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available to him were the proceeds of of funds of other persons, subsequentconsignments by other persons.
ly deposited by the commission mer[See 26 R. C. L. 1358. See also chant, to the indebtedness due from note in 26 A.L.R. 12.]
the merchant to it. On Rehearing.
- right to balance of deposit.
15. As against the bank in which Bank application of fund to claim commission merchant deposited right of stranger to reach.
funds belonging to his correspondent, 14. A consignor whose funds were which were subsequently dissipated, deposited by the commission merchant the correspondent is entitled to any in bank to his own account, and used balance in the merchant's account to pay other obligations, has no stand- which is not claimed by a creditor ing to test the application by the bank having a superior title.
APPEAL by plaintiffs from a decree of the District Court for Woodbury County (Newby, J.) dismissing an action brought to impress a trust upon funds alleged to have been deposited in the defendant bank by a certain company as agents of plaintiff to its own credit. Modified.
The facts are stated in the opinion of the court.
Defendant was not in any wise Flagstad, 182 Iowa, 826, 166 N. W. 289. prejudiced or induced to change its It is only when the depositor and situation to its detriment by reason of debtor stand in an identical relation the deposit of the fund to the com- to the bank that the bank, under any mission company's account, and there circumstances, is entitled to offset the are no equitable considerations under indebtedness against the deposit. which plaintiffs are estopped to claim International Bank v. Jones, 119 Ill. the fund as their property, or under 407, 59 Am. Rep. 807, 9 N. E. 885; which the defendant was, in equity or Adams v. First Nat. Bank, 113 N. C. good conscience, entitled to a prior 332, 23 L.R.A. 111, 18 S. E. 513. right thereto.
When the Ward Company deposited Wunderlich v. Merchants Nat. Bank, additional funds on the 7th, knowing 109 Minn. 468, 27 L.R.A.(N.S.) 811, its check for plaintiff's money was un134 Am. St. Rep. 788, 124 N. W. 223, paid, it is presumed to have made the 18 Ann. Cas. 212; Shotwell v. Sioux additional deposit for the purpose of Falls Sav. Bank, 34 S. D. 109, L.R.A. making good its balance to take care 1915A, 715, 147 N. W. 288; Boyle v. of plaintiff's check, and their equitaNorthwestern Nat. Bank, 125 Wis. 498, ble title to the fund immediately at1 L.R.A.(N.S.) 1.10, 110 Am. St. Rep. tached to the whole deposit. 844, 103 N. W. 1123, 104 N. W. 917; Hungerford v. Curtis, 43 R. I. 124, 12 Platts v. Metropolitan Nat. Bank, 130 A.L.R. 1040, 110 Atl. 650; Central Nat. Minn. 219, 153 N. W. 514; Wilson v. Bank v. Connecticut Mut. L. Ins. Co. Smith, 3 How. 763, 11 L. ed. 820; Cen- 104 U. S. 54, 26 L. ed. 693; Garst v. tral Nat. Bank v. Connecticut Mut. L. Canfield, 44 R. I. 220, 116 Atl. 432; Ins. Co. 104 U. S. 54, 26 L. ed. 693; Theodore Hamm Brewing Co. v. FlagUnion Stock Yards Nat. Bank v. Gil
stad, supra. lespie, 137 U. S. 411, 34 L. ed. 724, 11 Messrs. Shull. Stilwill, Shull, & Sup. Ct. Rep. 118.
