Munnerlyn v. Augusta Savings Bank

Simmons, Justice. 1. Munnerlyn, as trustee for his wife and minor son, and the two latter in their own right, sued the Augusta Savings Bank for certain money alleged to have been deposited with the bank by Munnerlyn as trustee. The bank pleaded payment to Munnerlyn on divers checks drawn by him. The action is upon the contract of deposit, and the theory of the plaintiffs is, that the bank, with full knowledge of the trust, paid Munnerlyn the money knowing that he was using it for his individual benefit, and not for the benefit of the trust estate. After a careful consideration of the case, we have come to the conclusion that if the bank paid the money to Munnerlyn or upon his order, no recovery can be had in this action. We think where a trustee makes a contract of deposit with a bank and draws out the money on his own checks, the law will not allow him to recover upon the contract. In such case there is no breach of the contract, for the bank complies with its contract when it pays out the money upon his checks or order; and this is true-although the officers of the bank knew that the money was drawn out for his own use and received part of it in payment of an individual debt 358 due by him. If he paid a part of the money to the bank upon his individual indebtedness, with the knowledge of the officers of the bank that the money paid was a part of the trust fund, the beneficiaries might recover, not upon the contract of deposit, but upon the wrong and injury to the trust estate by the misappropriation of the trust fund. They could follow that fund upon their equitable title. The fact that they are joined with the trustee as plaintiffs in this action, is of no consequence. He is the real plaintiff, seeking to recover upon a contract which, if the money was paid to him or his order, as claimed by the defendant, was fully discharged so far as he is concerned. The eestuis que trust would have a cause of action upon their equitable title for any misapplication of the trust fund in which the bank participated, but there would be no cause of action on the legal title upon the contract of deposit. Whenever a trustee misapplies the trust fund and it can be traced into the hands of third parties, with notice on their part of the misapplication, the beneficiaries of the trust can sue for the fund and recover it. On this subject see’ Foxton v. Banking Company, and cases cited, 54 L. T. Rep. (New Series), 406. The trustee in this case insists that the checks were not drawn upon this fund, but that he had made arrangements with the bank for a loan to himself individually of $10,000 and had deposited a large amount of collaterals as security therefor, and although the loan was never fully consummated, it was understood that these checks should be paid upon his individual credit. The coui’t refused to instruct the" jury upon this theory of the case. We think the court ought to have submitted this theory to the jury, and let them pass upon the question whether the cheeks were really draw’n against the trust fund or upon the individual credit of the trustee. In so far, if at all, as the bank may have appropriated 359 the trust fund without direction of the trustee and without any cheek or draft upon it by him individually or otherwise, there can be a recovery in this action. In so far as any of the fund or its proceeds went to the benefit of the trust estate, whether drawn out irregularly or not, the bank is not chargeable in this action or any other. 2, 3. Other questions in the case are covered by the head-notes. Judgment reversed.