Boyle v. Northwestern National Bank

125 Wis. 498 | Wis. | 1905

Lead Opinion

Tbe following opinion was filed June 23, 1905:

Cassoday, C. J.

1. Under tbe findings of tbe court and tbe evidence, tbe commission business in which Mr. Schwed-ler was engaged from September 6, 1901, to February 10, 1902, must be regarded as bis personal business and not a continuation of tbe business of tbe old grain corporation of which he had previously been the president, and which corporation was indebted to the bant during the time mentioned in the sum of $4,000. It appears from the findings and is undisputed, that the moneys received from time to time by Mr. Schwedler on the sale of grain and flax on commission during the period mentioned were deposited by him in the bank and that he drew checks thereon as stated. It also appears and is undisputed, that the last deposit so made by him was on February 8, 1902, the same being proceeds of the sale of Larson’s grain; that, after making that deposit, Mr, Schwedler only gave three checks drawn on that account, amounting in the aggregate to $109.20; and that after deducting that amount from the amount standing to his credit on the books of the bank there remained a balance to his credit on the morning of February 10, 1902, of only $648.13, notwithstanding Mr. Schwedler had deposited in the bank to the credit of that account between December 1, 1901, and February 10, 1902, $2,770.38, being the proceeds of sales of grain and flax belonging to the plaintiff and the five inter-veners, respectively, and none of which had been paid to them or any of them. On February 10, 1902, the.bank, without the knowledge or consent of Mr. Schwedler, or the plaintiff, or any of the interveners, and upon an unsigned check or memorandum drawn by itself, as found, charged said account with $648 and credited the same amount to its cashier’s account; and by virtue of such charge and credit so made the bank claims the right to withhold said $648 from the plaintiff and the five interveners and any of them, and apply the same upon the .debt which the grain corporation owed the bank. The trial court held that such claim was without foundation and that such charge and credit so made were improper, illegal, and in no way affected or diminished the amount of $648.13 so standing to the credit of Mr. Schwedler on the morning of February 10, 1902. One of the important questions in the case is whether such ruling of the trial court is correct. It is to be observed tbat Mr. Scbwedler makes no claim to any part of tbe money so on deposit. It is also found tbat tbe plaintiff and tbe five interveners are tbe only persons whose moneys were so deposited in said account and wbo bave not been paid.

Tbe question recurs wbetber, in equity, tbe money so on deposit should be paid to tbe owners of tbe produce from which it was realized or to tbe bank, to be applied on its old claim against tbe grain corporation. It is very evident tbat whenever Mr. Scbwedler sold a carload of grain or flax on commission, and received pay for tbe same, such proceeds, after deducting commissions, freight, inspection, and other charges, were held by him for tbe owner of tbe grain or flax so sold. Tbe contention seems to be tbat by depositing such proceeds in tbe bank to tbe credit of such account-the same became mixed with the funds of tbe bank generally, and tbat by reason of such mixture it became impossible to trace and identify tbe particular money so deposited as entering into any specific fund or property so sought to be charged. In support of such contention counsel cite Nonotuck Silk Co. v. Flanders, 81 Wis. 287, 241, 242, 58 N. W. 883; Burnham v. Barth, 89 Wis. 362, 366—370, 62 N. W. 96; Dowie v. Humphrey, 91 Wis. 98, 102-104; Bromley v. C., C., C. & St. L. R. Co. 103 Wis. 562, 568, 569, 79 N. W. 741; Hyland v. Roe, 111 Wis. 361, 366, 367, 87 N. W. 252. These cases do not, in our judgment, go to tbe extent claimed. On the contrary, “the more recent rule in England,” followed in these cases, is tbat:

“If money held by a person in a fiduciary character, though not as trustee, has been paid by him to bis account at bis banker’s, tbe person for whom be held tbe money can follow it, and has a charge on tbe balance in tbe banker’s bands.” In re Hallet's Estate, L. R. 13 Ch. Div. 696.

Tbe reasons for tbe rule are so fully stated by tbe learned Master of the Eolls in tbat case as to render it unnecessary to add to such reasoning here. At least two of the cases cited by counsel for the defendant expressly sanction the rule thus •quoted, and the others, in a general way, approve of the de■cision from which they are quoted. There is no purpose here •of renewing a discussion which is so fully covered upon reason and authority by our own cases. Nevertheless we venture to quote from two decisions in the supreme court of the United States what seems to be peculiarly applicable to the •case at bar:

“Although the relation between a bank and its depositor is that merely of debtor and creditor, the money which he deposits, if held by him in a fiduciary capacity, does not change its character by being placed to his credit in his bank account. 'The bank contracts that it will pay the money on his checks, and when they are drawn in proper form it is bound to presume, in case the account is kept with him as a trustee, or as acting in some other fiduciary character, that he is in the •course of lawfully performing his duty, and to honor them accordingly; but when against such an account it seeks to assert its lien for an obligation which it knows was incurred for his private benefit, it must- be held as having notice that the fund is not his individual property, if it is shown to consist, in whole or in part, of money which he held in a trust relation.” National Bank v. Insurance Co. 104 U. S. 54.