Wadden, for appellees: Although the proceeds of this ship
Claimant must trace the funds, and ment of stock were deposited with oth
when it afirmatively appears that the er funds in the commission company's
funds are gone there can be no reaccount and were wrongfully intermingled with other funds, which were
covery. drawn out of the bank, it is presumed
Boyle v. Northwestern Nat. Bank, that the commission company checked
125 Wis. 498, 1 L.R.A. (N.S.) 1110, 110 out its own funds first, and the bal
Am. St. Rep. 844, 103 N. W. 1123, 104 ance remaining in the fund
N. W. 917; Garst v. Canfield, 44 R. I. sought by plaintiffs is and should be 220, 116 Atl. 482; Central Nat. Bank v. impressed with a trust in favor of the Connecticut Mut. L. Ins. Co. 104 U. S. plaintiffs as against the defendant 54, 26 L. ed. 693. bank,
(- Iowa, —, 194 N. W. 957.) Per Curiam:
close of business on July 7 the bank The material facts are not in dis- charged the account of the Ward pute, and, briefly summarized, are Commission Company with $4,substantially as follows:
897.41, the amount due on the notes, about July 3, 1920, appellants con- and issued a cashier's check to itsigned forty-six head of steers to self for $2,338.03, the balance then the Ward Commission Company, a remaining in the account. The corporation located and engaged in cashier's check was still held by apthe live stock commission business at pellee at the time of the trial. Sioux City, Iowa, for sale upon the It is not claimed by appellee that market, with directions to remit the the beneficial owner of a fund denet proceeds derived therefrom to
posited in a bank by a factor or comthe Hudson State Bank of Hudson, mission merchant to his own credit South Dakota, the point at which may not maintain an action in equity the shipment originated. The steers against the bank to impress a trust were sold to one Birmingham for $7,- on such fund, and to recover the 561.25, who gave his check for that same from the bank, if it has acamount to the Ward Commission quired no equitable right thereto Company, payable to its order. The without notice of the claim of such Ward Commission Company, on July beneficial owner, or that, if any por6, deposited the check in the ap- tion of the proceeds of the sale of pellee bank to the credit of its gen- the steers in question is now in the eral account. On July 3 the Com- possession of the appellee bank, apmission Company drew a check, pay pellants are not entitled to a decree able to the Hudson State Bank, for in their favor for whatever amount $7,452.11, the proceeds of the sale, the evidence shows remains therein; less commissions, yardage, and but it is contended by appellee that freight, and forwarded the same by the Birmingham check was received mail to the payee as directed by ap- by it and credited to the general acpellants. July 4 was Sunday, and count of the Ward Commission ComMonday was observed as a legal holi- pany, without knowledge or notice day. The check of the Ward Com- of appellant's claim thereto or ownmission Company, which was re- ership thereof, and that same was ceived by the Hudson State Bank in fully paid out and dissipated on July due course of mail, was presented 6 upon checks drawn by the Ward to appellee on July 7 for payment. Commission Company, and prePayment was refused by the bank sented for payment and paid in the upon the ground that there were not usual course of business, and that if, sufficient funds in the bank to the upon any theory, any portion of credit of the drawer to pay the same. such deposit was in the possession The books of appellee on said date of the bank on July 7, and applied showed a tentative balance of some- by it to the payment of the indebtthing in excess of $10,000, but it is edness of either W. M. Ward or the claimed by the bank that the balance Ward Commission Company, it was was made up—in large part, at least so applied in good faith, for a val---of checks that had been deposited uable consideration, and without in the bank by the Ward Commis- notice of any claim or right of apsion Company and sent out for col- pellants thereto, and that, therelection, but which had not yet been fore, the bank is not liable. paid. W. M. Ward, the president of The law is well settled that the the Ward Commission Company, was title to property consigned to a facindebted to appellee upon a note for tor or commission merchant for sale $3,000, upon which there was a bal remains in the consignor, and that ance due of $2,500, and the Ward such factor or com
Factor-title to Commission Company was indebted mission merchant property con
signed to. to the bank upon a note for $4,000, holds the proceeds upon which there was a balance due derived from the sale of such propof $2,313.67. Sometime before the erty in a fiduciary or trust capacity,
cestui que trust
and that its character is not changed tain an action in equity against the by being placed to his credit in the bank if such trust
-application of bank (Union Stockyards Nat. Bank fund has been ap- funds with nov. Gillespie, 137 U. S. 411, 34 L. ed. plied by it, with no
tice of claim. 724, 11 Sup. Ct. Rep. 118; Central tice of the claim of the cestui que Nat. Bank v. Connecticut Mut. L. trust, to the payment of a matured Ins. Co. 104 U. S. 54, 26 L. ed. 693); indebtedness of the trustee (Smith that the owner may maintain an
v. Des Moines Nat. Bank, supra; action in equity against a bank to Allen v. Puritan Trust Co. 211 Mass.
impress a trust up- 409, L.R.A.1915C, 518, 97 N. E. Trust-snit to establish-funds on any portion of 916; Fidelity & D. Co. v. Rankin, 33 deposited in the funds deposited Okla. 7, 124 Pac. 71; Clemmer v.
therein by such fac- Drovers' Nat. Bank, 157 Ill. 206, 41 tor or commission merchant to his N. E. 728; Union Stockyards own credit and remaining in said Nat. Bank v. Gillespie, supra); bank, unless it has acquired an that, if the trust fund be withequitable right thereto without no- drawn by the trustee in the usual tice of the true claims of the owner course of business,
Bank-action by (Smith v. Des Moines Nat. Bank, so that the same has 107 Iowa, 620, 78 N. W. 238; been entirely dissi- after with:
drawal of funds. Packer v. Crary, 121 Iowa, 388, 96 pated. an action N. W. 870; Shotwell v. Sioux Falls against the bank cannot be mainSav. Bank, 34 S. D. 109, L.R.A.
tained (Hanson v. Roush, 139 Iowa. 1915A, 715, 147 N. W. 288; Fidelity
58, 116 N. W. 1061; Smith v. Des & D. Co. v. Rankin, 33 Okla. 7, 124
Moines Nat. Bank, supra; Stilson v. Pac. 71; Union Stockyards Nat.
