Court Opinion

ID: 5169691
Source: CourtListenerOpinion
Date Created: 2022-01-02 04:52:47.23382+00
Date Added: 2024-06-11T08:26:01.566582
License: Public Domain

AILSHIE, J.
(After stating the facts.) — Respondent has moved to dismiss this appeal on the ground that the order on Judgment appealed from is not final and is therefore not an appealable order or judgment. The position of the respondent is not tenable. The state came into the receivership case by petition to have a certain claim and lien established and decreed in favor of the state as a prior and preferred lien claim. The court’s order or judgment is final as to the subject matter involved in the state’s case. It finally determines that the state is not entitled to recover except as against the cash on hand in the bank at the time it suspended business. The additional clause in the decree authorizing an accounting and the state to receive “the proceeds of any investment made of trust funds between the 10th day of January, 1908, and the 20th day of January, 1908, both inclusive,” does not limit, qualify or affect the order or judgment in so far as the finality of the same is concerned. In view of paragraph 11 of the stipulation of facte, which was adopted as the finding of facts by the court, this clause in the decree would be meaningless and useless anyway. It is agreed by that stipulation that none of the trust fund was invested in notes or securities, and that none of it can be traced into any special fund or asset of the bank, but that, on the contrary, the entire trust fund went into the general funds of the bank and was used promiscuously and generally in investments and the payment of the debts of the bank the same as the other funds of the bank. The motion to dismiss the appeal is not well taken and is accordingly denied.
The controlling question to be decided in this ease is whether the state is entitled to a preferred lien on all the assets of the bank or only upon the cash in the bank at the time its *10doors closed to business. Many courts, and perhaps the greater number, passing upon this question, have held with the contention made by the respondent, that the lien can attach only against the cash on hand when the bank suspended payment. But this court, and many of the courts of the country of high standing, have held otherwise, and we believe the soundest reason and most convincing logic of the situation is with the position maintained by the state.
The money deposited by the state treasurer was the property of the state, and the bank knew that fact at all times it was dealing with this fund. It is conceded that it went into the general funds of the bank and was paid out from day to day together with general deposits on the cheeks of depositors and in the purchase of securities and other assets. No pretense is made by the bank or its receiver that this money was embezzled, stolen or dissipated. It was used in the due course of business as transacted by the bank. It is also conceded that no part of this fund can be traced into any particular securities, paper or assets. The bulk of it was doubtless paid out on depositors’ checks during the closing days the bank did business and while it' was struggling to maintain its credit and continue in business.. We fail to see what difference it can make in point of fact, reason or law whether the money was used in buying bonds, mortgages and other paper to add to the general assets of the bank, or in discharging the debts of the bank; In either event, it adds to or appreciates the body and value of the bank’s assets. If the money is used to-day to pay the bank’s debts and it suspends business to-morrow, the indebtedness of the bank to-morrow will be just as much less than it would otherwise have been as the amount paid out represents. The assets of the bank are worth more when the bank’s debts amount to only $500,000 than when they amount to $600,000. So it was in this case, — the assets of the bank in the hands of the receiver are worth more to the general creditor with the debts reduced in the sum of $60,000 by the disbursement of these trust funds than they would have *11been bad that amount of debts not been paid before the bank went into insolvency.
Appellant relies on State v. Thum, 6 Ida. 323, 55 Pac. 858, and First National Bank of Pocatello v. Bunting, 7 Ida. 27, 59 Pac. 929, for a reversal of the judgment of the trial court. In the Thum case, the state treasurer had deposited state funds in the bank of C. Bunting & Co., and the state successfully contended in this court that it had a preferred lien against all the assets of the bank in the hands of the receiver for the payment of the trust account. This court recognized and upheld the prior claim and lien of the state, and ordered that a judgment be entered directing the receiver to pay the state in full before paying any of the general creditors. The Thum case was followed and approved in the subsequent case of First National Bank v. Bunting. While the identical question here raised was not considered and discussed in the written opinion, still it was necessary to hold that the claim and lien was preferred against all the assets of the bank, irrespective of the amount of cash on hand when the bank closed, or of the class or character of the assets acquired by the particular fund, for the reason that the amount of cash on hand when the C. Bunting & Co. bank closed was only $5,300, while the preferred liens for trust funds that were established and approved by this court amounted to more than $63,000.
