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Okla. -,

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Denver Live Stock Exch. (1923)
Colo. — 220 Pac. 402.

Idaho. Bellevue State Bank v. Hailey Nat. Bank (1923) Idaho, 215 Pac. 126.

Iowa.-CABLE v. IOWA STATE BANK (reported herewith) ante, 748.

Nebraska. See State v. American State Bank (1922) 108 Neb. 129, 187 N. W. 769.

Oklahoma. Southwest Nat. Bank v. Evans (1923) Okla. 221 Pac. 53; Southwest Nat. Bank v. McVey (1923)

221 Pac. 784. Texas. Steere v. Stockyards Nat. Bank (1923) Tex. . -, 256 S. W. 586, rehearing in (1924) - Tex,-, 258 S. W. 1042—quoting annotation in 13 A.L.R. 324 and 334,

Vermont. Hall v. Windsor Sav. Bank (1923) — Vt. 121 Atl. 582.

To illustrate: In Drovers' Nat. Bank v. Denver Live Stock Exch. (Colo.) supra, it was held that a bank which received a deposit, knowing that it represented the money received for live stock sold by the depositor on a commission basis, and applied the deposit to the individual indebtedness of the depositor, could not hold the same as against the depositor's customer to whom the funds, less commissions, belonged. III. Effect of lack of knowledge of fidu

ciary character of funds. a. General rule permitting application.

1. In general. (Supplementing annotation in 13 A.L.R. 327.)

Supporting the general rule to the effect that where the bank in which funds in which third persons have an interest are deposited in the individual name of the depositor has neither knowledge, nor notice of facts sufficient to put it upon inquiry, as to the true character of the deposit, it may apply the deposit to the individual debt of the depositor, are the following cases: CABLE v. IOWA STATE BANK (reported herewith) ante, 748, superseding opinion reported in (1922) Iowa, 190 N. W. 262; Gillette v. Liberty Nat. Bank (1923) Okla. 218 Pac. 1057; Southwest Nat. Bank v. Evans (1923)

Okla. 221 Pac. 53; Southwest Nat. Bank v. McVey (1923) Okla.

221 Pac. 784; Steere v. Stockyards Nat. Bank (1923) Tex. 256 S. W. 586, rehearing in (1924) Tex.

258 S. W. 1042—quoting annotation in 13 A.L.R. 327. And see Holman v. Tjosevig (1922) 6 Alaska, 690.

2. Funds of secret partnership. No later decisions herein. For earlier cases, see annotation in 13 A.L.R. 328.

3. Effect of consent of depositor. No later decisions herein. For earlier cases, see annotation in 13 A.L.R. 329. 4. Theory of conversion by depositor.

No later decisions herein. For earlier cases, see annotation in 13 A.L.R. 330.

b. Equitable rule. (Supplementing annotation in 13 A.L.R. 330.)

The equitable rule that a bank, even though it has no knowledge, either express or implied, that another than the depositor has an interest in funds deposited in his own name, cannot apply such funds to the individual indebtedness to it of the depositor, where such lack of knowledge has not resulted in any change in the bank's position, and no superior equities have been raised in its favor, was adopted in the recent case of Beaver Boards Cos. v. Imbrie & Co. (1923) 287 Fed. 158, affirmed in Fulton Nat. Bank v. Hosier (1923) 295 Fed. 611, where, in holding that a bank in which a broker had deposited the check of his customer, drawn to buy stock for the latter, could not set off the amount thereof against the individual indebtedness of the depositor to it, even though it had no notice of the drawer's equity, the court said: “The first test of who it is that he owes is the legal liability. But this may be affected by the equities of others in the debt. If he knows of these equities, his legal right to set-off, like other legal rights, becomes subject to known equities.... If the equity is unknown, it may still prevail, if asserted before the banker has acted, or

refrained from acting, on the faith of debtor, acting as his agent, to make the appearances of the matter. If he a deposit in the debtor's name rather has given credit to the deposit, he is than in the name of such third party, protected as a sort of bona fide pur- who is the actual owner of the funds." chaser, or, perhaps more correctly, it

c. Special instances of denial of right to becomes a case in which one of two

apply. innocent parties must suffer from the wrongful act of a third, in which case

(Supplementing annotation in 13

A.L.R. 333.) the loss is visited upon him who put it in the power of the wrongdoer to

In Gillette v. Liberty Nat. Bank inflict the loss. If he had given no

(1923) Okla. - 218 Pac. 1057, credit to the deposit, he is then in the

where W. deposited a fund to the situation of a mere volunteer, against

credit of P., without authority from whom equities may be freely asserted.

