Bacon v. State Bank of Kamiah

*521 BUDGE, J. — The parties to this litigation entered into a stipulation of facts from which the trial court made findings of fact, conclusions of law and entered its decree. Only such of the facts appearing from the stipulation are set forth as are necessary to a proper determination of the case. Prior to April 8, 1921, the State Bank of Kamiah was doing a general banking business. On April 8, 1921, it closed its doors, and the commissioner of finance of the state of Idaho took charge of the bank for the purpose of winding up its affairs. The appellant gave written notice to the commissioner on May 5, 1921, of her claim to $6,000 as a trust fund, and on August 27th filed a claim in due form asserting a preference for this $6,000 under subdivision 2 of section 13, chap. 42, Session Laws 1921, as a debt due her by the State Bank of Kamiah as a trustee or fiduciary. On October 30th the commissioner notified appellant that her claim had been given priority of subdivision 3 of the statute, as a debt due a depositor. Her claim for preference is to be decided upon the following stipulated facts. On December 20, 1920, appellant turned over to George H. Waterman, of Pomeroy, Wash., certain valid bank cheeks aggregating $6,500 and described as follows: Check No. 12065, of West & Wheeler, in the sum of $5,022.90, dated November 27, 1920, drawn on National Bank of Commerce, Seattle, Wash., payable to the order of Mrs. George T. Bacon, and indorsed by her to George H. Waterman “only for use on loans”; check of Mrs. George T. Bacon dated December 14, 1920, amount $1,400, drawn on Evans State Bank of American Falls, Idaho, payable to the order of George H. Waterman, upon which was written “for loan on J. F. Kosanki home only $2,500.00”; check of Mrs. *522 George T. Bacon dated December 14, 1920, amount $77.10, drawn on State Bank of Kamiah, payable to the order of George II. Waterman, upon which was written “to balance for a $4,000 loan at 8% from date at Pomeroy, Wash.” The above checks were all indorsed by Waterman and in due course were delivered to the Federal Reserve Bank of San Francisco, Spokane, Wash., branch, with instructions to credit the proceeds thereof to the First National Bank of Clarkston, Wash.; the latter bank was instructed by Waterman to credit the State Bank of Kamiah with the $6,500. This fund -of $6,500 was received by the State Bank of Kamiah in the way of a credit from the First National Bank of Clarkston, Wash., on December 21, 1920. On December 20, 1920, Waterman acknowledged receipt of the $6,500, stating “with which amount I am to take up the mortgage at American Falls and place a $4,000 loan for you at 8% interest payable semi-annually. The $4,000 will be placed on an earning basis immediately and you know 1 will do all I can to line up the $2,500 loan according to your wishes. ’ ’ From December 21, 1920, on, the total fund of $6,500 was handled by the State Bank of Kamiah in accordance with the following custom: for some time prior to December 14, 1920, appellant had deposited funds with the State Bank of Kamiah for use only on loans; the amounts so received would be placed by the bank on deposit, evidenced by time certificates payable to Mrs. George T. Bacon, drawing interest at the rate of five per cent per annum, which interest was paid to her for the actual time the money was on deposit; when a suitable loan was found the certificates were canceled and the loan made. This custom was generally known among the officers of the bank, but all handling of such funds and the making of the loans were done by Waterman. Pursuant to the custom, a safe deposit bos was assigned to Mrs. George T. Bacon in the State Bank of Kamiah, to which Waterman had access at all times and in which he kept all of Mrs. Bacon’s papers relating to the bank. It was known among the officers of the bank that *523 $4,000 of the amount was to be used for procuring a loan to one Nichols which had already been made and which was then held by the Spokane and Eastern Trust Company of Spokane, "Wash., as collateral to certain bills payable of the State Bank of Kamiah, and that the remaining $2,500 was to be used for completing a loan to one J. F. Kosanki at American Falls. On January 28, 1921, Mrs. George T. Bacon drew on Farmers National Bank of Pomeroy, Wash., a customer’s draft in the sum of $500 payable to the order of the Citizens’ Bank of Pocatello, Ida., with a notation thereon, “loan to-J. F. Kosanki”; this draft was forwarded to State Bank of Kamiah and paid by said bank March 29, 1921, leaving a balance of said fund in the State Bank of Kamiah of $6,000. On March 28, 1921, because it was expected that the Kosanki loan would be made in the near future, the balance of $2,000 was placed on general deposit. At all times between December 14, 1920, and April 8, 1921, George H. Waterman was president o’f the State Bank of Kamiah, and was also president or other officer of the Farmers National Bank of Pomeroy, and of the First National Bank of Clarkston. Mrs. Bacon had no knowledge until after April 8, 1921, that said sum of $6,000 was on deposit in the State Bank of Kamiah, either on certificate of deposit or otherwise. She never received a certificate of deposit or pass-book showing that any part of the funds had been deposited to her credit in said State Bank of Kamiah. There was a certificate of deposit for $4,000 dated December 21, 1920, in a tin box belonging to appellant in