Whitcomb v. Carpenter

• Decision Date: 08 May 1907
• Citation: 111 N.W. 825,134 Iowa 227
• Parties: FRANK W. WHITCOMB, Appellant, v. L. M. CARPENTER, Assignee of E. E. Snyder, Appellee
• Court: Iowa Supreme Court

111 N.W. 825

134 Iowa 227

FRANK W. WHITCOMB, Appellant, v. L. M. CARPENTER, Assignee of E. E. Snyder, Appellee

Supreme Court of Iowa, Des Moines

May 8, 1907

Appeal from Jones District Court.--HON. B. H. MILLER, Judge.

Reversed.

Dale & Harrison, for appellant.

Jamison & Smyth and Park Chamberlain, for appellee.

OPINION

THE opinion states the case.--Reversed.

WEAVER C. J.

One E E. Snyder, doing business as a private banker, under the name of "Bank of Olin," became insolvent, and made an assignment to the defendant herein for the benefit of his creditors on December 13, 1904. A few days prior to the assignment, and at a time when he knew he was insolvent, and knew that he had no funds in the hands of his correspondent bank at Chicago, Snyder sold to the plaintiff a draft on said correspondent for $ 190, and demanded and received for the same from the plaintiff the full par value of such draft. On being presented to the Chicago bank, the draft was dishonored, and, Synder having failed to pay or return the money so received, plaintiff filed claim therefor against the defendant as assignee, and asked that it be allowed as a preferred claim. It is further shown, without dispute, that prior to the date of said draft the plaintiff herein had made and delivered his promissory note to Synder for $ 600, and that the same was outstanding, and in part at least unpaid. It appears, however, that Snyder had pledged or deposited said note with one Rummell as collateral security for a debt due from him to said Rummell, but the fact of such transfer was unknown to the plaintiff. After giving said note, but whether before or after it was transferred to Rummel is not made clear, the plaintiff paid or sent to Synder, to be applied upon said note, several sums, aggregating $ 175. For $ 150 of this money Snyder gave a receipt to the plaintiff, stating that said moneys were received by him "for credit on note." For the remaining sum of $ 25 no receipt is shown, but its payment by the plaintiff is not disputed. None of these payments were ever indorsed or applied upon plaintiff's note, but it is conceded that the moneys so received were by Snyder mingled with the funds of the bank and appropriated to its use. For this sum of $ 175 the plaintiff filed his claim against the assignee, and, as in the other case, asked that it be allowed as a preferred claim, in the event that, for any reason, it could not be applied and indorsed upon or set off against his said note. As Rummell, the holder of the note, was not a party to the proceeding, it appears that the prayer of the plaintiff to have his claims applied as payments upon the note referred to was denied, and of this ruling no complaint is made. The district court found that Snyder was justly indebted to plaintiff to the full amount of the claims in controversy, but ruled that neither of said claims should be given any preference over those of the general creditors. From this ruling an appeal has been taken by the plaintiff to this court.

In at least two recent cases, this court has had occasion to consider the extent to which moneys wrongfully received by or deposited in a bank may be treated as trust funds, and claims therefor given preference over those of general creditors. See Page County v. Rose, 130 Iowa 296, 106 N.W. 744; Officer v. Officer & Pusey, 127 Iowa 347, 101 N.W. 484. The doctrine there approved and applied governs the case now before us, and requires us to hold that the district court erred in refusing the preference which plaintiff demanded. We think it unnecessary to again review the authorities upon this point. It is sufficient to say that the act of Snyder in taking the money of the plaintiff for the draft which he knew was worthless, and which he had no assurance would be honored when presented for payment, was as wrong in law as it was reprehensible in morals. The money was not given to him as a deposit, nor as a loan. He received it upon his expressed or implied representation that he had such moneys or credit with his Chicago correspondent that, upon presentation of the draft, a like sum would be paid to the plaintiff. That representation he knew to be untrue, and he must be held to have received the money wrongfully, and to hold it in trust for the person who paid it to him.

As to the other item, there is even less doubt. As suggested by us in Page County v. Rose, supra, it is a well-established rule that moneys received by a bank to be applied as payments upon a particular debt, or to be remitted to some creditor of the person paying such sums, are regarded as trust funds, and a claim therefor is ordinarily entitled to preference over the claims of general creditors in the distribution of the assets of the insolvent bank. See Nurse v. Satterlee, 81 Iowa 491, 46 N.W. 1102; McCleod v. Evans, 66 Wis. 401 (28 N.W. 173, 57 Am Rep. 287); Central Bank v. Life Ins. Co., 104 U.S. 54 (26 L.Ed. 693); Brewing Ass'n v. Morris, 36 Neb. 31 (53 N.W. 1037); Capital Bank v. Coldwater Bank, 49 Neb. 786 (69 N.W. 115, 59 Am. St. Rep. 572); Foster v. Rincker, 4 Wyo. 484 (35 P. 470); Bank v. Weems, 69 Tex. 489 (6 S.W. 802, 5 Am. St. Rep. 85; Bank v. Latimer, 67 F. 27; Sherwood v. Bank, 103 Mich. 109 (61 N.W. 352); Plow Co. v. Lamp, 80 Iowa 722, 45 N.W. 1049; Peak v. Ellicott, 30 Kan. 156 (1 P. 499, 46 Am. Rep. 90). Snyder confessedly received this sum of $ 175 to be applied as payment upon plaintiff's note, and it was his duty to make the proper indorsement of such payment, if the note was still in his hands; or, if the note had been transferred to another, it was equally his duty to turn over the payment so received to the person holding the paper. He failed to do so, and mingled the funds with those of the bank, and, under the rule of the authorities to which we have referred, is chargeable as trustee to that amount. The cases relied upon by the appellee, Jones v. Chesebrough, 105 Iowa 303, 75 N.W. 97, and Bradley v. Chesebrough, 111 Iowa 126, ...