First State Bank, 152 Iowa, 724, Bank V. Gillespie, supra; Cen
133 N. W. 354; Officer v. Officer, 120 tral Nat. Bank v. Connecticut Mut.
Iowa, 389, 98 Am. St. Rep. 365, 94 L. Ins. Co. supra;
N. W. 947; Jones v. Chesebrough,
Clemmer v. Drovers' Nat. Bank, 157 Ill. 206, 41
105 Iowa, 303, 75 N. W. 97; First
State Bank v. Oelke, 149 Iowa, 662, N. E. 728; Hewitt v. Hayes, 205
129 N. W. 70); that it will be preMass. 356, 137 Am. St. Rep. 448, 91
sumed. where a trustee has deN. E. 332); that a bank may appro
posited trust funds in a bank to his priate a general deposit of a debtor
general credit with to the discharge of
funds belonging to to withdrawals Bank-right to a mutual indebtedappropriate de
himself, that with by trustee. posit in satisfnc- ness (Smith v. San
drawals made by him will be of his born State Bank,
own, and not the trust, funds (Theo147 Iowa, 640, 30 dore Hamm Brewing Co. v. FlagL.R.A.(N.S.) 517, 140 Am. St. Rep. stad, 182 Iowa, 826, 166 N. W. 289; 336, 126 N. W. 779); that a cestui
Importers' & T. Nat. Bank v. Peque trust cannot recover trust funds
ters, 123 N. Y. 272, 25 N. E. 319). which were deposited in a bank by The decision of this case must be the trustee in his own name, and rested upon the foregoing general which, without notice of its trust principles. The bank is solvent, and Trust-right to
character, the bank no rights of creditors are involved. impress on bank has applied to the First, as to the subject of notice: deposits.
payment of a ma- The evidence shows that the Ward tured indebtedness, surrendering to Commission Company is a corporathe trustee the evidence of the in- tion organized for, and engaged in, debtedness (Smith v. Des Moines the business of buying and selling Nat. Bank, supra; Kimmel v. Bean, live stock upon a commission; that 68 Kan. 598, 64 L.R.A. 785, 104 Am. it did not carry on the business of St. Rep. 415, 75 Pac. 1118); con- buying and selling live stock for it
rsely, that the owner may main- self; that the account kept at the
tion of indebtedness.
of interest of
(- Iowa, -, 19% N. W. 957.) appellee bank was in the name of balance in the bank to the credit of the corporation; that it deposited the commission company at the the proceeds of the sale of live stock opening of business on the morning therein to the credit of its gen- of July 6, was $22,307.12. Deposits eral account, and remitted the net were made during the day as folamount due its customers, by checks
lows-$9,055.43 and $6,547.07. A drawn upon appellee; that the presi- large number of checks drawn by
the commission company were paid dent of the bank at one time owned
during the day, so that the balance stock in the corporation; that the
to its credit at the close of business names of the customers of the com
on July 6 was $1,570.35. A copy of mission company were not custom
the bank ledger showing the account arily disclosed to the bank when de
of the commission company with the posits were made, but that the bank
bank from July 1 to July 13, 1920, officers were thoroughly familiar
both inclusive, was introduced in with the business of the commission
evidence by appellant. It shows an company and the manner in which
entry under the caption "New Balit was carried on; and that the ance, on July 6, of $4,964.72. The funds deposited by it were received letters “O D,” in capitals, appear on from the sale of live stock, and were the ledger immediately to the right remitted to the shipper, less charges, of the above entry.
of the above entry. These letters, by checks drawn upon appellee. The the evidence shows, were intended necessary conclusion from all the to indicate that the account was facts and circumstances is that ap- overdrawn to that extent. No other pellee knew that the only interest evidence was offered upon this point,
of the commission but it is insisted by appellee that Notice-to bank
company in deposits this entry upon the ledger shows commission from the proceeds conclusively that the proceeds of the house.
