216 N.W. 748 | Iowa | 1927
Lead Opinion
The Farmers Savings Bank of Hamburg was *1084 a corporation organized under the laws of the state of Iowa for the transaction of a banking business. It closed its doors on December 20, 1924. The superintendent of banking 1. MUNICIPAL of this state took possession, and on January 8, CORPORA- 1925, was appointed receiver. C.B. Clayton was TIONS: vice president of said bank, and had also, for a fiscal number of years prior thereto, been treasurer of management: the city of Hamburg, and kept his funds as such wrongful treasurer on deposit in said bank. The city of deposits. Hamburg, through its council, did not designate this bank as a depository for the city funds until October 21, 1924, if it did then. The bank never at any time made the statutory bond requisite to becoming a depository. The last deposit of city funds was made on October 25, 1924. The amount then deposited was $7,038.44. Many deposits had been made by this treasurer prior to this time, and they were all in an open account, and much money had been checked out at various times. The balance shown to be due the city at the time the bank closed was $16,441.78. Cash on hand, at the date of closing, and in other depositories, was $11,919.35. It is claimed that, at the time this last deposit was made, the city council had approved this bank as a depository, but the treasurer did not know that the council had so done until after this deposit was made.
It is admitted that the city of Hamburg is a city of the second class. The law in force at the time these deposits were made was Section 660-a, Code Supplement, 1913. Under this section the city council is required to do two things: It is required to designate the bank and the amount to be deposited. The statute further requires that, before such deposit is made, the depository is required to file bond in double the amount deposited, with sureties to be approved by the treasurer and the city council, which bond is to be filed with the city clerk. An investigation of the records of the city council shows only the following entry:
"That the Farmers Savings Bank of Hamburg, Iowa, be designated as a depository of the city of Hamburg, in accordance with Section 5651, Supplement 1919, and House File 154 of the Acts of the Fortieth General Assembly."
These citations are erroneous, and evidently refer to the aforesaid Section 660-a, Code Supplement, 1913. This section *1085
of the statute is prohibitive in its force and effect. In other words, a city treasurer has no right to deposit money in a bank unless the provisions of the aforesaid section have been complied with. It is apparent from the above record of the city council that the section has not been complied with in two respects. While it does designate this bank as a depository, it does not specify the amount to be deposited, nor was there any bond given, as required by this section. It must follow, therefore, that the deposits made by the city treasurer were wrongful. We have so held as to failure to give bond in the case of City of NewHampton v. Leach,
"If a trust fund is established, a presumption arises that it was retained in the possession of the trustee and came into the hands of the receiver, and the burden is upon the receiver to overcome this presumption."
This conclusion was based on our previous holdings, which are cited in the New Hampton case.
If this were all that is involved in this case, we might well end the opinion here by an affirmance, on the strength of our former holdings in Independent Dist. v. King,
But the record in this case shows that the deposits made by the city treasurer largely consisted of taxes collected by the county treasurer in behalf of the city, and the method 2. BANKS AND of payment by the county treasurer to the city BANKING: treasurer was as follows: The county treasurer trust carried his deposit with this same bank. When he funds: had collected taxes for the city and wished to charging turn them over, he drew his check, as county and treasurer, payable to the city treasurer, and crediting delivered this check to the city treasurer. The accounts: city treasurer then presented the same to the augmentation bank, and the bank charged the check to the of assets. county treasurer, and credited the city treasurer's account with *1086 an equal amount. It is seriously urged that this process of transferring funds did not increase the assets of the bank, and to this question we will give our attention.
We assume that no one would dispute the proposition that, if the city treasurer presented the county treasurer's check to the bank, properly indorsed, and the bank paid him the face of the check in cash over the counter, and then he passed the cash back to the bank, and asked to have it credited to his account as city treasurer, this in fact increased the assets of the bank. In its legal effect, is this not exactly what was done in the case at bar?
In Messenger v. Carroll Tr. Sav. Bank,
"That this method of collection was the full equivalent of the payment of money by the Swaney Company, and served to the augmentation of the assets of the bank in precisely the same manner as the delivery of currency would have done, is held in the following authorities: [citing numerous cases]. We deem it clear that the net result of the transaction of payment by the Swaney Company and the receipt thereof by the collecting bank was the same as though the Swaney Company had drawn the currency into its own hands by means of check, and had thereupon delivered the same to the collecting bank in payment of the sight draft."
