Opinion
Decided June 5, 1933.
Sales — Delivery not necessary to pass title — Banks and banking — Liquidation — Savings depositor preferred — Depositor ordered bonds, account charged and cashier's check issued therefor — Bank refused to accept bonds when tendered.
1. Delivery is not necessary to pass title in sale of personalty.
2. Where depositors, having savings accounts, requested bank to purchase certain bonds for them and bank ordered bonds and segregated funds for payment from depositors' accounts, placing them in cashier's check payable to bond dealer, but refused to accept tender of bonds because bank's manager failed to report transaction to main office, depositors had preferred claim for such amount on bank's insolvency, since contract for sale of bonds was complete when bonds were tendered and payment demanded.
APPEAL: Court of Appeals for Lucas county.
Mr. George A. Bassett and Mr. Frank H. Foster, for plaintiffs.
Mr. John W. Bricker, attorney general, Messrs. Brown Sanger and Mr. Sholto M. Douglas, for defendants.
Plaintiffs, Herbert Koepp and others, are creditors of the Security-Home Trust Company, and brought this action against the bank and Ira J. Fulton, as state Superintendent of Banks, for the purpose of requiring that their claim should be allowed as a preferred claim. The plaintiffs filed a motion in the Court of Common Pleas for a judgment on the pleadings in their favor, and that court, upon due consideration, granted the motion and rendered a judgment and decree in favor of the plaintiffs, finding that their claim was preferred and entitled to share pro rata with other preferred claims similarly situated, and from this finding the Superintendent of Banks appealed.
No reply was filed and the case is submitted to the court upon the petition and the answer thereto.
The petition avers that the defendant bank is and was a banking corporation carrying on a banking business prior to June 17, 1931, in the city of Toledo, and that Ira J. Fulton is and was the duly appointed and acting Superintendent of Banks of the state, and that said bank was taken over for purposes of liquidation on or about June 17, 1931. Plaintiffs aver that they duly presented their claim to the Superintendent of Banks for allowance as a preferred claim about October 30, 1931, and again on November 30, 1931, and that the same was disallowed and rejected by him. All these facts are admitted in the answer, and the other averments of the petition are denied. The answer, however, proceeds to set out the facts as claimed by the defendants, with a little less detail, but not materially different from the manner in which they are alleged in the petition. Those facts, as averred in the answer, are that on June 15, 1931, the plaintiffs had a savings account in the bank amounting to $3,202.67, and on that date requested the bank to purchase for them certain United States Liberty bonds; that on June 16, 1931, the plaintiffs executed a withdrawal notice in the sum of $3,173.48, and thereupon their savings account was charged with the amount thereof, and the bank, by its branch manager, drew its cashier's check in said sum payable to the bond house from which the Liberty bonds had been ordered by the defendant bank; that said bonds were tendered to the defendant bank at its main office, but acceptance thereof and payment therefor was refused, owing to the fact that said branch manager had failed to report the transaction to the main office.
The remaining allegations of the answer set forth the financial condition of the bank at the time it was taken possession of by the Superintendent of Banks, showing substantial amounts in cash and credits in the various accounts.
On these conceded facts, what are the rights of the parties?
The plaintiffs contend that by the transaction the bank became their agent to purchase certain Liberty bonds, for which they furnished the funds to the bank as trustee, and that the bonds were actually purchased by the bank, and tendered to the bank by the seller, while the bank was still continuing business, but that it refused to accept the bonds and pay for them although a cashier's check had already been drawn payable to the order of the bond house from which the bonds had been purchased and the amount charged out of the depositors' accounts. On the other hand, the defendants contend that the plaintiffs were general depositors in the savings department, and that the relation between them and the bank was that of debtor and creditor, and so continued, unaffected by the contract and unaffected by the fact that the bonds had been duly purchased and tendered. To sustain the position of the Superintendent of Banks, his counsel rely on Blakey, Recr., v. Brinson, 286 U.S. 254, 52 S. Ct., 516, 76 L. Ed., 1089, 82 A.L.R., 1288, and several other cases holding the principle there announced, notably Williams v. Hood, Commr. of Banks, 204 N.C. 140, 167 S.E. 574; Tattersfield v. Smith, Supt. of Banks (S.D.), 245 N.W. 44; Howland v. People, 229 Ill. App. 23; McNair v. Oesterreicher. (C.C.A.), 63 F.2d 876. The first case cited is a fair sample of the others, and it discloses that a depositor in the savings department of the bank, pursuant to conversations with a bank officer, increased his account by deposit in the usual way to an amount sufficient to pay for some bonds which the bank had agreed to purchase for him. He was afterwards informed by the bank that the bonds had been purchased, and the amount of the purchase price was charged against the depositor's account, and was credited as a deposit in a bond account. Soon thereafter, when the bank closed its doors, it was discovered that in fact no bonds had been purchased, ordered or received for the depositor. Under these circumstances it was held that the depositor continued to be a general creditor of the bank, and preference was denied. The facts in the various cases on which reliance is placed show that the agreement to purchase bonds had not been consummated and no bonds had been purchased. There was merely the shifting of credits, accompanied by misrepresentation. There had been anticipatory talk of the purchase of bonds, and the bank's officer had stated that they would be purchased, and finally that they had been purchased, but, as construed by the court, these were only idle words. In the case at bar the bank had agreed to purchase "certain United States Liberty bonds", and had complied with that agreement. This was followed by a tender of the bonds by the seller to the bank, but it refused acceptance on the sole ground that the branch manager had failed to report the transaction to the main office — a wholly insufficient reason. Delivery is not necessary to pass title in a sale of personal property. In the case at bar the contract was complete when the bonds were tendered and payment demanded. The fund with which to pay for the bonds had been segregated from the depositors' account, and placed in a cashier's check payable to the dealer from whom the bonds had been purchased. This situation distinguishes the case at bar from the cases on which counsel for defendants rely.
Many respectable authorities hold that a trust relation is created, and the plaintiff entitled to a preference, when the facts are similar to those in the cases cited by the defendants. Some of the authorities to that effect are referred to in the opinion of Mr. Justice Stone in Blakey, Recr., v. Brinson, supra. The authorities are collected in an extensive note in 82 A.L.R., 1292.
This court finds from the pleadings, under the admitted facts, that the plaintiffs, with other preferred creditors similarly situated, are entitled to a preference. Judgment and decree for plaintiffs.
Decree for plaintiffs.
WILLIAMS and LLOYD, JJ., concur.