“A bank receiving on deposit from a factor, under the circumstances set forth in this case, moneys which it must have known were the proceeds of property of the factor’s principal, consigned to him by the principal for sale on the principal’s account, of which moneys the principal was the beneficial owner, cannot, as against the latter, appropriate the deposits to the payment of a general balance due to the bank from the factor; and if it attempts to do so the remedy of the principal against the bank is in equity and not at law.” Union Stock Yards Bank v. Gillespie, 137 U. S. 411, 11 Sup. Ct. 118.

Upon, the strength of these authorities and many others which might be cited, it is manifest that the $648.13 standing fo the credit of Mr. Schwedler on the books of the banlc on tbe morning of February 10, 1902, was in equity tbe property of tbe owners of tbe net produce from wbicb tbe same-was realized, and should be paid to such owners according to-their proportionate shares thereof in equity.

2. Tbe right to tbe $500 mentioned is governed by a different principle. Tbe trial court held, in effect, that tbe check given by Mr. Schwedler on said account to tbe president of tbe bank October 8, 1901, for $500, and charging of the-same to said account, and issuing tbe cashier’s check therefor,- and crediting the amount of the check to the cashier’s account,, was only, in effect, a method of bookkeeping and was improper and ineffectual, and did not in any wise affect the fund' in the bank to the credit of said account. Assuming such-findings and ruling to be correct, the question recurs whether the trial court properly held that the $500 thereafter remained to the credit of Mr. Sehwedler’s account, and was in equity the property of the plaintiff and the interveners and subject to be charged as such in this action. The nature of the action seems to have been lost sight of. This is not a proceeding by attachment or garnishment. The question is not whether the-bank wrongfully induced Mr. Schwedler to give the check bn the fund in the bank, which in equity belonged to his consignors, but whether such fund belonged to the plaintiff and the interveners, or some of them, at the time the check was so given. As stated in some of the adjudications cited, the right of action to trace the moneys and charge the fund has its basis in the right of property, but never upon the theory of preference by reason of an unlawful conversion. Nonotuck Silk Co. v. Flanders, 87 Wis. 237, 242, 58 N. W. 383. So, as stated by Mr. Justice PiNNEY in one of the cases cited and reiterated in others:

“When the trust fund cannot be identified or traced into-some specific estate or substituted property, and the means of ascertainment fail, the trust wholly fails, and the party can only prove as a general creditor. ... As the right to-trace bis trust fund is founded on tbe right of property and not on tbe ground of compensation for its loss, be must be able to point out tbe particular property into wbicb tbe fund lias been converted. When be is unable to do this, tbe trust fails and bis claim becomes one for compensation only, for tbe loss of tbe fund, and stands on tbe same basis as tbe claims of general creditors. . . . "Where tbe trust fund cannot be traced, and tbe substituted property into wbicb it has entered specifically identified, tbe trust fund must be regarded as dissipated, within tbe meaning of tbe authorities — scattered, dispersed, and, as such, destroyed.” Burnham v. Barth, 89 Wis. 362, 367, 369, 370, 62 N. W. 96; Dowie v. Humphrey, 91 Wis. 98, 103, 64 N. W. 315.

Mr. Schwedler’s check for $500 was given to tbe bank nearly two months prior to tbe time when tbe plaintiff or any of tbe interveners shipped any grain to Mr. Schwedler, and more than two months prior to tbe time when any money belonging to tbe plaintiff or any of tbe interveners was so deposited in tbe bank. This being so, it is very obvious that such •check was not drawn upon any fund in wbicb tbe plaintiff or any of the interveners bad any interest. If, as found by tbe court, Mr. Schwedler, at tbe time of giving that check, notified tbe president of tbe bank that tbe money then in tbe bank to bis credit in said account did not belong to him nor to tbe grain corporation, but did belong to those who bad previously made consignments to him, still that could give no right of action in favor of tbe plaintiff or any of tbe inter-veners, in equity, to charge tbe fund then in tbe bank. In other words, tbe plaintiff and tbe interveners can only recover in this form of action by showing that they, or some of them, are tbe equitable owners of tbe fund sought to be •charged, and not by showing that some stranger to tbe action bad such right of action. We must bold that tbe trial court improperly held tbe bank liable for tbe fund of $500 covered by Mr. Schwedler’s check of October 8, 1901.

By the Oourt. — The judgment of tbe superior court for Douglas county is hereby modified by reducing tbe amount of tbe recovery from tbe First National Banlc to $648.13, and tbat tbe same be divided between tbe parties equitably entitled, as indicated in tbis opinion, and tbat, as so modified, tbe judgment is affirmed, with, costs in favor of tbe appellant.

