Sawyers v. Conner

Stevens, J., delivered the opinion of the court. (After stating the facts as above). While the deposit made by Mrs. Sawyer may not come within the literal meaning of the term “special deposit,” it does, in our judgment, constitute a deposit for a special purpose and is frequently referred to or known as a “special — 371 — deposit.” This particular class of deposits is referred to by the author on Banks and Banking in Corpus Juris. “as a distinct class.” It is stated on page 632, vol. 6, C. J., that: “In using deposits made for the purpose of having them apply to a particular purpose, the bank acts as an agent of the depositor, and if it should fail to apply It at all, or should misapply it, it can be recovered as a trust deposit.” In the case at bar, the evidence shows that the depositor absolutely refused to permit the proceeds of the check in question to be deposited either to her checking account or her savings account. It was explained to “the official -of the bank receiving the check that the proceeds were intended to pay and must pay the contractor who was repairing the damage to the house which this very check was designed to cover and satisfy. Miss Sawyer testifies that, if she had known the bank “was insolvent, she would not have placed the money in the bank at all. The fair inference from- all her testimony is that she would not have deposited the funds at all, if she had known that they would not safely reach the contractor. She regarded the funds as equitably the money of the contractor, and the sole purpose of depositing the check was to have the same forwarded for collection and the proceeds safely remitted and safely kept for Mr. McClutehie. The bank had notice that Mr. McClutchie had an interest in the funds and, with full knowledge of the facts, accepted the money as a deposit for a special purpose. Under such circumstances, good faith on the part of the bank required it safely to keep the funds to be applied as directed. Under such circumstanees, the bank, we think, did not take title to the proceeds of the draft, and it was never intended by the parties that the fund should be commingled with the general assets of the bank. It is contended by counsel for appellee that the proof does not show the bank was to deliver the proceeds to the contractor, but, on the con — 372 — trary, that Miss Sawyer was to return and execute a check to the contractor after his contract was completed. This, we think, is not a controlling factor in the case. The contractor could not be paid, of course, until his work had been done according to the contract, and it was a mere detail as to whether the bank would directly turn the funds over to McClutchie or whether Miss Sawyer would return and herself draw a check in his favor. The essential feature of this agreement was that the money belonged to the contractor the moment his contract was completed. The draft from the insurance company was upon a foreign bank and would in any event have to be forwarded for collection. This was not a deposit for collection in the usual sense of that term. There would have been no deposit for collection without the special agreement mentioned. The money at all times was charged with the trust in favor of the contractor, and at no time could the bank have charged the proceeds against any indebtedness due by Mrs. Sawyer to the bank. The principle here announced was one of the principles contended for and fully recognized by our court in Armour Co. v. National Bank, 69 Miss. 700, 11 So. 28. It is said by Mr. Michie, in his work on Banks & Banking (volume 2, p. (1291): “A special deposit exists when money or property is given to a bank for some specific and particular purpose, as a note for collection, money to pay a particular note, or property for some specific purpose. . . . A deposit of the purchase price of property to be paid to the vendor upon the compliance with certain conditions is special” — citing in the footnotes cases in point, among which we regard Kimmel v. Dickson, 5 S. D. 221, 58 N. W. 561, 25 L. R. A. 309, 49 Am. St., Rep. 869, and Shopert v. Indiana National Bank, 41 Ind. App. 474, 83 N. E. 515, as embodying the same principle here contended for. A case very similar to the instant case is that of Carlson v. Kies, 75 Wash. 171, 134 Pac. 808, 47 L. R. A. (N. — 373 — S.) 317. In that case money was directed to a bank by an administrator and attorney in fact for certain heirs; the funds to be held until receipts could be secured from the heirs, when it was to be forwarded to the holder by bank draft. The court held this to be a special deposit and entitled to a preference, although the bank commingled the money