Case Title: Grossmayer v. Campbell

Citation: 214 Or. 265, 328 P.2d 320

Docket Number: 

State: oregon

Court: Oregon Supreme Court

Date: 1958-07-30T00:00:00Z

Document:
Reversed July 30, 1958.
Petition for rehearing denied September 17, 1958.
*266 Walter H. Pendergrass argued the cause for garnishee-appellant. On the briefs were Pendergrass, Spackman & Bullivant, Portland.
Morton A. Winkel, Portland, argued the cause for respondent. On the brief were Rosenberg, Swire & Coan and Ernest Bonyhadi, Portland.
Before PERRY, Chief Justice, and ROSSMAN, BRAND[*] and McALLISTER, Justices.
REVERSED.
*267 ROSSMAN, J.
This is an appeal by the garnishee, The First National Bank of Portland, from a judgment which the circuit court entered against it in the sum of $581.15 in an action wherein Phil Grossmayer Co., a corporation, was plaintiff, and an individual by the name of C.A. Campbell was defendant. The judgment was based upon findings of fact and conclusions of law.
The action of Phil Grossmayer Co. against the defendant Campbell, instituted March 6, 1952, terminated with the award of judgment in favor of the plaintiff and against the defendant in the sum of $2,882.58, together with costs and interest. The award of the judgment was pursuant to stipulation of the parties.
When the writ of attachment was served upon the garnishee bank, the latter had no account in the name of C.A. Campbell but held $581.15 in a commercial account under the name of Campbell & Hall, Inc. A corporation thus entitled was formed in 1931 or 1932 and conducted an insurance business until 1951. C.A. Campbell, the defendant in Phil Grossmayer Co. v. Campbell, was for many years active in the affairs of that corporation and at one time owned virtually all of its shares of stock. January 7, 1952, after the corporation had failed to comply with the requirements of § 77-243, OCLA, the Governor issued a proclamation which dissolved it. In the latter part of 1951 Campbell opened with the garnishee bank the aforementioned account; that is, the one entitled Campbell & Hall, Inc. The corporation just named was not a party to the plaintiff's action against Campbell nor in the proceeding against the garnishee. The plaintiff claims, and the *268 circuit court found, that the account belonged to defendant Campbell.
The garnishee-appellant (the bank) presents seven assignments of error. The second charges that the trial judge erred when he entered as a conclusion of law the following:
The third assigns as error a finding of fact which reads:
The seventh challenges the following conclusion of law:
Those assignments of error will suffice to indicate the issues.
The appellant's brief argues that the circuit court made two basic errors, and abridges its statement of them into the following:
We explain that in April, 1953, more than a year after the bank made its amended return to the writ of attachment, *269 the plaintiff served upon it allegations and interrogatories.
In submitting the contentions just quoted, the bank depends in part upon § 40-1005, OCLA, [now, after slight revision, ORS 708.525] which reads in part as follows:
No restraining order of the kind mentioned in § 40-1005 was served upon the bank and no bond was posted.
The notice of garnishment was served upon the granishee (the bank) March 6, 1952; it stated:
It will be observed that the notice of garnishment spoke of Campbell & Hall, Inc., which was organized in 1931 or 1932. According to the defendant, the incorporators were "Rule and Son and myself and Charles Hall." The defendant became one of its stockholders and officers. In 1934 the defendant borrowed money from A.B. McManiff, his father-in-law, and with it purchased the shares of stock which Rule and Son held. About that time the defendant owned all of the corporate stock except one share. In order to secure payment of his indebtedness to Mr. McManiff, the defendant pledged his shares of stock to him. In 1951 Campbell & Hall, Inc., sold all of its assets to one L.B. McNab. The sale included the corporation's records, books, fixtures and good will. Following the sale, the corporation possessed nothing. The defendant testified:
Concurrently with the sale of all of its assets to McNab, Campbell & Hall, Inc., agreed to quit the insurance business for the next five years. The money it received from McNab was wholly consumed in the discharge of its indebtedness. Accordingly, following the sale, it possessed nothing, engaged in no business and had no income. We have mentioned the proclamation which the Governor issued January 7, 1952, whereby the corporation was dissolved and its articles of incorporation revoked. However, § 77-246, OCLA, recognizes that corporations which are the subject of such proclamations retain sufficient of the vital spark for five years to permit a wind-up of their affairs.
*271 Mr. McManiff died in 1936 and at that time the defendant's indebtedness to him remained unpaid. The defendant's wife inherited from her father the stock which the defendant had pledged to him and still held it at the time of the trial. Presumably it was worthless.
March 11, 1952, the bank, as garnishee, made a return which stated:
