Court Opinion

ID: 9830563
Source: CourtListenerOpinion
Date Created: 2023-09-01 20:17:24.523142+00
Date Added: 2024-06-11T07:43:24.338469
License: Public Domain

On Motion for Rehearing.
The facts in this case are stated in our original opinion and also stated, in a more concise form, in our certificate to the Supreme Court, to be hereinafter referred to. On original hearing, as will appear from our original opinion, we affirmed the judgment below except- as to the trustee in bankruptcy ; but being in doubt of the correctness of our conclusions, we certified to the Supreme Court for determination, among other things, the following question:
“Did the knowledge of the bank that one-third of the proceeds deposited by Graves during the course of his business was the proceeds of cattle sold by the commission company for individual shippers have the effect to place upon the hank the burden of making inquiry and ascertaining for itself the persons to whom such trust funds in fact belonged, and hence render unauthorized the offsets above shown to the commission company’s overdraft?”
The certificate was referred to Section B of the Commission of Appeals, and in an opinion by Presiding Judge Ben H. Powell, approved by the Supreme Court, it was held, after a review of numerous authorities, that:
“The actual knowledge on the part of the bank that the' Graves deposit consisted, in part, of trust funds placed upon the bank the burden of making inquiry before appropriating any of that deposit in payment of its own overdraft against Graves. If all of the Graves deposit had belonged to the shippers, within the knowledge of the bank, the latter certainly could not have appropriated any of the funds to its overdraft against Graves. The bank, knowing the deposit contained trust funds, must separate the trust funds in said deposit from the Graves funds therein before it makes an appropriation from the deposit to pay the Graves overdraft. The funds were mixed by Graves. The bank knew they were mixed. Therefore, under a rule as old as the law itself, the entire deposit will be treated as trust funds except so far as the bank might, upon inquiry, be able to distinguish the trust funds in said deposit from those therein belonging to Graves personally.”
Under such findings, by which we are bound, we see no escape from the conclusion that the appropriation of the funds in controversy in this ease to the páyment of Graves’ overdraft was unauthorized, for it is undisputed in the evidence that the bank *538had actual knowledge that at least a part of the funds on deposit with it to Graves’ credit belonged in equity to parties for whom Graves, as a broker, had sold cattle, and it is further undisputed that the bank in fact made no separation between the trust funds belonging to others and Graves.
It is vigorously insisted in behalf of the bank that the funds on deposit in the bank were not trust funds in fact, and that our Supreme Court did not so decide; but we have been unable to concur in this contention. We entertain no doubt of the fact that at least a large part of the funds on deposit in the bank to Graves’ credit was a trust fund. See Central National Bank v. Connecticut Mutual Life Insurance Co., 104 U. S. 67, 26 L. Ed. 693; Union Stockyards National Bank v. Gillespie, 137 U. S. 411, 11 S. Ct. 118, 34 L. Ed. 724; Union Stockyards National Bank v. Moore, 79 P. 705, 25 C. C. A. 150, cited with approval by our Supreme Court. See, also, Cady v. South Omaha National Bank, 46 Neb. 756, 65 N. W. 906; Clemmer v. Drovers’ National Bank, 157 Ill. 206, 41 N. E. 731; Boyle v. Northwestern National Bank, 125 Wis. 498, 103 N. W. 1123, 104 N. W. 917, 1 L. R. A. (N. S.) 1110, 110 Am. St. Rep. 844; Bills v. Schliep, 127 F. 107, 62 C. C. A. 103; Interstate National Bank v. Claxton (Tex. Civ. App.) 77 S. W. 44; Commission Company v. Beatty, 42 Okl. 721, 142 P. 1102.
Nor do we think it can be said that our Supreme Court did not so decide. As we read the opinion of the Supreme Court, the fund in controversy was treated as a trust fund throughout the entire opinion, and this view is emphasized by the fact, as appears from copies of appellants’ briefs and arguments in the Supreme Court, both .on the original hearing and upon a motion for rehearing, that the contention was expressly presented that the fund in fact was not a trust fund. As evidence of this” and also as presenting appellants’ views as now and here urged, we quote the following from the argument in behalf of the Stockyards National Bank in the Supreme- Court:
“Upon sale of the cattle, Graves came into possession, and had' the legal title, of the purchase money, and the shippers had the equitable title thereto. With consent of the shippers, Graves deposited this money in bqnk to his individual and personal credit. The shippers also agreed that Graves could pay them by his checks drawn on his individual and personal account. By the deposit made under such circumstances, the legal title to said money was divested out of the shippers, and both titles were vested in the bank; and, in so far as Graves and the shippers are concerned, the bank became the legal and the equitable owner of the money, and the relation of debtor and creditor was established between the bank and Graves in respect to the money. When the shippers consented to the divestiture of their equitable title in the money ■ and to the vesting of that title in the bank, to the creation of the relation of debtor and creditor between the bank and Graves in respect to said money, and to accept payment by Graves’ personal check, then the trust character of the money was destroyed. Therefore the shippers cannot follow the money in the possession of the bank on the theory that it is trust funds.”
