Lambert v. State Bank of Patch Grove

Owen, J. The trial court disposed of the case on the theory that the relation existing between a bank and a depositor is that of debtor and creditor, and that because the money was deposited in the bank in the name of the Military Ridge Cheese Company, subject to its check, it constituted the bank the debtor of' said company, and the fund so deposited could be reached by garnishment and subjected to the debts of the Military Ridge Cheese Company. While this proposition is no doubt correct when the funds deposited are in fact and in law the funds of the depositor, the result does not follow where the funds, though deposited in the name of the depositor, are not the funds of the depositor. In National Bank v. Insurance Co. 104 U. S. 54, it is said: “But although the relation between the bank and its depositor is that merely of debtor and creditor, and the balance due on the account is only a debt, yet the question is always open, To whom in equity does it beneficially belong? If the money deposited belonged to a third person, and was held by the depositor in a fiduciary capacity, its character is not changed by being placed to his credit in his bank account.” This principle also finds expression as well as illustration in Brovan v. Kyle, 166 Wis. 347, 165 N. W. 382. The defendant Military Ridge Cheese Company is a cooperative association organized under the provisions of secs. \786e- — 1 to 1786^ — 17, inclusive, of the Statutes, which authorize the organization of such a corporation to act “as a selling or buying agent for its members or patrons.” The answer discloses that the only business relations existing between the cheese company and its patrons was that of agent in the marketing of their product. The company did not buy the milk of the patrons. It did not in fact manufacture the same into cheese. That was done by the cheese-maker, with whom an independent and separate agreement was entered into by the patrons of the company. The only [363] thing that the cheese company did with the property of the patrons, or the property manufactured therefrom, was to sell it upon a stipulated commission. It at no time , derived any title to the milk delivered at the factory by the patrons or to the cheese manufactured therefrom. In Emigh v. Earling, 134 Wis. 565, 115 N. W. 128, it was held by this court that the legal title to the milk, to the product thereof, and to the proceeds arising from the sale thereof, under a similar contract, was at all times in the patrons of the company, and that the moneys arising from a sale of the cheese were held by the company in a fiduciary capacity for th'e beneficial use of the patrons of the company, and the trust character of the fund was not changed by the fact that it was deposited in the bank to the personal account of the company. If any authority were required, where the underlying principles involved are so clear, that case is decisive of the question here presented and fully establishes the trust character of the funds which are sought to be reached by the instant garnishment proceedings. So far as the moneys on deposit in the garnishee' bank belong to the patrons, or to the cheesemaker, they are immune from this proceeding. They do not belong to the company and cannot be subjected to the payment of its debts. In view of the fact that the contract set forth in the answer of the garnishee provides that the company may retain the sum of five cents for each hundredweight of milk so delivered, as compensation for its duties as selling agent, it may upon an accounting appear that a certain portion of this fund belongs to the company. Any portion of the fund belonging to the company may be reached by this proceeding and subjected to the payment of defendant’s debt. However, as the record is barren of any evidence to indicate what portion, if any, of the fund belongs to the company, there must be a new trial. By the Court. — Judgment reversed, and cause remanded for a new trial.