Corp. Commission v. Merchants Bank & Trust Co.
138 S.E. 22
N.C.
1927
Check Treatment
Adams, J.

The central question turns upon the nature of the transaction between the claimant and the Merchants Bank and Trust Com *699 pany. Considered in view of the evidence and the verdict, what did the transaction amount to in contemplation of law? The answer involves preliminary inquiry into the nature of the deposit — whether it was general or special, or whether it was a deposit for a specific purpose.

A general deposit is the payment of money into a bank to be repaid upon demand; the deposit creates between the bank and the defendant the relation of debtor and creditor; the relation is legal; the money passes from the depositor to the bank, and is mingled with other money, the entire amount forming a general fund from which depositors are paid. Deposits of this character are free from any “trust quality,” and the depositor, in the event of the bank’s insolvency, has no right of preference, but must share pro rata with general creditors. Boyden v. Bank, 65 N. C., 13; Lilly v. Comrs., 69 N. C., 300; Ruffin v. Comrs., ibid., 498; Hawes v. Blackwell, 107 N. C., 196.

A-special deposit is a deposit for safe-keeping, to be returned intact on demand — a naked bailment, the bank acquiring no property in the thing deposited and deriving no benefit from its use. The title remains in the depositor, who is a bailor and not a creditor of the bank. Boyden v. Bank, supra; 3 R. C. L., 517; 7 C. J., 630.

A deposit for a specific purpose is made when money or property is' delivered to a bank to be applied to a designated object, or for a purpose which is particularly defined, as, for example, the payment by the bank of a specified debt. It is neither general nor wholly special. It partakes of the nature of a special deposit to the extent that the title remains in the depositor, and does not pass to the bank. The consequence is that the money, if not applied, or if misapplied, may be recovered as a trust deposit. 7 C. J.; 631; 1 Morse Banks and Banking, sec. 185. In Morton v. Woolery, 24 A. L. R., 1107, it is said: “Where money is deposited for a special purpose, as, for instance, in this case, where it was deposited for the stated purpose of meeting certain checks to be thereafter drawn against such deposit, the deposit does not become a general one, but the bank, upon accepting the deposit, becomes bound by the conditions imposed, and, if it fails to apply the money at all, or misapplies it, it can be recovered as a trust deposit. Hitt Fireworks Co. v. Scandinavian American Bank, 114 Wash., 167; 195 Pac., 13; 196 Pac., 629; Dolph v. Cross, 153 Iowa, 289; 133 N. W., 669; First Nat. Bank v. Barger, .. . . Ky., .....; 115 S. W., 726; Smith v. Sanborn State Bank, 147 Iowa, 640; 30 L. R. A. (N. S.), 517; 140 Am. St. Rep., 336; 126 N. W., 779. See, also, Russell v. Bank of Nampa, 31 Idaho, 59; 169 Pac., 180; First Nat. Bank v. Miller, 46 N. D., 551; 179 N. W., 997; 7 C. J., 632.” For further discussion, see Webb v. Newhall, 26 A. L. R., 1; Re Interborough Con. Corporation, 32 A. L. R., 932; So. *700 Ex. Bank v. Pope, 108 S. E., 551; Williams v. Bennett, 123 S. E., 683; Sawyer v. Connor, L. R. A., 1918 A, 61.

As a general rule, if property is converted and the trust fund can be traced and identified, the cestui que trust may resort to a court of equity to compel its transfer to himself, and his right will not be affected by any change in the trust property wrought by the trustee without his consent, unless it has been transferred to a bona fide purchaser, or assignee, for value without notice. 2 Pomeroy’s Eq. Jur., sec. 1058; Whitley v. Foy, 59 N. C., 34; Barnard v. Hawks, 111 N. C., 333; Edwards v. Culberson, ibid., 342. But the point in controversy here is whether the claimant can impress a trust upon certain assets of the insolvent bank now in the hands of the receiver; and with respect to these assets, the controlling facts are that the title to the deposit passed to the Merchants Bank and Trust Company, and that, the parties intended that the proceeds of the deposit should be not segregated, but commingled with other funds and used by the bank pursuant to custom in its general banking business. These facts, established by the verdict, are wholly inconsistent with the notion of bailment, agency, or the creation of a trust. In Bank v. Davis, 114 N. C., 344, it is said that the test is whether there was an agreement, express or implied, that the fund should not be held as a special deposit, but should be mingled with the other funds coming into the bank and used in the transaction of its' business. The conclusion is that his Honor was right in declining to sign the judgment drafted upon the undisturbed verdict and tendered by the plaintiff.

But the appellant has other exceptions which are more serious. Upon the last three issues, this instruction was given the jury: Upon all the evidence, if you believe it, you will answer the eleventh issue “Yes,” the twelfth “Yes,” and the thirteenth “No.” In this there is error. Without regard to the suggestion that the wording of the instruction is subject to criticism (Alexander v. Statesville, 165 N. C., 527; S. v. Loftin, 186 N. C., 205), we find that the evidence relating to these issues is so inconsistent and conflicting as to require its submission to the jury. Lamb v. Perry, 169 N. C., 436; Lassiter v. R. R., 171 N. C., 283; Evans v. Lumber Co., 174 N. C., 31. As to these three issues there must be a new trial. We find no error in submitting the fourth, and none in declining the issue tendered by the appellant. Of course, the issues which were answered by consent will not be disturbed.

Partial new trial.