with its general funds. The court, by G-ose J., among other things, says: “When a bank accepts a special deposit, it becomes a trustee of the depositor, and holds the money subject to the trust. The receipt itself affords strong, if not conclusive evidence of a special deposit. It shows that the money was placed in the bank for a special purpose. Fortified by the evidence of the depositor and the admitted circumstances here- present, it is obvious that both parties to the transaction intended to make a special, and not a general deposit. It follows therefore that the bank holds the money, not as a general debtor, but ■in a fiduciary capacity”- — citing many authorities. The court also responded to the suggetion that the identical money was not traced into the hands- of the receiver: “That is true, but the old rule requiring an identification of the specific fund or its avails in the hands of a receiver has been relaxed in the later cases. The doctrine of the modern authorities, and what we consider the sounder view, is that the trust fund is recoverable where an equal amount in cash remained continuously in the bank until its suspension, and passed to the receiver” — citing also on this point several eases, including the very strong case of Fogg v. Tyler, 109 Me. 109, 82 Atl. 1008, 39 L. R. A. (N. S.) 847, Ann. Cas. 1913E, 41. In Peak v. Elliott, 30 Kan. 156, 1 Pac. 499, 46 Am. Rep. 90, the bank received money from the maker of a note with instructions to pay the sum to the holder of the note and return the canceled note, but the bank appropriated the money and failed to execute the directions of the depositor. The court expressly held that: — 374 — The money “was not deposited to be checked out or to be loaned, or otherwise used by the bank; in law the bank held it as a trust fund, and not as the assets, of the bank.” And again: “Wherever a fiduciary relationship exists, and money coming from the trust lies in the hands of the person standing in that relationship, it can be followed by the-principal' and separated from any money of the wrongdoer.” A strong case and one squarely in point is that of Smith v. Sanborn State Bank, 147 Iowa, 640, 126 N. W. 779, 30 L. R. A. (N. S.) 517, 140 Am. St. Rep. 336. It expressly answers the contention here made that, the bank was not authorized to deliver the funds to the-contractor, but that Mrs. Sawyer was to draw a check and herself attend to the payment. In the Smith Case,, the bank accepted a deposit of money which the depositor needed for a special purpose, and that purpose-was to pay certain debts specifically named, and then the remainder to be repaid to the plaintiff for the specific purpose of enabling him to take his sick wife to a hospital for treatment. The bank attempted to appropriate a portion of the funds to satisfy an indebtedness, claimed by the bank against the depositor. The court, says: “The evidence shows without dispute that the check for $200. was placed with the defendant upon the express agreement and understanding that, after paying certain specifically named debts, the remainder would be repaid to the plaintiff on the following day, or' whenever called for to enable him to take his wife to the hospital for needed treatment. Upon money so received, no lien attached in favor of the bank, and it's attempt to appropriate the same was wholly without right or authority. Upon such a record plaintiff was clearly entitled to recover.” — 375 — In the case of Dolph v. Cross, 153 Iowa, 289, 133 N. W. 669, a depositor made a deposit for the special purpose of meeting checks which he had already issued. The special conditions were explained to the bank at the time the deposit was made. The court held that this special arrangement did not create the relation of debt- or and creditor, but “that the right of the check holders, for whose benefit it was deposited, was superior to that of the garnishing creditor.” See also, Hutchinson v. National Bank of Commerce, 145 Ala. 196, 41 So. 143; Montagu v. Pacific Bank (C. C.), 81 Fed. 602; Covey v. Cannon, 104 Ark. 550, 149 S. W. 514; Fort v. First National Bank of Batesburg, 82 S. C. 427, 64 S. E. 405; Lynam v. Belfast National Bank, 98 Me. 448, 57 Atl. 799; Wagner v. Citizens’ National Bank & T. Co., 122 Tenn. 164, 122 S. W. 245, 28 L. R. A. (N. S.) 484, 135 Am. St. Rep. 869, 19 Ann. Cas. 483; McBride v. American Ry. & Lighting Co., 60 Tex. Civ. App. 226, 127 S. W. 229. We are of the opinion that appellant’s claim should be treated as a trust fund, and that she should have been awarded a preference. The question here presented will not be so important to depositors secured under the new bank guaranty act. Reversed and Remanded.