Case Name: STATE v. THUM, Receiver
Court: Idaho Supreme Court
Jurisdiction: Idaho
Decision Date: 1898-12-16
Citations: 6 Idaho 323
Docket Number: 
Parties: STATE v. THUM, Receiver.
Judges: Sullivan, C. J., and Huston, J., concur.
Reporter: Idaho Reports
Volume: 6
Pages: 323–340

Head Matter:
(December 16, 1898.)
STATE v. THUM, Receiver.
[55 Pac. 858.]
Public Monet — Trust Fund, When Deposited in Bank — Belongs to True Owner. — Public money deposited by a public officer in a bank becomes a trust fund, and not part of the estate of tbe bank, and, in ease of the insolvency of the bank, its receiver must treat such fund as the property of the true owner, and not of the bank.
Insolvent Bank — Creditors op. — The creditors of an insolvent bank are not entitled to share pro rata in public money deposited in such bank.
Pleading. — A defect in a complaint may be cured by allegation in the answer.
(Syllabus by the court.)
APPEAL from District Court, Bingham County.
R. E. McFarland, Attorney General, and Hawley & Puckett, for Appellant.
The money belonging, as it did, to the state, and being deposited in the bank by the treasurer, made it a trust fund and gave the state, as the true owner, the right to recover the amount from the bank assets, regardless of the fact that it had mingled with other funds, and that such amount of money had not been kept on hand. (Wolffe v. State, 79 Ala. 201, 58 Am. Rep. 590; Van Alen v. American Nat. Bank, 52 N. Y. 1; Merrill v. Bank of Norfolk, 19 Pick. 32; National Bank v. Insurance Co., 104 U. S. 67, and eases cited.) When a public treasurer, without authority of law, deposits public moneys in bank as treasurer, the title of the moneys does not pass to the bank, although there is no agreement that the identical bills shall be returned, and they are mixed with the banlCs general funds, and the county is entitled to recover an equal amount from a receiver of the bank prior to the payment of the general depositors. (San Diego County v. California Nat. Bank, 52 Fed. 59; Hot Springs School Dist. v. First Nat. Bank, 61 Fed. 417; Myers v. Board of Education, 51 Ivan. 87, 37 Am. St. Rep. 263, 32 Pae. 658, 662; Foster v. Bincker, 4 Wyoi 484, 35 Pae. 470; Hubbard v. Alamo Irr. Co., 53 Kan. 637, 36 Pac. 1053-1055, 37 Pac. 625; City of Lamed v. Jordan, 55 Kan. 124, 39 Pac. 1030, 1031; Ryan v. Phillips, 3 Kan. App. 704, 44 Pac. 909, 910; State v. Midland State Bank, 52 Neb. 1, 66 Am. St. Rep. 484, 71 N. W. 1011; Shepherd v. Meridian Bank, 149 Ind. 20, 48 N. E. 352; Kimmel v. Dickson, 5 S. Dak. 221, 49 Am. St. Rep. 869, 58 N. W. 561, 25 L. R. A. 309; Mechem on "Public Officers, sec. 922; Farmers’ Bank v. King, 57 Pa. St. 202, 98 Am. Dee. 215; Boone on Banking, sec. 285; Baker v. New York Nat. Bank, 100 N. Y. 31, 53 Am. Rep. 150; People v. City Bank, 96 N. Y. 37; Burnett v. First Nat. Bank, 38 Minh. 630; Skinner v. Bank, 4 Allen, 290; Allen v. St. Louis Bank, 120 D. S. 40, 7 Sup. Ct. Rep. 460; Boone on Banking, sec. 62; Slate v. Midland State Bank, 52 Neb. 1, 66 Am St. Rep. 484, 71 N. W. 1011; Independent Dist. of Boyer ■v. King, 80 Iowa, 497, 45 N. W. 909.) Sureties — subrogation ■of to rights of obligee. (Murfree on Official Bonds, sec. 671; 2 Brandt on Guaranty and Suretyship, 465, 479, note; City of Keokuk v. Love, 31 Iowa, 119; Appeal of Lebanon Co. (Pa.), 19 Atl. 303; Blake v. Traders’ Nat. Bank, 145 Mass. 13, 12 N. E. 414, 418; Livingston v. Anderson, 80 Ga. 175, 5 S. E. 49.) Separate accounts of a party kept in distinct characters at a bank must be kept distinct, and a trust account cannot be applied to pay a debt due on a personal account. (Morse on Banking, 40; Boone on Banking, secs. 65, 66, 285, 289; National Bank v. Insurance Go., 104 D. S. 54, 68; Union Stockyards Bank v. Gillepsie, 137 B. S. 422, 11 Sup. Ct. Rep. 118; International Bank of Chicago v. Jones, 119 111. 407, 59 Am. Rep. 807, 9 N. E. 886; Coates v. Preston, 105 111. 470, 473, and cases cited; Pennell v. Deffel, 4 De Gex, M. & G. 383, 390.)