Following the making of that return, David Pickett, an attorney who was a friend of the defendant, telephoned to Roger Otto, the officer of the bank who had made the return, and told him
After Pickett gave Otto that information he called at the bank and there spoke to Dave Cooper, an assistant cashier. He told Cooper, according to his further testimony:
March 13, 1952, following Pickett's telephone call and visit to the bank, the latter made an amended return to the garnishment which read as follows:
At the conclusion of his visit to the bank, Mr. Pickett presented to it a check for the entire sum of money on deposit in the name of Campbell & Hall, Inc., that is, $581.15. The check was honored. Pickett swore that after he had received the money he disbursed it to defendant Campbell's creditors in accordance with the latter's directions.
In the manner just indicated the bank account was exhausted. Its proceeds, it will be noticed, went to satisfy the defendant's creditors.
Following the sale of the assets of Campbell & Hall, Inc., the defendant engaged in the sale of insurance, and incurred the indebtedness to the plaintiff which underlies the attachment proceeding. In the meantime, he found it desirable to have a bank account and spoke to the aforementioned Dave Cooper, who had charge of new accounts for the garnishee bank. The defendant inquired if he would be permitted to open an account in the name of C.A. Campbell, Agent. According to him, Cooper replied that his bank "didn't approve of that kind of an account." The defendant then suggested that he would like to open the account in the name of Campbell & Hall, Inc. Presently he presented to Cooper a paper which purported to be a resolution of the board of directors of Campbell & Hall, Inc., authorizing the account and which, after describing the defendant as president of the corporation, designated him as the officer who would sign the *273 checks. Cooper approved the request and the account was opened April 14, 1951. Actually, no meeting of the board of directors had occurred and the purported resolution was a fabrication.
There is nothing in the record which intimates that Cooper knew that Campbell & Hall, Inc., had been dissolved. The allegations and interrogatories do not claim that the bank was a party to any fraud or had knowledge of the evil purposes which prompted the defendant. Likewise, they do not charge that there was any collusion between the bank and the defendant.
A belief that Otto or Cooper distrusted, or should have distrusted, Pickett when he told them that defendant Campbell had no interest in the money on deposit would find no support in the record. It will be recalled that when Pickett received the proceeds of the account he disbursed it to the defendant's creditors, but no witness suggested that any officer of the bank knew that he intended to take that course with the money.
The evidence renders it clear that the bank account, although in the name of Campbell & Hall, Inc., was actually that of the defendant. The following is taken from the latter's testimony:
1. The circuit court's findings of fact include the following:
Those findings are the equivalent of the verdict of a jury. Prudential Trust Co. v. Merchants' National Bank, 66 Or 224, 133 P 1191.
The findings do not state that the bank had knowledge that the account in the name of Campbell & Hall, Inc., belonged to the defendant and was not the property of Campbell & Hall, Inc. They do not declare that the bank was aware of the fact that Campbell & Hall, Inc., had been dissolved or that the defendant, in opening the account in the corporate name, was prompted by evil motives.
It will be recalled that after the notice of garnishment was delivered to the bank and Mr. Pickett had told two of its officers that the account belonged to Campbell & Hall, Inc., a check bearing that name and drawn for the full amount of the account [$581.15] was cashed. The question, therefore, which the case presents is whether the bank, as garnishee, is liable once more for the money  this time to the plaintiff because findings of the circuit court declare:
The plaintiff's brief expresses the issue in this manner:
In making answer to those questions we must bear in mind the part of § 40-1005, OCLA, which says:
the latter procured a restraining order prohibiting the bank from honoring the checks of the person entered upon the bank's records as depositor, or posted a bond which promises indemnity to the bank if it thereafter declines to honor the checks of the person whose name appears in its files as depositor. The statute provides that if the adverse claimant resorts to the restraining order method, he must make "the person to whose credit the deposit stands" a party and serve him with summons. The bank must also be made a party, for the statute speaks of "a restraining order, injunction or other appropriate process against said bank." If the adverse claimant selects the alternative to the restraining order, this is, "a bond indemnifying said bank or trust company from any and all liability," then the form of the bond and its sureties must be "acceptable" to the bank. It will be noticed that if the adverse claimant resorts to the restraining order method, he must file a suit; that is, one on the equity *276 side of the court which names as defendant, not only the alleged debtor, but also the bank and the person who, he claims, is the actual owner of the account. No such suit was filed in this case and no indemnity bond for the bank's protection was obtained.