of the sale of live sale of the forty-six steers to Birstock was for commissions, freight, mingham, which are included in the yardage, and other expenses inci- item of $9,055.43, were entirely disdental to the handling and disposi- sipated on July 6, and that the baltion of the live stock.
ance of $1,570.35 is a part of the
deposit of $6,547.07 which was We are of the opinion that the
made later in the day. bank was charged with notice of the
The entry on the bank ledger of trust relation of the commission
the new balance designated as an company with its customers, and that the funds deposited, less the
overdraft was doubtless made for
the convenience of the bank, and it items above suggested, belonged to the shipper. It was clearly the duty might be, if the checks, which vary
greatly in amount, were entered upof the bank to pay all checks drawn by the commission company and pre
on the ledger in the exact order in sented to it, so long as there were
which they were presented and paid
by the bank, that the whole of the funds to the credit Bank-duty to
fund represented by the Birmingof the drawer for commission mer- that purpose, and so
ham check was in fact dissipated; chant.
but the court cannot far as the fund in
take judicial notice cial notice-bank question was withdrawn by the de
of the time or order
transaction. positor the bank is relieved from
in which the checks were presented liability.
and paid, or in which the entries Second, were the proceeds of the were made upon the bock, or of the sale of the steers represented by the
time when the entries were made, or Birmingham check wholly dissipated that they were in fact entered in the prior to the presentation by the strict order of payment. The custom Hudson State Bank, on July 7, of of the bank in this respect is not the check received by it from the shown, nor was other evidence inWard Commission Company? The troduced for the purpose of showing
pay checks of
that the checks were in fact entered the Ward Commission Company, or upon the ledger in the exact order in embraced in the cashier's check is. which they were presented for pay- sued by the bank to itself. Under ment and paid. The overdraft may the rules announced, the bank, hayhave been a theoretical one only. ing notice of the trust character of How closely, in point of time, the the fund, did not have a right to two items were deposited, or just thus
thus appropriate it. Judgment how the checks were handled by the should therefore have been entered bookkeepers after they had been in favor of appellants and against paid, does not appear. The sheet of the bank for this amount, with inthe ledger showing the account was terest. identified by the vice president of Some contention is made by apthe bank, who did not make the en- pellants, upon the authority of Garst tries, and who admitted that his tes- v. Canfield, 44 R. I. 220, 116 Atl. 482, timony was based entirely upon the and Hungerford v. Curtis, 43 R. I. entries shown above. In the ab- 124, 12 A.L.R. 1040, 110 Atl. 650, sence of evidence tending to show that the court will presume that the
that the checks were deposits made after July 6 were of Bank-state of entered upon
the funds belonging to the commission ascertained.
ledger in the exact company, and that they were made order in which they were paid, and for the purpose of replacing the that the items deposited were not trust funds. This contention is sufactually in the bank at the time the ficiently answered by the fact that last check was paid, we must accept the inference to be drawn from all the balance shown at the close of the testimony is that these deposits business as conclusive. So far as were the proceeds received from the the record shows, the several checks sale of live stock which made up the credit item of consigned
to the ton as to re
Trust-presump$6,547.07 may have been in the commission compa- placement of bank, but not entered upon the ledg- ny and sold in the er, at the time the amount of the regular course of the commission alleged overdraft was entered there- business, and that the only interest on. The credit and debit sides of the commission company had therethe account varied, of course, dur- in was such charges as it could ing the day; but the balance shown rightfully make against its customat the opening and closing of busi- ers. ness alone shows the true state of It follows that the judgment of the account.
the court below must be reversed, It will be presumed that the bal
and the cause remanded for judgance of $1,570.35 at the close of ment and decree in harmony with business on July 6
this opinion. -presumption as to character of was a part of the
Preston, Ch. J., and Weaver, De balance, proceeds of the sale
Graff, and Stevens, JJ., concur. of appellants' steers, which the commission company held in trust for
A petition for rehearing having their benefit. The ledger account
been filed, the following Per Curiam shows a deposit on July 7 to the
response was handed down March credit of the commission company
4, 1924 (- Iowa, -197 N. W.
434): of $11,296.84, and on July 8 of $984.95, and that only a few small A petition for rehearing having items were drawn out by the com- been filed in this case by appellants, mission company on that date. It we have again reviewed the record. follows that the item of $1,570.35 We now reach the conclusion that was not dissipated, but was a part the original opinion should be modi. of the amount appropriated by the fied to the extent of permitting the bank to the payment of the notes appellants to cover $2,338.03, with held by it against W. M. Ward and interest as provided by law.