P., which fund belonged to G., which . . In the present case the bank,

fact, however, was not known by by contract, stipulated for the main

either the bank or W., and the bank tenance, subject to set-off, of a deposit applied the deposit in satisfaction of balance of a certain amount. This

past-due indebtedness of P. to it, it

was held that the set-off was wrongbalance was maintained outside of the

ful and that the appropriation fund in controversy, and it alone

amounted to a conversion of the fund. seems reasonably to have been credited by the bank. No new loan, nor

In reaching this conclusion the court any renewal of an old one, occurred

recognized the general rule that a between the deposit of the sum in con

bank may apply a deposit to past-due troversy and the failure; no checks

indebtedness, even though the deposwere honored which would not have

it is in fact owned by a third person, been honored had this deposit not

if the bank has no notice of such been made. The bank shows nothing ownership; but held that, for such to rebut hinder the equity

rule to be applicable, the deposit must of

have been such a one as would create Hosier, notwithstanding it had no notice of his equity.

the relation of debtor and creditor

The bank should, therefore, be decreed to sur

between the depositor and the bank, render to the receivers the sum in

which relationship, it was further de. controversy, and they, in turn, should

clared, was not created in the case

under consideration, because of the surrender it to Hosier." And in First Nat. Bank V. First

fact that the deposit was made by a State Bank (1923) Tex. Civ. App.

third person, W., without the knowl. 252 S. W. 1089, in holding that

edge or consent of P., the debtor of

the bank. a bank could not apply upon the individual indebtedness of a depositor IV. What constitutes notice to deposi. the funds of a third person deposited

tary. in his own name,-at least, where it (Supplementing annotation in 13 had not changed its position,-the A.L.R. 334.) court said: "The appellant bank In Steere v. Stockyards Nat. Bank suffered no loss by the transaction. (1923) - Tex. 256 S. W. 586, Its position was in no way changed rehearing in (1924) or prejudiced. To require payment of S. W. 1042, quoting and applying the funds to the Campbell State Bank the rule, as stated in 13 A.L.R. 334, leaves the appellant bank in precisely that where the bank, although having the same situation where it stood at no actual notice of the character of the time the deposit was made in re- funds deposited with it, has knowllation to Gilbreath's indebtedness to edge of such circumstances as are reit. Under these circumstances the garded as sufficient to necessitate in. contention is untenable that a bank quiry upon its part, the bank cancan offset an indebtedness to it with not, as against the true owner, set money belonging to a third party, off such funds against the individual merely because such party permits the indebtedness of the depositor to the

or

Tex. -,

258

was

bank, the court held that knowledge upon the part of the bank that at least one third of the sums deposited by a commission firm belonged to its customers imposed upon the bank the duty of making inquiry before appropriating a deposit in satisfaction of the individual debt of the depositor, and this, although no descriptive words were added to the depositor's name in making the deposit. In this case the court also said that, where a bank knows that part of a deposit is trust funds, it must separate the trust funds from the moneys of the latter before making any application of the deposits in satisfaction of the individual debt to it of the depositor.

So, in the reported case (CABLE V. IOWA, STATE SAV. BANK, ante, 748), it was held that where a bank knows that a commission house deposits the proceeds of sales and transmits the proceeds by check, it is charged with notice that the only interest which the depositor has in deposits from the proceeds of sales is its commission and the expenses necessary to the handling and disposition of consignments, so as to prevent application by the bank of the whole deposit to the individual indebtedness to it of the depositor.

And in Southwest Nat. Bank Evans (1923) Okla. 221 Pac. 53, where a live-stock brokerage company customarily deposited the funds of its customers to its individual account, which fact was known to the bank, it was held that the nature of the brokerage company's business handled through the bank was sufficient to charge the latter with notice

that the company was acting as agent in depositing a check for the price of a carload of cattle, or at least sufficient to create an issue of fact on that issue, so that a finding against the bank precludes it from upholding an appropriation of the amount of the check to the individual indebtedness to it of the brokerage company. This decision was followed in Southwest Nat. Bank v. McVey (1923) Okla. 221 Pac. 784, which was said to involve similar facts.

On the other hand, in Beaver Boards Cos. v. Imbrie & Co. (1923) 287 Fed. 158, affirmed in Fulton Nat. Bank v. Hosier (1923) 295 Fed. 611, it held that knowledge upon the part of the bank that its debtor depositors sometimes acted as brokers was not notice that a particular check, apparently belonging to them, really belonged to the drawer, and that such knowledge did not require that the bank inquire as to the real ownership of the check.