2, 3. The application of the statute just cited is not restricted to attachment and garnishment proceedings. It does not even mention proceedings of that kind and its reach is broader. The statute is applicable in all cases when "an adverse claim to a deposit" is made. Its purpose is to relieve the bank of the financial responsibility attendant upon deciding whether the person entered upon the bank's books is entitled to the deposit money, or whether the person whom the adverse claimant says is the owner of the account should be recognized as such. If the adverse claimant, whatever may be the nature of his purported rights, obtains from the court an injunction, he is required to file an undertaking and thereupon both the injunction and the undertaking protect the bank when it complies with the court's order. It is in that suit that the court will determine ownership of the account. If, in lieu of securing an injunction, he posts an indemnity bond, the latter affords the bank protection when it declines to honor the checks of the individual whose name is entered in its records as depositor.
The plaintiff argues that § 40-1005, supra, is inapplicable to the case at bar. Its brief says:
Going on, the brief declares:
But when the bank, after the writ of attachment had been served, was presented with a check bearing the signature of Campbell & Hall, Inc., for the full amount of the deposit, it did not know that Campbell & Hall, Inc., was a mere pseudonum for C.A. Campbell. The demands and assurances of Mr. Pickett persuaded the bank's officers that Campbell & Hall, Inc., was an existing corporation and that C.A. Campbell, whom the plaintiff claims was the owner of the account, had no interest in it. The mere fact that the defendant, C.A. Campbell, had sought to open the account in the name of C.A. Campbell, Agent, and that the bank declined to grant him that privilege does not establish that it knew that the defendant was the owner of the account which was later opened in the name of Campbell & Hall, Inc. Before that account was opened Campbell had presented the resolution which, he asserted, the board of directors of the corporation had adopted. When the bank, in the absence of a restraining order or of the alternative indemnity bond, deemed itself bound to honor a check bearing the signature of Campbell & Hall, Inc., it had as authority for its action in so doing: New Amsterdam Casualty Co. v. Roberston et al., 129 Or 663, 278 P 963, 64 ALR 1396; Dahl & Penne, Inc. v. State Bank of Portland, 110 Or 68, 222 P 1090; Zollmann on Banks and Banking, Perm Ed, § 3153; 9 CJS, Banks and Banking, § 342, p 684; and 1 Paton's Digest of Legal Opinions, 4A:6, p 177.
The plaintiff cites Prudential Trust Co. v. Merchants' National Bank, 66 Or 224, 133 P 1191, and Valley Bank & Trust Co. v. Parthum, 47 Ariz 496, 56 *278 P2d 1342. In garnishment proceedings in the Prudential Trust Company case, the circuit court found that J.J. Metzler and J.J. Metzler, Agent, were the same individual. The resulting judgment was affirmed upon appeal. In so doing, this court declared:
At that time, § 40-1005, OCLA, had not been enacted.
In the Valley Bank case, one by the name of Frank Healy opened a checking account with the bank September 12, 1933, in the name of Katherine Lee. Healy had a daughter, fifteen years of age, by the name of Katherine Lee Healy. Healy made the deposits in the account and his daughter signed the checks, using the name Katherine Lee in so doing. The decision, referring to the account and the manner in which it was operated, said:
The notice of garnishment, according to the decision,
*279 The bank answered that it possessed nothing and, following the notice, continued to honor checks drawn as above described. In that manner, the account was exhausted. The court, in affirming judgment against the garnishee, said:
The decision, however, held that the notice of garnishment
The decision mentioned no statute similar to § 40-1005, OCLA. Upon rehearing the court made the following significant utterances:
*280 The court added that the answer averred that the money in the account belonged to the daughter. Then the court said:
It will be observed that § 40-1005, supra, affirmatively requires that in instances such as the present, "the person to whose credit the deposit stands" must be "made a party and served with summons."
4. We believe that this case is within § 40-1005 OCLA, and, since the plaintiff did not charge the bank with fraud, collusion or bad faith, and failed to comply with the demands of the statute just mentioned, the garnishee bank was justified in honoring the check drawn by Campbell & Hall, Inc. Therefore, the previously quoted assignments of error are sustained. The circuit court erred when it entered the challenged judgment against the garnishee bank. That judgment is reversed.
[*]  Resigned June 30, 1958.