the State Bank of Kamiah, but appellant had no knowledge of when it was made or when or by whom it was placed there. Appellant never authorized Waterman or other officers or employees to place said sum or any part of the said $6,500 on deposit to her credit, but her instructions were to make a loan of $4,000 with interest at eight per cent per annum, payable semi-annually, and to make a loan of $2,500 on the residence of J. F. Kosanki at American Falls. *524 The trial court adopted as its findings of fact the facts stipulated by the parties, and from them made the following conclusions of law: “That the deposit of the plaintiff (appellant) in the State Bank of Kamiah consisting originally of $6,500, and appearing herein as a balance of $6,000, was a general deposit and not a special deposit; that the ruling of the commissioner of finance in classifying the plaintiff’s claim under Subdivision 3 of Section 13, Chapter 42, of the Laws of 1921, should be sustained, and that the claim of plaintiff should be denied.” Session Laws 1921, chap. 42, sec. 13, in part provides: “The order of payment of the debts of a bank or trust company liquidated by the commissioner hereunder shall be as follows: “(1) The expenses of liquidation .... “ (2) Debts due by the bank or trust company as trustee or other fiduciary, or other claims of like character; “ (3) Debts due depositors ....;” The sole question here presented is whether, under the facts stipulated, appellant’s claim should be given priority of subdivision 2 or of subdivision 3 of this statute. If the facts show that the deposit was made under such circumstances as to create the relation of bailor and bailee between appellant and the bank, appellant’s claim should be classed under subdivision 2. If, however, the deposit created the relation of debtor and creditor, it would come under subdivision 3. The case of People v. California Safe Deposit & Trust Co., 23 Cal. App. 199, 137 Pac. 1111, clearly defines a general and a .special deposit in the following language: “A general bank deposit exists where the bank is given custody of the money deposited with the express or implied intention that the bank is not required to return the identical money, but only its equivalent, in which case the legal title to the money passes to the bank. 'A ‘special deposit’ is where the bank merely assumes charge Or custody of the property without authority to use it; the depositor being entitled to receive the identical thing deposited, in which *525 case the title remains with the depositor, and, if the subject is money, the bank has no right to mingle it with its own funds. ’ ’ This court in the case of Fralick v. Coeur d’Alene Bank & Trust Co. (on rehearing), 36 Ida. 108, 210 Pac. 586, made the following observations: “In order to establish a special deposit it was incumbent upon respondent to prove by a preponderance of the testimony that such a contract of special deposit was entered into. Proof of a unilateral coxitract does not establish a special deposit. Nor do we think that a deposit of funds in the bank, intended by the depositor to be used for a special purpose, in the absence of competent proof that it was deposited and accepted by the bank as a special deposit, amounts to anything more than a general deposit.” “Deposits of money in the ordinary course of business are presumed to be general, and the burden of proof is upon the depositor to overcome such presumption by proving that the deposits were made under such stipulations and directions as to constitute them special deposits as distinguished from general deposits, and in the absence of such stipulations such deposits become a part of the bank’s general fuxxds. The bank becomes the owner of the fund, the depositor its creditor.” The rule stated by this couxi in the case last cited is that a deposit intended by the depositor for a specific purpose does not amoxxnt to anything more than a general deposit unless it is deposited and accepted by the bank as a special deposit, and that the burden is upon the depositor to prove that the contract made it a special deposit. Appellant claims that under the facts and circumstances appearing in the present case, the deposit was special. We shall now examine the stipulated facts to determine whether or not the appellant has met the burden of proof. In the first instance, appellant sent to Waterman checks totaling $6,500 drawn on three different banks. She intended that at some time in the future this should be paid out by Waterman, $4,000 on one loan and $2,500 on another. *526 The checks not being in the amounts of the respective loans, Waterman was authorized to reduce the money represented by the checks into his possession. In doing this he took the usual and ordinary course of putting the cheeks through the banks for collection, credit therefor ultimately reaching the State Bank of Kamiah for plaintiff’s account. All three of the checks were on banks other than the one located at Pomeroy, Wash., and two of the checks were on banks at distant points. This is a circumstance indicating that in the beginning of the transaction the ordinary and usual course of banking was contemplated. Appellant asserts that the directions contained in her notations upon the cheeks made their deposit a special one. These notations are as follows: on the West & Wheeler check, “only for use on loans”; on the Evans State Bank check, “for loan on J. F. Kosanki home only $2,500”; on the State Bank of