Star Cutter Co. v. Smith

Moran, J; The Star Cutter Company had a factory at Lowell, Michigan, and a salesroom in Chicago. One Buckingham was indebted to the company, and from time to time gave it checks drawn on the Traders’ Bank of Chicago, and it frequently happened that he did not have on deposit in such bank sufficient funds to meet the check given, and when that occurred the Star Cutter Company would deposit in said bank, to Buckingham’s credit, money to meet the particular check outstanding. The bank became dissatisfied with Buckingham’s method of doing business, requested him to take away his account, and his bank book was written up and showed a balance to his credit of some $3. On December 29,1887,the president of the Star Cutter Company received at Chicago a telegram from the secretary at Lowell, stating that the said company had used Buckingham’s check on Traders’ Bank for $1,000, and requested him to cover it. Thereupon .the president drew the check of the Star Cutter Company, payable to the order of J. L. Short, a clerk of the company, for $1,000, which check the clerk procured to be certified by the First National Bank, and took to the Traders’ Bank, and asked permission of the paying teller to deposit it to the credit, of Buckingham, but the teller would not allow it to be so deposited, but learning that it was for the purpose of paying a check, which Buckingham had drawn upon the bank, told the clerk that if he wanted to leave the check he could leave it with him, indorsed, payable to the Traders’ Bank, and he would give a receipt for it. To this the clerk assented. The teller then pinned a memorandum to the check, stating that it was left by J. L. Short to take up a check of E. D. Buckingham, for $1,000. Said memorandum and the check was carried by the said teller in his cash from December 29, 1887, until May 10, 1888, when he sent the check forward through the clearing house for collection, and in its place caused a certificate of deposit to be made out, reciting that “Traders’ Bank had deposited in this bank $1,000, payable to the order of...................,” etc On the back of this certificate the teller indorsed the following : “ Check of the Star Cutter Company, left by J. L. Short to take up a check of E. D. Buckingham for $1,000, December 29,1887.” The Buckingham check was never, after December 29, 1887, presented to the Traders’ Bank, and it is not shown what became of it, nor does it satisfactorily appear that it was ever in fact used by the Star Cutter Company. The books of the said company were in confusion, and it is possible, but does not appear from the proof, that said check was presented to the bank and thrown out before the deposit was made to meet it, and was otherwise taken care of by the Star Cutter Company. However that may be, it has never turned up and no one has given any account of it. In October, 1888, the Traders’ Bank failed, and the certificate of deposit, indorsed as above described, went into the hands of appellee as receiver, with- the assets of the bank. The Star Cutter Company obtained an assignment of all Buckingham’s rights and interest against the bank, and filed a petition asking to have said $1,000 paid over to it by the receiver. On the hearing the court ordered that petitioners be paid dividends on the said deposit, treating it as a general deposit, but refusing to treat said deposit as special, and to direct its payment as such. The first question is, whether said deposit was a special deposit by the Star Cutter Company. That it was such we think is clear. The clerk, Short, was willing, it is true, to make a general deposit of the money to the credit of Buckingham, but the bank, through its agent, refused to receive such deposit, but offered to take it for the specific purpose of taking up a check of Buckingham for $1,000, and on the clerk’s agreeing to leave it for that specific purpose, it was earmarked by an indorsement to identify it as being deposited and held for that purpose, and such marking or identification was attached to the fund when the money was drawn upon the check, and took the form of a certificate, and was retained upon it till it came into the hands of the receiver. The object and intent of placing the money in the bank was, so far as the Star Company was concerned, to meet a particular check which it was understood had been used by its agent, and the bank was particular to confine its agency in the matter and the relation of the parties to the transaction, to that specific and definite purpose and no other. While, because of the lack of particular description of the Buckingham check intended to be covered, the bank might be justified in applying the fund in payment of the first Buckingham check .for the amount of $1,000 presented, it having no notice that such was not the check intended to be provided for, it is very clear that the bank could not legally split up the fund and use it to discharge a Buckingham check for a less amount. The fund was not in the bank for Buckingham’s general account, and could not be dealt with in any other manner than as a specified trust fund, to be applied to the particular purpose for which only the bank consented to receive it. “ When the very money or other thing deposited is to be restored, or is given to the bank for some specified and particular purpose, as to pay a certain note, or to act as agent for the collection of bills or notes deposited, the property does not pass from the depositor. When money is delivered to a bank for the express purpose of paying a note, the relation of principal and agent is created, not that of debtor and creditor. The deposit is a trust fund, and in case of an assignment for creditors, this fund does not pass as assets of the bank, but may be recovered in full.” 2 Morse on Banks & Banking, Sec. 567; People v. City Bank of Rochester, 96 N. Y. 32. It is suggested that if the deposit was special, then it became the property of the cestui que trust, the holder of the Buckingham check, and that the Star Cutter Company has no right to receive the fund. It is a fair conclusion from the evidence, and the known general course of business, that there is now no holder of the Buckingham check, if there ever was one, other than the Star Cutter Company. But if there was such a holder, he has never presented the check, and he would not have a complete right to the funds deposited to meet the check without presentation. He certainly has no right of action at law. Munn v. Burch, 25 Ill. 35. While the effect of the deposit made by the Star Cutter Company was to create a trust, the intended beneficiary has never assented to, or so far as shown, had any notice of the trust. Under such circumstances the trust is revocable. It is like the case of a creditor who, without being insolvent, vests property in trustees to pay his debts; “ the trustees are mere mandatories, and the deed confers no right upon the creditors who are neither parties nor privies, and the debtor may at any time at his pleasure revoke or vary the trust or call for the retransfer of the property.” If the trustee had done anything to charge him in execution of the trust, the question would be different. See Lewin on Trusts, 516. Here, as we have seen, no property vested in the bank as trustee. It was a mere agent; and the intended beneficiary had no notice. So that under the strict rule that obtains in cases of assignment for the benefit of creditors, the trust created might be revoked. 2 Perry on Trusts, Sec. 593. Our conclusion is, therefore, that the petitioner is entitled to be paid the entire fund held as a special deposit by the bank, and now in the hands of a receiver, and the order of the Superior Court will be reversed and the case remanded with directions to enter an order directing the receiver to pay to the petitioner the sum of $1,000 without diminution, and to pay a dividend upon such sumas Buckingham has standing to his credit in said Traders’ Bank on general account. Reversed and remanded.