Lyttleton Price, for Respondent.
The deposit being a general deposit, is, in legal effect, a loan to the bank. The state treasurer may not loan public moneys. If he does so, the state cannot seek to recover the money loaned without ratifying the loan. This could be done only by legislative authority, if at all. (State v. Keim, 8 Neb. 63; Approved in First Nat. Bank v. Gandy, 11 Neb. 431, 9 N. W. 566; State v. Bartley, 39 Neb. 353, 58 N. W. 172, 176.) When a depositor makes a general deposit in a bank the relation of debtor and creditor is established. (Janin v. London etc. Bank, 92 Cal. 14, 27 Am. St. Rep. 82, 27 Pac. 1100; State v. Buttles, 3 Ohio St. 309; Bank v. Windisch etc. Co., 50 Ohio St. 151, 40 Am. St. Rep. 660, 33 N. E. 1054; Henry v. Martin, 88 Wis. 367, 60 N. W. 263; McLain v. Wallace, 103 Ind. 562, 5 N. E. 911; Alston v. State, 92 Ala. 124, 9 South. 732; State of New York v. Mechanics’ etc. Institution, 1 Am. & Eng. Corp. Cas. 573; Balbach v. Frelinghuysen, 15 Fed. 675; 5 Thompson on Corporations, sees. 7098, 7101; Story on Bail-ments, Bennett’s ed., sec. 88; Ruffin v. Board Co. Commrs., 69 N. C. 498, 509; Brahm v. Adkins, 77 111. 263; Keene v. Collier, 1 Met. (Ky.) 415 1. The addition of Storer’s official title does not affect the character of the deposit nor change his relation to the bank as its creditor. (Alston v. State, 92 Ala. 124, 9 South. 732; Otis v. Gross, 96 111. 612, 36 Am. Rep. 157, 159; McLain v. Wallace, 103 Ind. 562, 5 N. E. 911; Citizens’ Bank v. Alexander, 120 Pa. St. 476,14 Atl. 402; Fyrman v-St. Louis Bank, 84 Mo. 408; Swartout v. Bank, 5 Denio, 555; German Bank v. Heinstedt, 42 Ark. 62; Lowry v. Polk Co., 51 Iowa, 50, 33 Am. Rep. 114, 115, 49 N. W. 1049.) Where the deposit is not special there is no trust relation. (5 Thompson on Corporations, secs. 7102, 7104; 2 Story’s Equity Jurisprudence, sec. 1259; 2 Pomeroy’s Equity Jurisprudence, sec. 1058; Multnomah Go. v. Oregon Nat. Bankj 61 Eed. 912; St. Louis etc. Assn. v. Austin, 100 Ala. 313, 13 South. 908; Bank v. Smith, 15 Fed. 858; Ind. Dist. Pella v. Beard, 83 Fed. 5-17.)
Petition by the state, on the relation of J. H. Anderson, state auditor, and R. E. McFarland, attorney general, in an action by the First National Bank of Pocatello against C. Bunting & Co. The respondent, C. E. Thum, was appointed receiver of C. Bunting & Co., bankers, an insolvent corporation, on the fifteenth day of February, 1897, by order of the district court of the fifth judicial district, made in the action brought by the First National Bank of Pocatello against said C. Bunting & Co., bankers. On February 8, 1898, the state ex rel. J. PL Anderson, state auditor, and R. E. McFarland, attorney general, pursuant to order of said district court granting leave so to do, filed its petition in said action, in which it is alleged: That one George PL Storer, was duly elected at the regular November election in 1896 state treasurer of the state of Idaho, and duly qualified as such officer, and assumed the duties of said office; that said Storer, as such treasurer, has deposited in and with said C. Bunting & Co., bankers, large sums of money, belonging to the state, and which came to his hands as such treasurer; that said moneys were received by said C. Bunting & Co., bankers, and credited on its books to said George PL Storer as treasurer, with full notice and knowledge that said moneys belonged to and were the property of the state; that said corporation is insolvent, and has suspended payment, and is unable to pay its indebtedness, and that there came to the hands of the respondent, C. E. Thum, as receiver of said banking corporation, the sum of $11,101.16, money of the state; that the state has demanded payment of said sum from said receiver, but said receiver fails and refuses to pay same to the state; that said receiver has disbursed large portions of the assets of said banking corporation, and threatens and intends to pay out and distribute the remaining assets of said banking corporation remaining in his hands, and said money of the state, to the creditors of said corporation; that said receiver claims that said money deposited by said Storer as treasurer belongs to, and is a part of, the estate of the said corporation, and will, unless otherwise directed by the court, pay-out said money to the creditors, whereby same will be lost to the state. To this petition the respondent made answer, in which he denies that said Storer deposited any sum or sums of money belonging to the state; that there is a credit on the books of said C. Bunting & Co., bankers, to the credit of said Storer, state treasurer; that said credit is the result of deposits ■of checks made by said Storer; that when said Storer came into office as such treasurer there were, to the credit of C. Bunting, state