Kamiah cheek, “to balance for a $4,000 loan at 8% from date at Pomeroy, Wash.” These directions are • equivocal; they may be understood either as mere instructions to Waterman as to the purpose for which the money was forwarded to him, or as a limitation upon the character of the deposit he could make of the cheeks. .Since the directions are not conclusive upon the question of general or special deposit, the remainder of the evidence becomes decisive of the case. Further evidence on behalf of appellant, as stipulated, shows that the officers and employees of the State Bank of Kamiah knew that $4,000 of the fund was to be used in procuring a loan to one Nichols, and the remainder for a loan to one Kosanki, and that Waterman was an officer of the Clarkston, Pomeroy and Kamiah banks. This shows nothing more than that the banks knew to what purpose the appellant ultimately intended to apply the money. It does not show that the money or checks representing the money were delivered to the bank with the present directions that it should pay the proceeds over to third persons without mingling them with the general funds of the bank. In Cabrera v. Thannhauser & Co., *527 183 Cal. 604, 192 Pac. 45, the California court, in summarizing. its conclusions regarding special deposits, said: “Even if the reason for the remittance be known to the depositary to be the payment of an obligation owed by the depositor to a third person, nevertheless the depositor must, at the time of making the deposit, specify that the funds are to be kept apart from other moneys of the depositary and devoted only to the payment of the depositor’s debt.” In other words, the nature of the deposit, as well as its purpose, must be specified in order to constitute it a special deposit. Part of the evidence against appellant is that while the money was on deposit she drew a draft in the sum of $500 against the deposit, or against the bank in which she supposed the money was deposited, marking on the draft that it was to be charged against the money intended for the Kosanki loan. This fact makes it appear that the deposit was made with the intention by the appellant of some time thereafter applying the money in a particular manner, rather than with any direction to the bank as to its present application. Appellant’s exercise of control over the fund by drawing against it indicates that the bank’s contract as to this deposit was the same as to any ordinary deposit, viz., to repay it in money on the demand or order of the depositor. Another point against appellant’s contention is that Waterman’s acknowledgment of receipt stated that the “$4,000 will be placed on an earning basis immediately.” What he meant by “earning basis” and what appellant understood therefrom is' explained by the further stipulation that for some time prior to December 14, 1920, appellant had been accustomed to deposit funds with the State Bank of Kamiah for use only on loans, and that the amounts so received would be placed by the bank on deposit, evidenced by a certificate of deposit drawing interest which was paid to her for the actual time the money was on deposit, and when a suitable loan was found the certificates were canceled, and the loan made. This course of dealing was known to the bank officers, but the handling *528 of the funds and the making of the loans were done by-Waterman. It is true that it is stipulated that appellant had no knowledge that the sum of $6,000 was on deposit, either on certificate of deposit or otherwise, that she never received any certificate of deposit or pass-book showing that any part of the funds had been deposited to her credit in the State Bank of Kamiah. And it is true that it is also agreed that she never authorized Waterman or other officers of the bank to place the $6,000 to her credit, and that her instructions were to make the two loans mentioned. Had the remittance to Waterman in the first place been by checks totaling the respective sums of $4,000 and $2,500, it would be a circumstance of some weight in determining whether she authorized a deposit to her credit. Waterman was her agent, and she must be charged with knowledge of the deposit. She must also be charged with knowledge of the ostensible authority conferred upon Waterman by their previous dealings. The $6,000 was mingled with the general funds of the bank according to the custom theretofore carried out between her and Waterman. She had notice that former deposits had been mingled with the funds of the bank, as it is stipulated that “she had theretofore made like deposits and received interest which was paid to her for the actual time the money was on deposit.” She had actual notice that the present deposit would be handled in the same way as previous deposits, as she was notified on December 20, 1.920, that part of the money would be placed on an earning basis immediately, and that the $2,500 loan would be made according to her wishes. To this arrangement, made some three and a half months before the bank failed, appellant did not see fit to object. We are therefore of the opinion that the appellant has not proved by a preponderance of the evidence that the contract was one of special deposit. From what has been said, it follows that the trial court did not err in holding that the deposit was general, and not *529 special. The judgment should therefore be affirmed, and it is so ordered. Costs are awarded to respondent. William A. Lee, C. J., and Taylor, J., concur.