The authorities on this question are numerous, and it would serve no useful purpose to attempt to review, consider or analyze them in this opinion. In addition to the above cases from our own court, we will call attention to one other case, namely, Meyer v. Board of Education, 51 Kan. 87, 37 Am. St. 263, 32 Pac. 658. That was a ease where the treasurer of a school district had deposited money in a bank without any authority to do so, and the bank thereafter became insolvent, and at the time it went into the hands of a receiver there was not enough cash on hand to pay the amount due the school district. The money could not be traced into any special fund or particular part of the assets. It had apparently been paid out largely on the checks of depositors *12in the discharge of the bank’s indebtedness. The supreme court of Kansas upheld the claim of the district for a preferred lien on all of the assets of the bank in payment of the trust account. The court, in considering the validity of the claim and the equity doctrine applicable thereto, said:
“The modern doctrine of equity, and the one more in consonance with justice,' is that the confusion of trust property so wrongfully converted does not destroy the equity entirely, but that, when the funds are traced into the assets of the unfaithful trustee or one who has knowledge of the character of the funds, they become a charge upon the entire assets with which they are mingled.It would seem to be immaterial whether the property with which the trust funds were mingled was moneys, or whether it was bills, notes, securities, lands, or other' assets. The bank which assigned in this case appears to have been engaged in a general business, and its assets consisted of moneys, securities, and lands; and, as the estate was augmented by the conversion of the trust funds, no reason is seen, under the equitable principle which has been mentioned, why they should not become a charge upon the entire estate.”
The court in reviewing the ease of McLeod v. Evans, 66 Wis. 401, 57 Am. Rep. 287, 28 N. W. 173, and speaking of the facts of that case and the rule applied to it, said:
“It was found that the proceeds of the trust property were used by the trustee either to pay off his debts or to increase his assets, and it was held to be unnecessary to trace the trust fund into any specific property in order to enforce the trust; and that, if it could be traced into the estate of the defaulting agent or trustee, that was sufficient. It was further decided that, whether the trust funds were used to increase the assets or to pay off the debts, in either case it would be for the benefit of the estate; and, having been so used, it was held that a trust attached to the entire estate which came into the hands of the assignee. ’ ’
Meyer v. Board of Education, 51 Kan. 87, 37 Am. St. 263, 32 Pac. 658, has been subsequently cited with approval in the following cases: Rose v. Douglas Tp., 52 Kan. 451, *1339 Am. St. 354, 34 Pac. 1046; City of Clay Center v. Meyer, 52 Kan. 363, 35 Pac. 25; Hubbard v. Almo Irr. Co., 53 Kan. 637, 36 Pac. 1053, 37 Pac. 625; City of Larned v. Jordan, 55 Kan. 124, 39 Pac. 1030; Ryan v. Phillips, 3 Kan. App. 704, 44 Pac. 909; Burroughs v. Johntz, 57 Kan. 778, 48 Pac. 27; Hazeltine v. McAfee, 5 Kan. App. 119, 48 Pac. 886; Travelers' Ins.. Co. v. Caldwell, 59 Kan. 156, 52 Pac. 440; Kansas State Bank v. First State Bank, 9 Kan. App. 839, 61 Pac. 868; Kansas State Bank v. First State Bank of Marion, 62 Kan. 788, 64 Pac. 634; Reeves v. Pierce, 64 Kan. 502, 67 Pac. 1109; Cherry v. Territory, 17 Okl. 221, 89 Pac. 192, 8 L. R. A., N. S., 1254; Capital National Bank v. Coldwater National Bank, 49 Neb. 786, 59 Am. St. 572, 69 N. W. 115; State v. Midland State Bank, 51 Neb. 1, 66 Am. St. 484, 71 N. W. 1101; Page Co. v. Rose, 130 Iowa, 296, 106 N. W. 744, 5 L. R. A., N. S., 886.
It has also been disapproved and criticised in the following cases: Bank of Commrs. v. Security Trust Co., 70 N. H. 536, 49 Atl. 113; Spokane Co. v. First National Bank, 68 Fed. 979, 16 C. C. A. 81; Newformers' Bank Trustees v. Cockerell (Ky.), 51 S. W. 2; State v. Bank of Commerce, 54 Neb. 725, 75 N. W. 28; Lowe v. Jones, 192 Mass. 94, 116 Am. St. 225, 78 N. E. 402, 6 L. R. A., N. S., 487; City of Lincoln v. Morrison, 64 Neb. 822, 90 N. W. 905.
Notwithstanding the criticism of the Meyer ease from courts of the highest standing, the reasons given by the writer of that opinion appeal to us as sound, and the rule there adopted is in harmony with our view of the equities of this ease and is in accord with the rule this court has heretofore announced in the Thum and Bunting cases. We would note this exception to that rule which we believe should be observed: Had the receiver shown that the trust fund had been embezzled or stolen or dissipated by unfaithful officers of the bank or others, prior to the suspension of business, and that the bank received no benefit therefrom, either by way of swelling its assets or payment of its debts, then the trust lien should not attach to the general assets of the bank. That is not the situation, however, in this case.
*14The order is reversed and the canse remanded, with directions that judgment be entered decreeing the state a preferred lien over general creditors of the bank. Costs in favor of appellant.
Sullivan, C. J., and Stewárt, J., concur.