treasurer, his predecessor, large sums of money deposited in said bank by his predecessor; that said Storer received from his predecessor a check for such sum; and that said Storer continued to keep, as state treasurer, with said bank, an áccount based upon credit received from checks from his predecessor, and other cheeks, and that said Storer deposited no money or cash in said bank. The evidence shows that C. Bunting, former treasurer, gave to his successor, George H. Storer, state treasurer, January 6, 1897, a check for $32,-702.58, and which cheek was credited by said bank to said ■Storer, state treasurer; that C. Bunting, as state treasurer, deposited funds of the state with said bank, and there was to his ■credit, as such treasurer, in said bank, on January 6, 1897, more than $32,702.58. Said Storer, state treasurer, deposited other cheeks in said bank, and drew his checks thereon, leaving, on February 15, 1897, a balance to his credit as state treasurer of something over $11,101.16. On the trial, after the above facts had been proven, the respondent moved for a non-suit, which the trial court granted, whereupon judgment was entered dismissing the appellant’s petition. From this judgment the state appeals. The evidence is set forth in appellant’s bill of exceptions. Reversed.

Opinion:
QUARLES, J.
(After Stating the Facts.) — The contention of the respondent that public money deposited in a bank on general deposit, by a public officer, in violation of law, becomes the estate and property of the bank, the owner of the money so deposited, contrary to its will, becoming a mere creditor of the bank, raises the principal question in this case. The district court sustained this contention. We are unable to do so. The position of the state in this case is unlike that of an ordinary depositor in a bank. A party who deposits money in a bank on general deposit voluntarily becomes the creditor of such bank, and, impliedly at least, agrees that the bank may commingle such money with its own, and use it until called for by such depositor. The relation of debtor and creditor arises by mutual consent. Not so in the case at bar. The state never consented to become the creditor of C. Bunting & Co., bankers. It never deposited, or consented that the funds in question should or might be deposited, with said bank on general deposit. On the other hand, the state absolutely prohibited the making of such deposit. Sections 6975-6977 of the Bevised Statutes, are as follows:
"Sec. 6975. Each officer of this territory, or of any county, city, town, or district of this territory, and every other person charged with the receipt, safekeeping, transfer, or disbursement of public moneys, who either:
"1. Without authority of law, appropriates the same or any portion thereof to his own use, or to the use of another; or,
"2. Loans the same or any portion thereof; or, having the possession or control of any public money, makes a profit out of, or uses the same for any purpose not authorized by law; or,
"3. Fails to keep the same in his possession until disbursed or paid out by authority of law; or,
"4. Deposits the same or any portion thereof in any bank, or with any banker or other person, otherwise than on special deposit; or,
"5. Changes or converts any portion thereof from coin into currency, or from currency into coin or other currency, without authority of law; or,
"6. Knowingly keeps any false account, or makes any false entry or erasure in any account of or relating to the same; or, "7: Fraudulently alters, falsifies, conceals, destroys, or obliterates any such account; or,
"8. Willfully refuses or omits to pay over, on demand, any public moneys in his hands, upon the presentation of a draft, order, or warrant drawn upon such moneys by competent authority; or,
"9. Willfully omits to transfer the same, when such transfer is required by law; or,
"10. Willfully omits or refuses to pay over to any officer or person authorized by law to receive the same, any money received by him under any duty imposed by law so to pay over the same; is punishable by imprisonment in the territorial prison for not less than one nor more than ten years, and is disqualified from holding any office in this territory.
"Sec. 6976. Every officer charged with the recipt, safekeeping, or disbursement of public moneys, who neglects or fails to keep and pay over the same in the manner prescribed by law, is guilty of felony.
"Sec. 6977. The phrase 'public jnoneys/ as used in the two preceding sections, includes all bonds and evidence of indebtedness, and all moneys belonging to the territory, or any city, county, town, or district therein, and all moneys, bonds, and evidences of indebtedness received or held by territorial, county, district, city or town officers in their official capacity."