Also the third point of the bank’s motion for rehearing is as follows:
“Third. This court erred in holding that the credit to Graves offset by the bank against his overdraft was ’a trust fund.”
Among other things, the Commission of Appeals, in ahswer to the motion before it for rehearing, said:
“We have carefully considered motion for 'rehearing Sled herein by appellee. We think the same is without merit and recommend that it be overruled.”
We are of the opinion that the foregoing conclusions, together with those announced in the opinion on certified questions, are the vital ones presented in this case, and that we need not therefore discuss other contentions made in behalf of the appellee bank. We accordingly conclude, it having been so agreed by counsel for all parties in this case other than appellee bank and the intervening carriers, that the judgment below in favor of the trustee in bankruptcy for the sum of $317.85, together with his costs and interest as adjudged, be and the same is hereby affirmed; that as to the interveners other than the carriers the judgment below should be reversed and here rendered in their favor for the amount applied by the appellee bank in payment of Graves’ overdraft, to wit, $14,268.62, together with interest thereon at the legal rate from the date of said appropriation, to wit, from and after September 30, 1918; said sum to be prorated among said interveners in proportion to their s several debts against Graves. As to the intervener carriers,' we conclude, as announced in our original opinion, that the judgment against them must be affirmed ; it being our conclusion that as to the sums claimed by the carriers, Graves was but their debtor, and it not appearing that the appellee bank had notice of any kind that any part of Graves’ deposits belonged to the carriers as freight. This conclusion, however, is not to be construed as prohibiting the prosecution of the carriers’ claims for freight, if any they have, against the several owners of the cattle shipped to and sold by Graves, and upon which the freight was not paid.
In explanation of the process by which we arrived at the amount for which the appellee bank was liable to the intervening shippers', we should perhaps add that as shown in our opinion on original hearing, *539between the dates of September 30, 1918, when Graves’ overdrafts of $45,744.69 was paid by the bank, and October 6, 1918, the total deposits made by Graves aggregated $179,132.70. Of that amount $153,135.21 was the proceeds of sales of all cattle sold by Graves on commission during that period; and $92,889.63 of that sum represented the proceeds of cattle sold by Graves for the shippers who are plaintiffs in this ease. Therefore, $179,132.70 minus $153,135.21 leaves $25,997.49, which appears to be the amount realized by Graves from his own individual cattle and in which none of the shippers had any interest; and unquestionably the bank had the right to apply that sum upon the indebtedness of $45,744.69, which Graves owed it by its payment of his overdrafts on September 30th. See Michie on Banks and Banking, vol. 2, p. 1009, § 134 et seq. The total amount of checks given by Graves on the account during the period above 'mentioned, beginning October 1st and ending October 5th, was $138,886.55. That total subtracted from the total deposits during the same period of $179,132.70 leaves an excess of deposits over checks of $40,-266.70. The shippers are claiming that entire excess. The bank has applied the whole of that excess to the payment of Graves’ said overdrafts. The bank had the right to apply $25,997.49 to said overdrafts, since Graves had that amount in the deposits which belonged to him individually; but the balance of such excess, to wit, $14,268.62 could not be so applied because it belonged to the shippers. Therefore the shippers are entitled to recover of the bank $14,268.62.
The bank applied the deposits made during the first five days in October, in part, to the liquidation of the prior overdrafts of Graves, on each day those deposits were made. It had the right and it was its duty to pay the checks drawn by Graves during that period out of the trust fund regardless of the purpose for which those checks were given. Graves had the authority of the shippers to so expend the trust fund, and it was not the duty of the bank to question that authority. After it had rightfully paid those checks out of the trust fund, in part, it certainly was entitled to credit therefor as against the demand of the shippers now made. That question is settled by the Claxton Case, upon which the shippers chiefly relied. Hence the shippers are in no position now to urge the contention that $65,-000 of the checks so paid was paid out to satisfy Graves’ individual debts, or for his individual benefit, and therefore those checks should not be charged against the trust fund until after his individual deposits were exhausted.
For the reasons stated, it is ordered that the motions for rehearing in behalf of the trustee in bankruptcy and of the several in-terveners be granted; that the judgment below be affirmed as to the trustee in bankruptcy, but as to the intervening shippers reversed and here rendered in their favor, as herein above declared.
BUCK, J., not sitting.