Washington Shoe Mfg. Co. v. Duke

• Citation: 218 P. 232,126 Wash. 510
• Decision Date: 20 September 1923
• Docket Number: 17589.
• Court: United States State Supreme Court of Washington
• Parties: WASHINGTON SHOE MFG. CO. v. DUKE, State Supervisor of Banking.

218 P. 232

126 Wash. 510

WASHINGTON SHOE MFG. CO. v. DUKE, State Supervisor of Banking.

No. 17589.

Supreme Court of Washington, En Banc.

September 20, 1923

Appeal from Superior Court, King County; C. H. Neal, Judge.

Action by the Washington Shoe Manufacturing Company against J. P Duke, State Supervisor of Banking, liquidating the Scandinavian-American Bank of Seattle. Judgment for plaintiff, and defendant appeals. Reversed and remanded, with directions.

Tolman and Fullerton, JJ., dissenting.

W. V Tanner and John P. Garvin, both of Seattle, for appellant.

G. E Steiner and Carkeek, McDonald, Harris & Coryell, all of Seattle, for respondent.

MAIN C.J.

The plaintiff brought this action to recover a deposit made in the Scandinavian-American Bank of Seattle on June 30, 1921, the last day on which the bank was open for business, or, in lieu thereof, to have the assets of the bank impressed with a trust in a sum equal to the amount of the deposits on that day. The cause was tried to the court without a jury, and resulted in a judgment sustaining the plaintiff's right to recover. From this judgment, the defendant appeals.

The respondent is a corporation organized and existing under the laws of this state. The appellant is the state supervisor of banking, and is in possession of the assets of the Scandinavian-American Bank, which for many years prior to its closing was engaged in the banking business in Seattle. The bank was turned over to the appellant on the morning of July 1, 1921, and since that time has been in the process of liquidation. For some time prior to the closing of the bank there had been a steady loss of profits. During the 18 months immediately preceding, there had been a loss of deposits in approxmiately the sum of $700,000 per month. After January 15, 1921, when a bank of the same name, doing business in the city of Tacoma, failed, the withdrawal of deposits from the Seattle bank was accentuated. From that date until the time the Seattle bank was turned over to the appellant, there were withdrawals aggregating approximately $3,500,000. In order to provide funds to meet these withdrawals, an attempt was made to liquidate the assets of the bank, which included quite an amount of slow paper. About two weeks prior to the closing of the bank the consideration of its condition was taken up with some of the other banks of Seattle through the clearing house with a view to consolidating the Scandinavian-American Bank with other banks and continuing business in that way. As a result of these negotiations there was evolved a plan of forming a consolidated bank consisting of the Scandinavian-American Bank and three others, and, for the purpose of guaranteeing the members of the consolidation against loss and aiding the slow and doubtful assets of the Scandinavian-American Bank, it was planned to raise among the banks of the state and others a fund of $2,000,000 in cash. This plan met with such success that on the morning of June 30, 1921, there had been raised among the banks in Seattle and the banks of the state approximately $1,825,000. The conferences looking to the plan of reorganization were participated in by the president of the Scandinavian-American Bank, officers representing the other banks concerned, members of the clearing house of Seattle, and the supervisor of banking of this state. The testimony is undisputed that there was every expectation of the success of the plan during the day of June 30 and until about 11 or 12 o'clock on the night of that day, when, the entire subscription of $2,000,000 not having been obtained, the plan for the merger failed. Rumors of the proposed consolidation and condition of the bank had gained such circulation in the city of Seattle during the few days prior to June 30 that it was feared by those in charge of the bank that a run upon it would result. The bank was then in that condition that, if there were further heavy withdrawals of deposits, it would in a short time be unable to pay upon demand. The officers of the bank, on the morning of June 30, realizing this state of affairs, and having in mind the possibility of the failure of the consolidation plan, instructed the tellers of the bank to keep entirely separate all deposits offered on that day by putting the money of each depositor in a separate envelope, and marking the name of the depositor on the outside thereof. The reason for this was that it was the hope of the officers that, if the consolidation plan failed, the deposits received on this day would be returned to those who made them, if, under the law, they should be entitled thereto.

