Opinion
No. 24026
Decided July 12, 1933.
Banks and banking — Liquidation by state superintendent of banks — Rentals, deposited by lessees for distribution to lessors, not preferred as trust funds — Section 710-165, General Code.
ERROR to the Court of Appeals of Lucas county.
Each of the defendants in error herein was an heir of John T. Coghlin, deceased, and as such is the owner in fee simple of an undivided one-twelfth of lots numbered 204 and 205 in Port Lawrence division, in Toledo, Ohio, upon which is erected the Commodore Perry Hotel. The Commodore Perry Hotel Company leased from the owners thereof the premises aforesaid for a period of ninety-nine years, at a stipulated quarterly rental of $4,500, payable in advance. The lease provides that this rental shall be paid to the Security Savings Bank Trust Company of Toledo, or to such other bank or trust company in Toledo as lessors may from time to time designate, and shall be distributed by such bank or trust company to lessors in proportion to their respective interests therein.
Since the 7th day of June, 1931, the defendant, I.J. Fulton, as superintendent of banks, has been in possession, for liquidation purposes, of all of the property and assets of the Security Home Trust Company, theretofore the Security Savings Bank Trust Company. On June 19, 1931, the owners of the premises in question designated the Ohio Savings Bank Trust Company as the trust company to which the rentals were to be paid, the trust company agreeing to act as such trustee in accordance with such designation and under the terms of said lease in the collection and distribution of the rentals payable thereunder.
On July 31, 1931, the Commodore Perry Hotel Company paid into the trust department of the Ohio Savings Bank Trust Company the sum of $4,500, being the quarterly payment of rent then due, by check drawn against its commercial account in said bank. On August 11, 1931, a cashier's check for $375 was mailed to each of the co-lessors, among whom were the plaintiffs in the six consolidated actions below. The checks so mailed, when received by the plaintiffs below and presented for payment, were not paid. The Ohio Savings Bank Trust Company discontinued business on August 15, 1931, and on the following Monday, August 17th, the superintendent of banks took possession of its assets and property for liquidation.
On and since August 13th there has been and there now is in the vault of the Ohio Bank a sum of money in excess of the rentals paid to it by the hotel company. A claim for preference presented by defendants in error was rejected by the superintendent of banks.
The answer of the superintendent of banks admits the foregoing facts and alleges that the Ohio Savings Bank Trust Company was engaged in a general banking business and that all funds received by it from whatever source derived were commingled together, that all disbursements for whatsoever purposes were made from the commingled fund, and that such was the customary practice of banks; that it had received funds on account of various trust estates, aggregating $2,127,310.58, including funds of plaintiffs below which it had so commingled, and that claims for preference for such funds and for an additional $1,498,792.30 have been asserted; that at the time of closing, the bank had in its vaults cash in the amount of $2,026,537.23; and that the lowest amount of cash in vaults since the date of payment of such rent was on August 8, 1931, in the amount of $957,812.83.
No reply was filed to this answer of the superintendent of banks. Motion was made by defendants in error for judgment on the pleadings in their favor, which motion was granted by the court, as stated by it, in accordance with the rule indicated in the case of State, ex rel. Toledo Theatres Realty Co., v. Fulton, Supt. of Banks, 124 Ohio St. 360, 178 N.E. 585, and a decree was entered in favor of plaintiffs below. The cause was heard on appeal to the Court of Appeals of Lucas county, which court on motion rendered judgment on the pleadings in favor of defendants in error herein, and error is now prosecuted to this court to reverse the Court of Appeals.
Mr. John W. Bricker, attorney general, Messrs. Brown Sanger and Mr. Sholto M. Douglas, for plaintiff in error.
Messrs. Kirkbride, Boesel, Frease Cole, for defendants in error.
The Court of Appeals was correct in indorsing the rule laid down in the case of State, ex rel. Toledo Theatres Realty Co., v. Fulton, Supt. of Banks, 124 Ohio St. 360, 178 N.E. 585. The whole question here is whether or not plaintiffs below were entitled to a preference over general creditors, upon the statement of facts contained in the pleadings.
The question is between the general depositors of the Ohio Savings Bank Trust Company and the defendants in error.
The general depositors in effect claim that the bank in question was merely a collector of rents, and that the rental money, notwithstanding it may have been attempted to stamp it with the sanctity of a trust fund, was as a matter of fact, under Section 710-165, General Code, as construed in the case of McDonald, Admr., v. Fulton, Supt. of Banks, 125 Ohio St. 507, 182 N.E. 504, and kindred sections, nothing more nor less than a part of the commercial or general fund of the bank.
It is pleaded in effect in the answer of the superintendent of banks that "on or about July 31, 1931, the lessees executed and delivered to the Trust Department of Trustee, its check drawn against its commercial account with the bank for the sum of $4,500.00 as rental and the bank charged the check to lessees' commercial account, there being at the time sufficient funds in such account to honor said check, and credited the amount to the Trust Department and mailed the payees their respective checks, and before the checks reached the bank in regular course for presentation, the bank had been taken over by the superintendent of banks for liquidation."
This trust had no corpus or res other than the check given by lessees on its commercial account, the commercial account was charged with it and it was credited to the trust account. The moneys were now ready for distribution and it was attempted to distribute them. This could only be done by two ways, by paying the cash from the trust account, and, as a matter of good business, taking a receipt therefor, or by drawing checks in favor of the payees against the commercial account.
A trust is a creature of equity. It has a body or corpus. You can derive proceeds from a trust fund, but there must be a corpus to produce it. If it is nonproductive, and there is a proper charge against it, then so much of the corpus must be taken as will respond to the charge. If there is no corpus, there is no trust.
We see no distinction between this case and the case of McDonald, Admr., v. Fulton, Supt. of Banks, supra, and on the authority of that case this cause is reversed.
Judgment reversed.
ALLEN, STEPHENSON, BEVIS and MATTHIAS, JJ., concur.