The funds, with the knowledge and consent of the city, were not handled as trust funds, and if the parties originally intended creating a trust relation, that purpose was manifestly subsequently abandoned. City Council of Charleston v. Elliott (C.C.A. 4) 73 F.2d 920; Keyes v. Paducah I.R. Co. (C.C.A. 6) 61 F.2d 611, 86 A.L.R. 203; Northern Sugar Corporation v. Thompson (C.C.A. 8) 13 F.2d 829; Santee Timber Corporation v. Elliott (C.C.A. 4) 70 F.2d 179, 93 A.L.R. 874; McNulta v. West Chicago Park Commissioners (C.C.A. 7) 99 F. 900; Swan v. Children's Home Society (C.C.A. 4) 67 F.2d 84, 87; State v. Bartley, 39 Neb. 353, 58 N.W. 172, 176, 23 L.R.A. 67; Board of Education v. Union Trust Co., 136 Mich. 454, 99 N.W. 373, 374; City of Aberdeen v. National Surety Co., 151 Wn. 55, 275 P. 62, 65 A.L.R. 794; Lewis v. Dark Tobacco Growers' Co-op. Ass'n, 247 Ky. 301, 57 S.W.2d 8, 10. In City Council of Charleston v. Elliott, supra, the city asserted right of priority for deposits made by it to meet tax anticipation notes executed by the city.
In the absence of the requisite trust language, segregation or its absence is a relevant factor in determining intent and whether a trust res exists. See, e.g., Lewis v. Dark Tobacco Growers' Co-op. Ass'n, 57 S.W.2d 8 (Ky App. 1933) (court considered absence of any requirement that funds be kept separate from other funds in determining whether contract without trust language in fact created trust). Segregation, however, is not essential for the creation of a trust.
Defendants argue that the court properly sustained the general demurrers on the ground that the deed from Powell to Wiley, which was filed with the petition as an exhibit, being an absolute deed on its face contradicted the averments of the petition that the grantee agreed upon the execution of this deed he would hold the property in trust for his wife and children, therefore, the exhibit must control over the averments of the petition. They cite such cases as Lewis v. Dark Tobacco Growers' Co-op. Ass'n, 247 Ky. 301, 57 S.W.2d 8; Vandiver v. B. B. Wilson Co., 244 Ky. 601, 51 S.W.2d 899, to the effect that when an exhibit upon which an action is based contradicts the petition, the exhibit must control on demurrer. Obviously, that rule has no application in the instant case where the exhibit is directly attacked and the petition averred it did not contain the true agreement between the parties; otherwise, an agreement could never be reformed, set aside or cancelled.
We have more than once held that certificates of deposit and saving accounts were not entitled to preference. Without going into detail, we may point to Smith v. Spicer's Guardian, 244 Ky. 68, 50 S.W.2d 64; Kincheloe v. Bank of Hardinsburg Trust Co., 246 Ky. 1, 54 S.W.2d 384, 84 A.L.R. 1530; Lewis v. Dark Tobacco Growers' Ass'n, 247 Ky. 301, 57 S.W.2d 8; Perry Bank Trust Co. v. Riggins, 233 Ky. 257, 25 S.W.2d 386, and the later case of Brashear v. Perry Bank Trust Co., 252 Ky. 297, 67 S.W.2d 28, which we think, when applied under facts developed here, conclusively show that these deposits were never at any time impressed with such a trust, or semblance of trust, as would justify a preference or priority in favor of appellant, as against other depositors. We find in brief for appellant a stipulation which apparently admits all the allegations of the petition, even to the extent that the bank, or its officers, willfully and wrongfully refused to pay appellant or the distributees.
1. A fundamental rule of pleading prevailing in this and other jurisdictions is that an exhibit may never supply an essential allegation required to be contained in a pleading, but it may detract from allegations which a pleading may contain. That rule is so firmly established in this jurisdiction as not to require a listing of the cases so declaring, but two recent ones are Lewis, etc., v. Cooperative Association, 247 Ky. 301, 57 S.W.2d 8, and Powers v. Hardesty, 250 Ky. 522, 63 S.W.2d 616, 617. As exemplifying the applicability of the correct practice as above stated we briefly refer to the question involved in the Powers case and our disposition of it. The action therein was filed by the holder of a negotiable note under our Negotiable Instruments Act against the maker and the payees thereof, the latter of whom had endorsed it to him. The endorsers made no defense and did not appear at the trial when judgment by default was taken against them.
A "special deposit" has been defined to be a deposit in which the identical subject-matter deposited must be kept and delivered in kind or applied to a particular designated purpose, without right or authority on part of the depository to use it for a purpose other than designated. 18 C. J. 562; Tuckerman v. Mearns, 49 App. D.C. 153, 262 F. 607; Lewis, Special Banking Com'r, v. Dark Tobacco Growers' Co-op. Ass'n, 247 Ky. 301, 57 S.W.2d 8. The National Bank of Kentucky, principal, for which appellants were surety, paid interest for the use of the funds deposited with it and, therefore, had the right to mix and commingle it with other funds of the bank and use it as it saw proper.
Morse on Banks and Banking, secs. 183, 186; Michie on Banks and Banking, vol. 5, sec. 328. In Lewis v. Dark Tobacco Growers' Co-operative Association, 247 Ky. 301, 57 S.W.2d 8, it was held that money deposited to the joint account of claimants, who until a lien on certain property was released were not to withdraw the money from the bank which paid interest thereon, was a general and not a special deposit, and that the depositors were not entitled to priority on the bank's insolvency. There is authority to the effect that, in addition to special deposits of money in which the identical money deposited is to be returned in specie, and which merely creates the relationship of bailor and bailee as between the depositor and the bank, there is a class of deposits which is made for a special purpose, which precludes use of the funds by the bank and entitles the depositor to a preference upon insolvency of the bank.