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Rehearing

Tbe plaintiff and tbe interveners moved for a rebearing, wbicb was denied without costs, and tbe following opinion was filed October 3, 1905:

Cassoday, C. J.

Tbe motion for a rebearing presents no ground for bolding tbe bank liable in tbis action for tbe $500 for wbicb Mr. Schwedler gave bis check more than a month prior to tbe time when any money belonging to tbe plaintiff or to any of tbe interveners was deposited in tbe bank. Tbe reason for this ruling is sufficiently stated in tbe opinion filed (ante, pp. 498, 505-511, 103 N. W. 1123, 1127, 1128). So, for tbe reasons there given (ante, pp. 505-510, 103 N. W. 1126, 1127), we adhere to tbe ruling there made “that tbe $648.13 standing to tbe credit of Mr. Schwedler on tbe books of tbe bank on tbe morning of February 10, 1902, was in equity tbe property of tbe owners of tbe net produce from wbicb tbe same was realized, and should be paid to such owners according to their proportionate shares thereof in equity.” We are now asked to fully determine tbe rights of tbe parties upon tbe facts here presented. While tbe principles upon wbicb those rights 'are to be determined are stated in tbe former opinion, yet tbe rights of tbe respective parties are not there stated in detail.

Tbe question is as to tbe proper distribution to be made of tbe $648.13 to tbe credit of Schwedler in tbe bank on tbe morning of February 10, 1902. As stated in tbat opinion, $1,161.43 belonging to tbe plaintiff, Boyle, was deposited in tbe bank to tbe credit of Schwedler December 14 and 18, 1901. Upon tbe theory tbat there was only $648.13 to be distributed, it was found by tbe trial court and is undisputed tbat tbe lowest balance to tbe credit of Scbwedler between December 9, 1901, and February 10, 1902, was $153.50, on January 2, 1902. Since no money belonging to any of tbe interveners went into tbe bank prior to tbe day and year last mentioned, it is manifest tbat tbe $153.50 so to tbe credit of Scbwedler January 2, 1902, was in equity tbe property of Boyle. It is also manifest, upon tbe principles stated, tbat tbe moneys belonging to Boyle wbicb had been drawn from tbe bank on tbe checks of Scbwedler prior to January 2, 1902, cannot be reached by him in this action. It appears from tbe findings and is undisputed tbat after January 2, 1902, and during tbat month, there were deposited in tbe bank to tbe credit of Scbwedler moneys belonging to tbe following inter-veners, respectively, in tbe amounts stated, to wit: Wibe, $426.92; Anderson, $430.38; McNeil, $147.35; and Brown, $165.20 — making in tbe aggregate, with tbe amount so belonging to Boyle, $1,323.35. It also appears from tbe findings and is undisputed that tbe intervener Larson shipped to Scbwedler a carload of grain, wbicb be sold on commission, and tbe proceeds thereof, amounting to $527.78, were deposited in tbe bank to tbe credit of Scbwedler February 4 and 8, 1902, and tbat after paying therefrom tbe freight, inspection, and other charges, including commissions, tbe balance thereof, amounting to $439.08, belonged to Larson, and tbat after such deposit of tbe proceeds of Larson’s grain “tbe only checks drawn or paid upon said account were three in number, . . . amounting in tbe aggregate to $109.20.” Assuming tbat this amount was all paid from the proceeds of Larsons grain, then, by deducting this amount from tbe $527.78, tbe proceeds of Larson’s grain so deposited, there remains a balance of at least $418.58 as belonging to Larson, and wbicb must have been in tbe bank to tbe credit of Scbwedler on tbe morning of February 10, 1902. We perceive no reason why Larson is not entitled to tbat amount in tbe judgment to be entered in this action. Deducting tbe $418.58 from tbe $648.13 standing to the credit of Sehwedler on the morning of Eeb-ruary 10, 1902, and it leaves a balance of $229.55 to be distributed to Boyle and the four interveners whose moneys went into the bank to the credit of Sehwedler in the month of January, 1902, as stated, according to their proportionate shares thereof in equity; that is to say, to Boyle $26.63, to Wibe $74.05, to Anderson $74.65, to McNeil $25.56, and to Brown $28.66, making a total of $229.55. This gives to each a little over seventeen and one third per cent, on the amount of his claim for his money so on deposit in January, 1902. The division thus to be made is in accordance with the principles stated in the former opinion.

By the Gourt. — The judgment of the superior court for Douglas county is hereby modified by reducing the amount of the recovery from the First National Bank to $648.13, and that the same be divided between the parties equitably entitled, as indicated in the former opinion and as stated in this opinion, and that, as so modified, the judgment is- affirmed, with costs in this court in favor of the appellant.