In Union St. Bank v. Peoples St. Bank,
"This court has already adopted the doctrine that the deposit to the credit of the customer at the counter of the bank of one of its own checks is the exact equivalent, in legal view, to the bank passing to its customer the cash and the *1087
passing of the cash back for deposit and credit. It was so held in Ellis v. State,
In Northwest Lbr. Co. v. Scandinavian Am. Bank,
"As a final reason against a recovery it is urged that there was by the transaction no augmentation of the assets of the bank. The fact here assumed is undoubtedly true, as applied to the general assets of the bank: that is to say, it is true in the sense that the bank held no greater assets at the completion of the transaction than it held at its beginning. But it is not our understanding that this is the principle upon which the doctrine of augmentation rests. The equitable right to follow misapplied property into the hands of the parties receiving it depends upon the ability of identifying it in specie, or the ability of identifying the property with which it has been confused, or into which it has been converted. If this cannot be done, there can be no recovery, even though it be shown that the general assets of the estate have been increased to the amount and value of the property. The rule as applied to money which has been intermingled with other money thus means that it must be shown that the mass of money from which it must be taken has been increased by the amount of money which has *1088 been misapplied, — not that it must be shown that the general assets of the possessor of the money have been increased. In the instant case, there is a showing that the money which came into the hands of the supervisor on the insolvency of the bank was greater by the amount of the check than it would have been, had the bank performed its duty and made the actual segregation, and in consequence, an augmentation of that mass."
As supporting this doctrine, that court cites People v. CityBank of Rochester,
Without delving further into the many cases of this court and other courts on this question of preference, we will say that there seems to be an underlying principle which is present in all cases of this character: that is, that a 3. TRUSTS: preference can only exist where the title to the preserva- property has not passed. In other words, he who tion: seeks to claim preference must be able to point presumption. out certain specific property, and say, "That is my property, because I have a title thereto;" or, in case the property has been commingled so that he is unable to point out his identical property, if he yet can say and show that in the mass of property "my property exists," although incapable of specific identification, he is entitled to reclaim it. It is not in fact a question of preference or superior right over other claimants, but it is a simple proposition of recovery of property to which he holds title.
The evidence in the instant case shows that, at the various times these deposits were made by the city treasurer, as above explained, there was at all times in the vaults of the bank money far in excess of the amount of deposits thus made. When the city treasurer presented the county treasurer's check on these funds, it is therefore apparent that, had he requested cash on the county treasurer's check, there was actual money in the bank far in excess of that necessary to meet the check. The law does not require the doing of idle things. Under our holdings, the deposit made by the city treasurer was unlawful and wrongful; and, in line with our holding in the Messenger case and the cases above cited, we hold that, in legal effect, *1089 under the circumstances in this case, the net result was identically the same as though he had drawn the money on the check in actual cash, and then returned it to the bank for credit to his account as city treasurer. When the bank received the check and charged it to the county treasurer's account, it, in effect, withdrew that amount from his account and paid it to the city treasurer. The city treasurer then redeposited the same to his own credit, and we have held that this deposit by him was unlawful. However, the funds were commingled with the funds of the bank, and, of course, lost their identity. The deposit being wrongful, the title thereto never passed to the bank, and it therefore follows that the claimant was entitled to recover his property from the common mass. The record shows that, before this bank closed, the mass of its cash assets had been reduced to $11,919.35. This being less than the balance the city treasurer had on deposit, it follows that the excess over and above the cash on hand at the time the bank closed had been dissipated.
Further than this, the evidence in the case shows that there are two other claims on which preference is made; and while we hold that the city has traced its funds into a common mass sufficiently to answer the call of the law under such circumstances, and that it is entitled to recover its funds, it must be limited to the funds on hand at the time the bank closed. There is a further limitation also on the right to recover from this common fund, by reason of the fact of the existence of the two other claims for preference, which, if allowed, must share in this common fund. The district court established this claim as a preferred claim, and ordered it paid in full, provided there were sufficient funds in the hands of the receiver; and if not, then the preferred creditors should share pro rata in such fund. This order is too broad, because the fund from which the preferred creditors are to be paid is limited to $11,919.35. The order should be modified accordingly. — Modified and affirmed.
EVANS, C.J., and FAVILLE, De GRAFF, KINDIG, and WAGNER, JJ., concur.
STEVENS, J., not participating.