The former treasurer, C. Bunting, had no authority to deposit public money in the bank of C. Bunting & Co., bankers, on general deposit. The bank had, and was charged with express notice that the state treasurer had, no authority to make such general deposit. More than that; the bank, nor the officers of said bank, after receiving said money, could mingle it with the funds of the bank, or loan it, or make profit out of it, or appropriate it, without committing a felony. If a bank receives public money, it must do so on special deposit. It must keep such money separate from its own funds. It must not use it or loan it. If any of these acts are committed, the persons or officers who participate are guilty of a felony. Now, it must necessarily follow that, the state treasurer, having no authority to deposit public money with a bank on general deposit, but he being authorized to deposit such money with a bank on special deposit, the instant that C. Bunting & Co. received public money from the state treasurer, it did so on special deposit, and that if the officers or any officer of said bank thereafter used said money, or commingled it with the money of the bank, or loaned it, such officers or officer, by such act, committed a felony. The bank could not appropriate it. Hence it did not become the estate or property of the bank. If the bank was still doing business, it could not claim the money in controversy, or any part thereof, as its own. It could assert no claim adverse to the state to such money, or any part thereof. The respondent, as receiver of said bank, can assert no claim to said money which the bank could not itself assert if it was still doing business. The' creditors of the bank have no interest or claim upon said money. The joint wrong and criminal act of the agent of the state and of the officers of the bank does not redound to the financial interest of the creditors of the bank. The bank received the money in trust for the true owner, the state. It must be regarded as a trustee. (Wolffe v. State, 79 Ala. 201, 58 Am. Rep. 590; Bank v. Hummel, 14 Colo. 259, 20 Am. St. Rep. 257, 23 Pac. 986; State v. Midland State Bank, 52 Neb. 1, 66 Am. St. Rep. 484, 71 N. W. 1011; Foster v. Rincker, 4 Wyo. 484, 35 Pac. 470; Kimmel v. Dickson, 5 S. Dak. 221, 49 Am. St. Rep. 861, 58 N. W. 561; Meehem on Public Officers, sec. 922; Winslow v. Iron Co. (Tenn. Ch. App.), 42 S. W. 698; Hubbard v. Manufacturing Co., 53 Kan. 637, 36 Pac. 1053, 37 Pac. 625; Ryan v. Phillips, 3 Kan. App. 704, 44 Pac. 909; City of Larned v. Jordan, 55 Kan. 124, 39 Pac. 1030.) We could cite many other authorities to the same effect. In Vane v. Towle, 5 Idaho, 471, 50 Pac., we said, at page 1008: "Trustees must, in dealing with trust funds, and with the beneficiaries thereof, show the utmost good faith and fair dealing. They can make no profit out of the trust funds, nor obtain any advantage over the beneficiaries of such funds ; and a trustee cannot assert an adverse claim to funds which he receives in his fiduciary capacity." The respondent, as receiver, is in the same position as the bank. He -can assert no adverse claim against the state to the money in question. That fund, being a trust fund, is no part of the insolvent bank's estate. It must be paid to the state before the bank's estate is distributed. Creditors of a bank need not expect, under the laws of this state, to have public funds in the bank distributed among themselves in case of the failure of such bank. Could it be contended that if A robbed B of a large sum of money, and then went into insolvency, that that money should be distributed among A's creditors? Certainly not. We cannot give our consent to the doctrine or theory that if two persons, in handling a particular fund, commit a felony with reference to such fund, their criminal act devests the owner of title, or creates the relation of debtor and creditor between the true owner of such fund and the parties who commit the criminal act.
(January 11, 1899.)
The respondent insists that the motion for nonsuit was properly granted on the ground of variance between the allegation and proof. It is true that the evidence shows that some or all of the money in question was deposited with C. Bunting & Co., bankers, by the former treasurer, and not by the present one. In this respect the petition is defective. But such defect is cured by the allegations of the answer, wherein it is alleged that such money was placed in said bank by C. Bunting, former treasurer, who gave his check therefor to Treasurer Storer. The judgment- appealed from is reversed, and the cause remanded to the district court, with instructions to enter judgment in favor of the state as demanded in the petition, and to direct the respondent, C. E. Thum, as receiver, to pay the said judgment out of assets of the said C. Bunting & Co. in his hands before any distribution of such assets among the creditors of said banking corporation. Costs of appeal to be paid out of funds in the hands of said receiver.
Sullivan, C. J., and Huston, J., concur.