In Hall Windsor Sav. Bank (1923) Vt. -, 121 Atl. 582, it was held that the addition of the word “Executor" to the name of the payee of a check was enough to charge the bank in which it was deposited with notice that the funds belonged to some estate of which the payee depositor was the executor, so render illegal the application by the bank of the deposit to the individual indebtedness of the depositor. In connection with this case it should be remembered that, as is shown in 13 A.L.R. 335 et seq., there are many authorities to the contrary, as well as others in support of the conclusion reached by the court. G. J. C.

V.

V.

as to

.

DISTRICT GRAND LODGE NO. 18, GRAND UNITED ORDER ODD

FELLOWS,

V.
SALLIE COTHRAN, Admrx., etc., of Allen Ray, Deceased.

Georgia Supreme Court October 12, 1923.

(156 Ga. 631, 119 S. E. 594.) Insurance — predecease of beneficiary — who may enforce.

1. Where the wife of a member of a mutual benefit association, who is Headnotes by HILL, J.

named as a volunteer beneficiary in a certificate issued by such association, dies without leaving child or children, and without debts, prior to the death of the member, neither the administrator of the deceased member nor the administrator of the deceased beneficiary is a proper party to bring suit against the association for the benefit named in the certificate.

[See note on this question beginning on page 762.] - effect of rule of insurer.

tificate, upon failure of a beneficiary 2. In the question propounded by qualified to take.

qualified to take. Where such prothe court of appeals it does not ap- vision is made in the constitution, bypear that there is any provision made laws, or certificate, or by the statin the constitution, by-laws, or cer- utes of the state, the rule might be tificate issued by the mutual benefit different. association, providing for the pay- [See 19 R. C. L. 1314; 3 R. C. L. ment of the benefit named in the cer- Supp. 1012.]

CERTIFICATION by the Court of Appeals for the opinion of the Supreme Court of a question arising upon writ of error by defendant to review a judgment in favor of plaintiffs in an action brought to recover the proceeds of a life insurance policy. Question answered.

The facts are stated in the opinion of the court.

Messrs. Branch & Howard, for de- Md. 390, 46 L.R.A. 160, 43 Atl. 792; fendant:

United States Casualty Co. v. Kacer, The administrator of the deceased 169 Mo. 301, 58 L.R.A. 436, 92 Am. beneficiary, under the facts as stated St. Rep. 641, 69 S. W. 370; Bryan v. by the court of appeals, has no right Rooks, 25 Ga. 624, 71 Am. Dec. 194; of action.

Dewelle v. Roath, 29 Ga. 733; Perry Dell v. Varnedoe, 148 Ga. 91, 95 S. E. v. Tweedy, 128 Ga. 402, 119 Am. St. 977; Smith v. Locomotive Engineers Rep. 393, 57 S. E. 782, 11 Ann. Cas. 46; Mut. L. & Acci. Ins. Asso. 138 Ga. 717, Lee v. Wheeler, 4 Ga. 541; Smith v. 76 S. E. 44.

Moore, 129 Ga. 644, 59 S. E. 915. The administrator of the member has no right of action.

Hill, J., delivered the opinion of Perry v. Tweedy, 128 Ga. 402, 119

the court: Am. St. Rep. 393, 57 S. E. 782, 11 Ann.

The court of appeals requested Cas. 46; Union Fraternal League v. instructions from

the supreme Walton, 112 Ga. 315, 37 S. E. 389; court upon the following question: Fraternal Life & Acci. Asso. v. Evans, “Where the wife of a member of a 140 Ga. 284, 78 S. E. 915; Bacon, Life

mutual benefit association, who is & Acci. Ins. 4th ed. 313; Warner v.

named as a volunteer beneficiary in Modern Woodmen, 67 Neb. 233, 61

the certificate issued by such assoL.R.A. 603, 108 Am. St. Rep. 634, 93 N. W. 397, 2 Ann. Cas. 660; 29 Cyc.

ciation, dies without leaving child 159, 162; 19 R. C. L. 1314; Union

or children, and without debts, prior Fraternal League v. Walton, 109 Ga.

to the death of the member, is the 1, 46 L.R.A. 424, 77 Am. St. Rep. 350, administrator of the deceased mem34 S. E. 317; District Grand Lodge v. ber, or the administrator of the deMorris, 26 Ga. App. 371, 106 S. E. 188; ceased beneficiary, the proper party District Grand Lodge v. Gardner, 27 to bring suit against the associaGa. App. 145, 107 S. E. 774.

tion?" Messrs. Bond Almand and Willing

The question as to whether the ham, Wright, & Covington also for de

administrator of the deceased benefendant. Messrs. Harris & Harris, for plain- ficiary, under the facts as stated by

the court of appeals, is a proper tiffs : Plaintiff administratrix was entitled

party to sue for the benefit named to collect the insurance.