MORLING, J., dissents. *1090
Dissenting Opinion
A so-called claim for preference such as this is merely one for the establishment of claimant's ownership of property in the possession of the receiver, and a demand for decree for its restitution to claimant. Claimant is not entitled to be preferred in the payment of a liability incurred by the insolvent for the loss of claimant's property. Claimant, to establish his right, must show: (1) The existence of some concrete fund or article or item of property (2) of which the claimant is the owner(Farnsworth v. Muscatine P. P.I. Co.,
The existence of a fund or other item of property belonging to the claimant and capable of augmenting the assets in the possession of the bank is not shown. The county treasurer was a depositor in the defendant bank. There is no suggestion that the deposits by the county treasurer were unauthorized or wrongful. As rightdoing, not wrongdoing, is presumed, it must be presumed that the deposits to the county treasurer's account were rightful; that the title to the funds deposited by him had passed to the bank; and that the relationship between the bank and the county treasurer was that of debtor and creditor. The state of the county treasurer's account at no time is shown. For all that appears, it may have been, at the times under consideration, overdrawn; but, if we assume that there were in the account credit balances equal in amount to the checks drawn in favor of the city treasurer, the fact remains that the bank was merely indebted to the county treasurer to the amount of such credit balances, and that the checks at most operated, to the extent of the amount thereof, to substitute the city treasurer as the creditor of the bank, in place of the county treasurer. The result was merely that the city treasurer became the creditor of the bank to the amount of the check. The parties intended no differently; for the testimony of the city *1091
treasurer, who was vice president of the bank, is that this (so-called) money was put into the bank with the balance of the bank's funds, and treated the same as the money of any depositor. This was known by the city council. The mayor received the vouchers from the county treasurer and delivered them to the city treasurer. The council made settlements with the city treasurer, and always took the checks and figured them up. Interest was allowed and credited on the balances. The assets of the bank were not increased a penny by the county treasurer's checks. Messengerv. Carroll Tr. Sav. Bank,
On July 18, 1924, the directors put into the bank their notes aggregating $25,000, and took out excess loans to that amount. On November 25, 1924, they put in $39,000 in cash, and took out an equivalent amount in the notes of themselves and others. There was paid out in 1924 $3,348,386.18. The examiner in charge estimated that there would be a deficiency of $100,000 in paying deposits.
The city treasurer would have no authority to accept in payment of taxes collected by the county treasurer drafts on bank correspondents' accounts. On this record, it would be fallacious to hold as a proved fact that if, on April 24, 1924, — even though, on that date, as the evidence shows, the "amount of money in various banks, including cash on hand," was $57,490.97, — the vice president of the bank, as city treasurer, had presented to himself, as vice president of the bank, the county treasurer's check for $7,608.09, it would have been in good faith paid in cash over the counter, and would have been taken out of the bank, and that the acceptance and deposit of the check were equivalent to the receipt and redeposit of the cash. Equally without foundation would it be to hold that, on October 25, 1924, though the "amount of money in various banks, including cash," was then $31,676.09, a like process would have resulted in the taking out by the vice president of the bank, as city treasurer, of the cash for $6,276.67. The condition of the bank and the well known history of banks in similar condition during the last few years tell us that an insistence *1094 upon the withdrawal of public funds or the payment of such amounts in cash for the purpose of actual withdrawal would have resulted in closing the doors. That the vice president of such a bank, acting as city treasurer, would withdraw the money, or had any intention of paying the checks in money, or performing any act equivalent thereto; is phantasmic.
It is a fiction, therefore, to say that, on April 25, 1924, the city had $7,608.09, or even a fraction of it, in the form of concrete property, capable of increasing the assets in the hands of the bank, and that it came into the possession of the bank to the augmentation of such assets. It is a fiction to say that the assets in the possession of the bank were augmented thereby, a fiction to hold that the city's property came into the possession of the receiver, and impossible to say "that the fund or some part thereof still exists in some tangible form in the receiver's hands" (Hudspeth v. Union Tr. Sav. Bank,
A bank failure works great hardships to all classes of depositors. Though their legal relationship to the bank is that of debtor and creditor, yet in popular estimation, in making the deposits and in consequences to them, depositors put their money in the bank in the belief that it is to be returned to them on demand, or at the time stipulated therefor. The savings of the aged and the poor, the living of the widow and orphan, are there. These suffer cruel distress when the bank fails. To allay the sufferings of depositors as far as practicable, the law gives them a right of preference in the distribution of the property belonging to the bank. The law is humane, and its beneficient provisions ought not to be diminished or defeated by the acceptance of presumptions unfounded in experience, or so fanciful as to be mere fictions. The property in question here (barring fictions) does belong to the bank. The contest here is with depositors. Stilson v. First St. Bank,
I think the judgment should be reversed.
