howard v. Walker, (Tenn.) 21 S.W. 897. A review of the cases cited by appellant indicate that the facts in each of them created the relation of debtor and creditor as between the owner and the bank; payment by the state treasurer of the warrant by delivering a check against his account in defendant bank, and the charging of the amount against his account, constituted the payment of the warrant in cash. This principle is supported by the overwhelming weight of authority. The acceptance by the bank of a check drawn on itself in payment of a collection item is in law and in fact a collection by the bank of cash. Wagner v. Spaeth, (Wyo.) 245 P. 123. The relation of principal and agent existing between a bank and the owner of a collection item does not shift to a relation of debtor and creditor, upon the bank's collecting the item. Macey v. Roedenbeck, 227 F. 346 (8th Cir.).

KIMBALL, Justice. BLUME, Ch. J., and POTTER, J., concur.

OPINION

KIMBALL, Justice.

The plaintiff, Vermont Loan and Trust Company, of Spokane, Washington, having a claim in the sum of $ 4698 against the defendant, the insolvent First National Bank of Cheyenne, obtained in this action a judgment for the amount, which was declared to be a preferred claim entitled to payment ahead of claims of the general creditors. The defendant bank and its receiver have appealed.

The only contested point was the right to a preference. The case was heard on an agreed statement of facts. The plaintiff was the owner and holder of a cash warrant of the State of Wyoming in the sum of $ 4698, payable to plaintiff. About the first of July, 1924, plaintiff placed the warrant in the hands of the Old National Bank of Spokane for collection. By that bank the warrant was sent to the Spokane Branch of the Federal Reserve Bank which in turn sent it to the Omaha Branch of the Federal Reserve Bank by whom it was received July 5, 1924. The Omaha Branch of the Federal Reserve Bank, on July 6, 1924, sent the warrant for collection to the defendant bank, after endorsing it thus:

"Pay to the order of any bank or banker for collection and remittance. All prior endorsements guaranteed.

July 5, 1924.

Omaha Branch Federal Reserve Bank of Kansas City."

The warrant was received by the defendant bank July 7, 1924. On the same day the State Treasurer, whose duty it was to pay the warrant, did so by giving his check on the defendant bank with whom he had on deposit more than sufficient funds to make the payment. The check was charged against the State Treasurer's account, and for the amount so collected the defendant bank then, on the same day, issued and transmitted to the Omaha Branch of the Federal Reserve Bank a draft drawn on the Omaha National Bank. The draft was received by the Omaha Branch of the Federal Reserve Bank on the afternoon or evening of July 8, and presented for payment the following day. Before its presentation, payment thereof had been stopped by a National Bank Examiner who, on July 9, had taken charge of the defendant bank which was then insolvent and soon passed into the hands of the receiver. When the State Treasurer gave his check in payment of the warrant, and at all times thereafter, the amount of money in the vaults of the defendant bank and taken over by the receiver, was greatly in excess of the amount of the plaintiff's claim.

It is conceded that, under the law in this state as announced in Foster v. Rincker, 4 Wyo. 484, 35 P. 470, followed in Lusk Development and Improvement Co. v. Giinther, 32 Wyo. 294, 232 P. 518, if the State Treasurer had handed to the defendant bank the actual cash in payment of the warrant, the bank then would have held the collected moneys as a trust fund although they were immediately mingled with moneys belonging to the bank. And it is further conceded that, if the warrant had been so collected, the facts stipulated are sufficient, under the principles announced in State v. Foster, 5 Wyo. 199, 38 P. 926, 29 L.R.A. 226, and Lusk Development & Imp. Co. v. Ginther, supra, to prove that the trust fund has come into the possession of the receiver, and it would follow that plaintiff's claim should have preference over the claims of general creditors.

We are not asked to overrule the foregoing cases, and the principles which they announce must be considered as settled in this jurisdiction. It is contended, however, that those principles are not applicable to a case where the collection is made by a check on the collecting bank.

It is further conceded, as we understand, both by counsel for the receiver and by some of the authorities on which he relies, that, if the State Treasurer had demanded the cash for his check and on receiving the cash had immediately returned it to the bank in payment of the warrant, the bank then, under the above cited cases, would have held the money as a trust fund, which, being traced into the hands of the receiver, could be recovered as a preferred claim. As the money to meet the State Treasurer's check was in the vaults of the bank when the check was presented, we must assume that the State Treasurer might have taken the money out and paid the warrant in cash. The bank was authorized to collect the warrant in money only, and the transactions of July 7, 1924, were in legal effect a collection of the money. Wagner v. Spaeth, (Wyo.) 36 Wyo. 279, 254 P. 123; American National Bank v. Miller, 229 U.S. 517, 33 S.Ct. 883, 57 L.Ed. 1310.

While the defendant bank held the warrant there can be no doubt that the relation between the bank and the plaintiff was that of agent and principal. That relation, under the law in this jurisdiction, would continue after the collection was made, and the collected moneys were just as much the property of the principal as the warrant itself was. Foster v. Rincker, 4 Wyo. at p. 491, 35 P. 471. We are asked to hold that this rule fails of application here because the State Treasurer did not go through the formality of having the money passed over the counter to him and then passing it back.

There are many cases holding that the relation of principal and agent existing between the owner and the collecting bank is changed to that of debtor and creditor when the money is collected. In most of these cases the note was sent for "collection and credit," or with the understanding that the proceeds were to be retained and used for a time by the collecting bank. Such cases are not opposed to the views of this court, as heretofore expressed.

There are other cases holding to the general proposition that the bank, upon receipt of the money due its principal becomes a debtor instead of a fiduciary. From the fact that the collection is sent to a bank it is presumed or inferred that the owner has consented that the bank may use the money. For discussion and citation of cases supporting this view, see Scott's Cases on Trusts (1919) note, p. 63 et seq.; 21 Columbia Law Rev. 507, 514; note, 86 Am. St Rep. 786; Hecker-Jones-Jewell Mill. Co. v. Cosmopolitan Trust Co., 242 Mass. 181, 136 N.E. 333, 24 A. L. R. 1148. The reasoning seems to be that the owner who sends a collection to a bank must know that he will not receive the specific money collected; he...

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6 cases
  • In re Riverton State Bank
    • United States
    • United States State Supreme Court of Wyoming
    • 1 d2 Outubro d2 1935
    ...of relationship after collection is made is well stated in 3 R. C. L. 633. The principle of agency continues after collection. Vermont Company v. Bank, 37 Wyo. 216; see also 90 L. R. 6. The funds available for paying the preference is not an issue before this court; creditors have no proper......
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    • United States State Supreme Court of Wyoming
    • 11 d2 Dezembro d2 1934
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