in the certificate, seems to have been Smith v. Head, 75 Ga. 755; Steele v.

settled by the decisions of this court. Gatlin, 115 Ga. 931, 59 L.R.A. 129,

In Dell v. Varnadoe, 148 Ga. 91, 95 42 S. E. 253; Thomas v. Cochrane, 89 S. E. 977, this court held:

“A mere (156 Ga. 631, 119 S. E. 594.) volunteer beneficiary in a certificate association is under no obligation to issued by a mutual benefit associa- pay to anyone, nor can the fund be tion upon the life of one of its mem- recovered by his executor or adminbers has no vested interest therein istrator as assets of his estate." prior to the death of the member." There is no waiver of the right to

And in Smith v. Locomotive En- the fund on the part of the mutual gineers Mut. L. & Acci. Ins. Asso. benefit association, but, on the con138 Ga. 717, 76 S. E. 44, it was held trary, it is insisted that the associathat "the interest of a beneficiary in tion is entitled to it. In the followa certificate on the life of a member ing cases the member's heirs took of such association is a mere expect to the exclusion of the beneficiary's ancy, which becomes vested only on heirs or representatives: Haskins the death of the member." See also v. Kendall, 158 Mass. 224, 35 Am. Modern Woodmen v. Puckett (Pilch- St. Rep. 490, 33 N. E. 495; Espy v. er v. Puckett) 17 L.R.A.(N.S.) 1083 American Legion of Honor, 7 Kulp, (3) and note (77 Kan. 284, 94 Pac. 134; Speegle v. Sovereign Camp, W. 132).

W.77 S. C. 517, 58 S. E. 435; FischThe general insurance law is not er v. American Legion of Honor, 168 applicable to mutual benefit associa- Pa. 283, 31 Atl. 1089; Supreme tions, such as the one involved in Council, A. L. H. v. Gehrenback, 124 the present case.

Park's Code, $ Cal. 43, 56 Pac. 640; Michigan Mut. 2564 (t); Union Fraternal League v. Ben. Asso. v. Rolfe, 76 Mich. 146, Walton, 112 Ga. 315, 37 S. E. 389. 42 N. W. 1094; Supreme Council, R. Also Fraternal Life & Acci. Asso. V. A. v. Bevis, 106 Mo. App. 429, 80 Evans, 140 Ga. 284, 78 S. E. 915; S. W. 739; Richmond v. Johnson, 28 Perry v. Tweedy, 128 Ga. 402 (6), Minn. 447, 10 N. W. 596; Daniels 119 Am. St. Rep. 393, 57 S. E. 782, v. Pratt, 143 Mass. 216, 10 N. E. 11 Ann. Cas. 46.

166; note in 17 L.R.A. (N.S.) 1086. The next inquiry is as to whether But in some of those cases, at least, the administrator of the deceased provision was made, either in the member can bring suit against the constitution, charter, or by-laws of mutual benefit association. The the society, preventing a forfeiture. weight of outside authority is to the But in the question propounded effect that, in the event of the death by the court of appeals there is no of the beneficiary in a mutual benefit suggestion that there is any proviassociation certificate, in the life- sion in the constitution, charter, time of the member, if the member by-laws of the socifails to designate another benefi- ety, or in the certif- -effect of rule of ary of the class provided by the con- icate of memberstitution and by-laws of the order, ship, either generally or specially,

the benefits in such or by statute of the state, which Insurance

case revert to the would prevent a forfeiture; and we predecease of beneficiary- order. Bacon, Life take it that the disposition of the

& Acci. Ins. 4th ed. benefit is generally determined by

§ 313; Warner v. these provisions. In the absence of Modern Woodmen, 67 Neb. 233, 61 such provisions we hold, with the L.R.A. 603, 108 Am. St. Rep. 634, weight of outside authority, that the 93 N. W. 397, 2 Ann. Cas. 660; 29 benefit reverts to the society, and, Cyc. 152, 162. In 19 R. C. L. 1314, answering the question propounded it is said: "By the decided weight by the Court of Appeals as asked, of authority, however, if a member and assuming that the Court of Apdies leaving no designated benefi- peals means to ask whether in the ciary qualified to take, and there is

one case or the other the adminisno one who is entitled to payment trator can bring suit against the asunder the charter, constitution, or sociation for the benefit named in by-laws of the association, or by vir- the certificate, we are of the opinion tue of statutory provisions, then the that neither the administrator of

insurer.

who may enforce.

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