White Truck Sales of Saginaw, Inc. v. Citizens Commercial & Sav. Bank

• Decision Date: 22 April 1957
• Docket Number: No. 53,53
• Citation: 82 N.W.2d 518,348 Mich. 110
• Parties: WHITE TRUCK SALES OF SAGINAW, Inc., a Michigan Corporation, Plaintiff and Appellant, v. CITIZENS COMMERCIAL & SAVINGS BANK, of Flint, Michigan, a Michigan Banking Corporation, Defendant and Appellee.
• Court: Michigan Supreme Court

Page 518

82 N.W.2d 518

348 Mich. 110

WHITE TRUCK SALES OF SAGINAW, Inc., a Michigan Corporation Plaintiff and Appellant, v. CITIZENS COMMERCIAL & SAVINGS BANK, of Flint, Michigan, a Michigan Banking Corporation, Defendant and Appellee.

No. 53.

Supreme Court of Michigan.

April 22, 1957.

Cook & Cook, Saginaw, for plaintiff-appellant.

Winegarden & Booth, Flint, for defendant-appellee.

Before the Entire Bench, except BOYLES, J.

EDWARDS, Justice.

This is a suit in equity. The plaintiff, the White Truck Sales of Saginaw, Inc., (hereafter known as White Truck) seeks to impress a trust upon funds previously deposited in the account of one of its dealers, Collins White Truck Sales, Inc. (hereafter known as Collins), at the Citizens Commercial & Savings Bank, of Flint (hereafter referred to as the bank).

White Truck's claim is based upon a check issued to it by Collins in the sum of $6,327.44 in payment for a new truck. The bank, after refusing payment on the check as a result of insufficient funds, applied nearly all the funds in Collins' account to satisfy a chattel mortgage held by the bank in the sum of $5,472.02 which was in default.

The circuit judge before whom this case was tried held that the Collins funds on deposit were neither trust funds nor special deposit, that the bank had a right to set off its chattel mortgage claim against the Collins account, and that certain of White Truck's own improper acts had contributed to the ultimate insolvency of Collins to the extent of barring its right to equitable recovery in this action.

On appeal White Truck contends that the lower court erred on all 3 counts.

The trial judge in his opinion included a statement of the pertinent facts. A review of this record convinces us that this is both fair and complete, and we hereby adopt same:

'The facts in this case are as follows: In July, 1949, one Barrett approached the Collins White Truck Sales, Inc., and indicated his desire to trade in his secondhand truck on a new White Truck. An understanding was reached, as a result of which the secondhand truck was sold through the good offices of the plaintiff. That sale was financed, and the proceeds of $2,600 were received by the plaintiff, who retained $500 to apply on an account for parts running from Collins to plaintiff, and sent $2,100 to Collins.

'On July 11th, 1949, Collins drew a check in favor of plaintiff on the defendant bank, which was holding Collins' note and chattel mortgage for credit previously extended. The check was for $6,327.44 and represented payment from Collins to plaintiff for the new truck furnished Barrett. While drawn on the 11th of July, and given to plaintiff on that date, the check was dated the 15th of July. On the 12th of July Collins deposited the $2,100 received from the sale of the old truck, together with some other money, in the defendant bank.

'Some time between the 11th and the 15th of July, Collins called E. W. Potter, an officer of the bank, and stated that he had written a check for some sixty-three hundred dollars and probably would not have enough in the account to cover it, and asked if Mr. Potter would have the bank honor it. Mr. Potter gave him assurance that the bank would take care of the check and accept the overdraft.

'Proofs are clear that the Collins company was in a position of insolvency and had been for some time; that the bank had from the time honored checks which had created overdrafts running into the hundreds of dollars at various times over the preceding year or so. On the 16th of July, Barrett received his new truck and Collins made a deposit of funds received from the sale in 2 items: $4,000 and $1,300. On the 19th of July, the defendant bank returned the check unpaid and protested it for 'not sufficient funds.'

'On the 21st a meeting was held in the office of the attorney for the bank. This meeting was attended by a representative of plaintiff, Collins, and Mr. Potter and others of the bank, and by the attorneys for the bank and for Mr. Collins. The discussion centered around the financial difficulties of the Collins company. Apparently a tentative conclusion was reached that Mr. Kersheske, the representative of plaintiff, might find a buyer for the company, and would contact Mr. Collins of any success along that line.

'On the next day Collins went to Saginaw to talk with Mr. Levinsohn, an officer of plaintiff corporation, who gave him some reason to hope that he or those represented by him might take the 22d of July. The same day the over the Collins company. This was on check which had been returned NSF by defendant, had made its journey from Flint to Saginaw and back to Flint, where it reposed in the collection department of the Flint branch of the Michigan National Bank. Proof is lacking as to exact dates but one can reasonably conclude that plaintiff had notice of the nonpayment and instructed its bank in Saginaw not later than the 21st to return it to Flint for collection.

'Following the news of the nonpayment, plaintiff called Collins, who in turn called Mr. Potter. Mr. Potter assured him the check would be paid if again presented; and Collins so informed plaintiff. On the evening of the 22d, the same day the check appeared in the Flint branch of the Michigan National Bank, Mr. Kersheske, without notice to Collins, took from the buildings of the Collins company all White truck parts and delivered them to plaintiff company in Saginaw.

'The following day, the 23d of July, Collins called plaintiff and talked with Mr. Kersheske to find out if his company or anyone else were interested in taking over the company. Kersheske said they were no longer interested. He did not inform Collins that he had taken the parts. On Monday, July 25th, Collins discovered that the parts were missing, and so notified the State police, his attorney, and the bank. Obviously the lack of parts to service trucks effectively put the Collins company out of business.

'On the 26th of July the defendant bank charged off the balance of its note against the Collins account, in the amount of $5,472.02. It should be added that the note was in default in the amount of 3 payments, each $226. But it is evident that the action of the bank was not motivated principally by such default. Had the check been honored it would have caused an overdraft of $1,290, which was considerably more than any of the previous overdrafts allowed on the account by the bank.

'It appears clear too, that had Potter been contacted concerning the check when it was first presented he would have given instructions to pay it; but due to faulty intelligence between himself and the staff the check was dishonored.

'The items of deposit: $4,000 and $1,300 and $2,100 all flow from the same transaction, the trade-in and sale of an old truck and the sale of a new truck.'

On appeal we are confronted with 4 questions which may be summarized thus:

1) Is plaintiff entitled to recover on this check because the Collins account represented either special account or special deposit?

2) Is plaintiff entitled to recover because under the circumstances equity should impress a trust on the funds in the Collins...