During the 30th many deposits were made, one of the depositors being the respondent. So far as the depositors were concerned, the deposits were made in the usual way, the entry being made in the depositor's passbook, or a duplicate deposit slip being issued in the absence of the book. When the money and checks were passed to the tellers, each depositor's money and checks were placed in an envelope, and his name placed on the outside. No entries were made on the books of the bank. The depositors had no knowledge of the manner in which the deposits were handled after they were passed to the tellers. These deposits, together with the other assets of the bank, came into the possession of the supervisor of banking on the morning of July 1, when that officer took possession. Thereafter the envelopes were opened and the entries made upon the books of the bank.

As above stated, at about 11 o'clock on the night of June 30, the last day on which the bank was open for business, the negotiations leading to the consolidation were abandoned, and soon thereafter, and during the same night, the trustees of the Scandinavian-American Bank passed a resolution to turn the bank over to the supervisor of banking on the following morning.

The respondent claims that it had a right of recover the deposit made on June 30, which was placed in the envelope, as above indicated, or, in lieu thereof, have the assets of the bank impressed with the trust in the amount of the such deposit. If the respondent has a right to prevail, it is because the deposit was a special one, and not a general deposit. As is well understood, a deposit in a bank is either general or special. Where a general deposit is made, the title thereto passes to the bank, and the latter becomes the debtor of the depositor. When the bank accepts a special deposit, it becomes a trustee of the depositor, and holds the money subject to the trust. Carlson v. Kies, 75 Wash. 171, 134 P. 808, 47 L. R. A. (N. S.) 317; Kies v. Wilkinson, 101 Wash. 340, 172 P. 351. In the second case cited the rule and the exceptions thereto are stated as follows:

'As a rule, when money is deposited in a bank, title to it passes to the bank. The bank becomes the debtor of the depositor to the extent of the deposit, and to that extent the depositor becomes the creditor of the bank. Allibone v. Ames, 9 S. D. 74, 68 N.W. 165, 33 L. R. A. 585. Such deposit then constitutes a part of the assets of the bank and, in case of insolvency, belongs to the creditors of the bank in proportion to the amounts of their respective claims. Exceptions to this rule are: First, where money or other thing is deposited with the understanding that that particular money or thing is to be returned to the depositor; second, where the money or thing deposited is to be used for a specifically designated purpose; and, third, where the deposit itself was wrongful or unlawful.'

The rule is that a deposit will be deemed general unless it is made special by contract, and, in the absence of an agreement to the contrary, it will be presumed to be a general deposit and not special. Blackwell v. Dean, 9 Okl. 626, 60 P. 226; Schofield Mfg. Co. v. Cochran, 119 Ga. 901, 47 S.E. 208; Town of Manitou v. First National Bank, 37 Colo. 344, 86 P. 75; Dawson v. Real Estate Bank, 5 Ark. 283; Nichols v. State, 46 Neb. 715, 65 N.W. 774. In the case last cited it is said:

'Whether the deposit was a general or special one was of course a question of fact to be determined from the intention of the parties, but a deposit is presumed to be a general one in the absence of evidence to the contrary.'

The question then arises whether the deposit made by the respondent, which is presumed to be general and which could only be made special by the intention or agreement between the bank and the depositor, was made special by reason of the fact that the bank did not intend to receive it as a general deposit, unless the plan of consolidation should be consummated. In other words, did the intention of the bank, not disclosed to the respondent, the depositor, to accept the deposit as special make it such? The rule is that a deposit is not special unless made so by the depositor. In 7 C.J. 630, it is said:

'Whether a particular deposit is general or special is a matter to be determined by the facts and circumstances attending the making of the deposit, and the rule is that a deposit is not special unless made so by the depositor or unless made in a particular capacity.'

In Boettcher v. Colorado Nat. Bank, 15 Colo. 16, 24 P. 582, it is said:

'A deposit is not special unless made so by agreement or directions of the depositor, or by such circumstances as being inclosed in a box, or other matter indicative of intent not to make a general deposit, or unless made in a particular capacity which indicates such intent.'

In Meadowcroft v. People, 163 Ill. 56, 45 N.E. 991, 35 L. R. A. 176, 54 Am. St. Rep. 447, it is said:

'Besides this, a deposit of money with bankers at their banking house is regarded as general, unless it appears that the depositor makesit special or deposits it expressly in some particular capacity.'

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