Covey v. Cannon

Kirby, J., (after stating the facts). If the moneys of these claimants had been placed on deposit in the bank in the usual way, they would have been general deposits and established the relation of debtor and creditor between the bank and the depositors; the bank having the right to mix the moneys with its other funds and use it in its own business. Zane on Banks, § 130; Steelman v. Atchley, 98 Ark. 294; Carroll County Bank v. Rhodes, 69 Ark. 43. If it was placed in the bank for safekeeping, and not to be checked out by the depositor, or under an agreement that the bank should act as bailee or agent and deliver the money to some other persons under certain conditions or apply it to a special purpose, it would have been a special deposit and the bank an agent or bailee with no right to use it and mingle it with its own funds. Warren v. Nix, 97 Ark. 374; Zane on Banks, § 130; 5 Cyc. 514, 515; 3 A. & E. 822; Woodhouse v. Crandall, 197 Ill. 104, 64 N. E. 292; Kimmel v. Dickson, 5 S. D. 221, 49 Am. St. Rep. 869; Anderson v. Pacific Bank, (Cal.) 32 L. R. A. 479. As said in Commercial National Bank v. Armstrong, 148 U. S. 50: “All deposits made with bankers may be divided into two classes, namely, those on which the bank becomes bailee of the depositor, the title to the thing deposited remaining in the latter; and that other kind of deposits of money peculiar to banking business, i,n which the depositor, for his own convenience, parts with the title to his money and loans it to the banker; and the latter, in consideration of the loan of the money and the right to use it for his own profit, agrees to refund the same amount or any part thereof on demand.” It was not the purpose nor intention of Mason or Cannon, upon placing the checks and drafts with the contracts of purchase and the deeds tó be held in the bank and delivered when the trades were consummated, that the checks should be cashed and the money deposited therein to their credit, and the bank did not understand that such was the purpose, as clearly shown by its marking the account “escrow” in each instance. This was all done without the knowledge of either of the parties, and doubtless for its own convenience to identify the fund. Said deposits, in any event, were not general, but special, deposits for a particular purpose. The funds were so placed to the credit of these individuals as depositors without right and authority, and wrongfully mingled with the funds oí the bank. The ordinary relation of debtor and creditor was not thereby established, nor did the funds lose their character as trust funds by being so wrongfully used and commingled with the funds of the bank; but, as said in Hill v. Miles, 83 Ark. 488: ‘ ‘ The mere fact that an insolvent, bank owes one for trust funds does not entitle such creditor to a preference. To obtain a preference, he must show that the receiver or person having charge of the assets of the insolvent bank has in his hands some of the trust funds or property purchased by such funds or into which such funds have been changed or invested.” Citing cases. It was formerly held that the blending of trust money with that of the trustee defeated the owner’s title, upon the theory that there was no way to identify money, and it could not, therefore, be recovered in specie, but the better rule, and one that seems now well established, avoids that difficulty in the case of commingled or blended moneys in a bank account from which amounts have been drawn from time to time by the presumption that the sums drawn out were the moneys of the bank or trustee which it had the right to expend in its own business, and that the balance remaining included the trust fund, which the bank had no right to use. Of course, this presumption will not stand against evidence; and it is a part of the rule applicable to following misappropriated moneys into a bank account that if, at any time during the currency of the commingled account, the amounts drawn out leave a balance less than the amount of the trust funds the trust funds must be regarded as dissipated to that extent and except as to such balance, and the sums subsequently added to the account from other sources can not be attributed to the trust fund. Powell v. Mo. & Ark. Land Mining Co., 99 Ark. 553; Crawford County Bank v. Strawn, 157 Fed. 49, 84 C. C. A. 553, 15 L. R. A. (N. S.) 1100. So, in this case, such of the interveners as are entitled to a preference can look only to the amount of the funds remaining in the insolvent bank, of which theirs can be considered a part under said rule, and it is conceded that the lowest amount to which the cash in the bank has been reduced after the mingling of the trust funds with its own, and before it closed its doors on August 6 and the receiver took charge, was $1,5Q0, and no greater sum can be identified as trust funds. On the morning of that day its cashier delivered to the State Bank of Siloam Springs $1,074.42 to protect said bank on drafts given to it by the Bank of Siloam which had gone to protest, of which amount $526 was afterwards returned to the receiver. On the same day the cashier of the Farmers’ National Bank received from the failed bank $1,331 to cover a protested draft and $957.04 in cash for deposit in said bank, which was supposed at the time to be all of the cash in said Bank of Siloam, and was, in fact, all but $13 in pennies. These three last amounts constitute a larger sum than said conceded lowest balance, $1,500, and interveners, being without right to a preference claim out of a larger amount of funds in the hands of the receiver than said sum of $1,500, can have no such claim against any of the $1,074.42 delivered to the Bank of Siloam Springs, for there was still left remaining in the failed bank after such payment, the $1331, the $957.04 and the $13 in pennies, it being assumed that these latter amounts were paid out after the payment to the Bank of Siloam Springs, since they were supposed to comprise all the money in the failed bank. The Farmers’ National Bank used the $1,331 to pay the failed bank’s protested draft, and was indebted to it in the sum of the deposit $957.04, which was collected by the receiver. This last amount with the $13 in pennies is all that came into the receiver’s hands that can be identified as part of the trust funds, $970.04 in all. It can be said that the $957.04 collected by the receiver from said Bank of Siloam Springs is sufficiently identified, for that much trust money actually went into sait bank as a general deposit, making it liable therefor as a debt, and it is as clearly identified thereby as if the cashier of the failed bank had bought with said money a note of said bank, instead of making a deposit therein. The $526 overpaid to the State Bank of Siloam Springs of the $1,074.42 delivered to protect it against protested drafts of the failed bank, afterwards returned to the receiver, does not increase the sum in his hands that can be identified as trust funds to which interveners are entitled, for, as already said, the whole of said sum is presumed to have been the failed bank’s money, and its collection could not augment the trust fund any more than would the collection of any other debt due the failed bank, and the chancellor erred in holding otherwise. No contention is made here among interveners that any are not entitled to a preference; and, as the general creditors would not be affected if some are not, it is not necessary to decide the question. Said interveners, except Darby, are entitled to a preference over the general creditors to be paid pro rata out of said sum of $970.04, and an allowance of the balance of their respective claims against the receiver as general creditors. As to the claim of Darby, the decree is affirmed. There was no authority to sell his land except for cash, and it will be considered that the two notes executed by Stillions to the bank to procure the money to pay cash therefor were taken for the balance of the purchase money, no cash being in fact received or paid, and that Darby ratified the transaction of taking the notes, and they became his property, and, having been sold by the receiver, he is entitled, as a preference, to the amount of his claim out of the proceeds of the sale thereof, over the claims of general creditors. As to the other interveners, the decree is reversed, and the cause remanded with directions to enter a decree in accordance with this opinion.