Opinion
Opinion filed April 6, 1937.
1. — Banks and Banking. Where trust company presents check, payable to its order, to another trust company on which drawn and second trust company issues its secretary check payable to the payee of original check and said payee is not a depositor of second trust company and is not given credit on its books held that payee trust company is entitled to preference of its claim.
2. — Banks and Banking. Where trust company payee presents check to another trust company on which it is drawn and receives in exchange a cashier's check and where payee trust company had no deposit in second trust company held that such acceptance was not "unconditional credit given on its books" within the meaning of sec. 5575, R.S. of Mo. 1929.
Appeal from Circuit Court of City of St. Louis. — Hon. H.A. Hamilton, Judge.
REVERSED AND REMANDED.
Robert L. Aronson for appellant.
(1) The trial court erred in sustaining objection to the filing of the amended claim; this was not a new claim, but merely an enlargement and a development of the original claim, admittedly filed in proper time; further, respondent could not adjudicate priorities and he was not prejudiced by the amendment. State ex rel. Gentry v. Page Bank, 14 S.W.2d 597; Woods v. Cainsville Bank, 11 S.W.2d 56; Macon County v. Farmers' Trust Co., 325 Mo. 784, 29 S.W.2d 1096; In re Liquidation of Gower Bank, 55 S.W.2d 713; Missouri Public Service Co. v. Cantley, 57 S.W.2d 755; In re Cooper County State Bank, 67 S.W.2d 109; Miller v. Farmers' Exchange Bank, 67 S.W.2d 528; Henneman v. Rosebud Bank, 78 S.W.2d 113; In re Hodiamont Bank, 91 S.W.2d 127; Matter of Lee Hoyn Ton, 268 N.Y. 381, 150 Misc. 5. (2) The trial court erred in sustaining objection to the introduction of evidence, since the filing of the amended claim should have been permitted; and, further, because the court's ruling was too general. (3) Appellant was entitled to a preference under sec. 5575, subd. 2, of Revised Statutes of Missouri 1929. Provisions of cited statute; In re Hodiamont Bank (Jones v. St. Rose's Church), 91 S.W.2d 127; Shell Petroleum Corp. v. Sturdivant Bank, 87 S.W.2d 1064; New York Indemnity Co. v. Farmers' Trust Co., 227 Mo. App. 55, 57 S.W.2d 201; People ex rel. Nelson v. Dennhardt, 353 Ill. 450, 188 N.E. 464; State ex rel. Sorenson v. Farmers' State Bank, 125 Neb. 427, 250 N.W. 557. (4) Upon well-settled principles of equity, a trust arose in this case, by reason of the bank's failure to perform its duty and to obey its instructions in the payment and remittance of the proceeds of the collection of the check drawn upon it, so that appellant's claim should be allowed as preferred. In re Cooper County State Bank, 67 S.W.2d 109; State ex rel. Gentry v. Page Bank, 14 S.W.2d 597; Laclede Trust Co. v. Rodenberg, 93 S.W.2d 55; Johnson v. Farmers' Bank, 11 S.W.2d 1090; In re Hodiamont Bank, supra; Bank of Illmo v. Sturdivant Bank, 89 S.W.2d 560; Farmers' Bank v. Moberly, 78 S.W.2d 906; Henneman v. Rosebnd Bank, 78 S.W.2d 113; Kahmann v. Moberly, 77 S.W.2d 858: Koehler v. Joplin State Bank, 68 S.W.2d 728; Hiatt v. Miller Bank, 34 S.W.2d 532, 224 Mo. App. 1040; Claxton v. Cantley, 297 S.W. 975; Householder v. Cantley, 27 S.W.2d 1034: Schreier v. Joplin State Bank, 63 S.W.2d 179; Andrews v. Farmers' Trust Co., 21 S.W.2d 641: Blackshaw v. French, 45 S.W.2d 915; Thomson v. Bank of Gerster, 74 S.W.2d 74: Niewald v. Rosebud Bank, 78 S.W.2d 464; Nichols v. Bank of Syracuse, 220 Mo. App. 1014, 278 S.W. 793. (5) Apart from the statute, since a collecting agent, unless specially authorized otherwise, can accept only cash as payment, a draft given in settlement of a collection item is deemed to be received provisionally, and credit is conditioned upon clearance: therefore, a claim upon a cashier's check given in remittance of a collection must be allowed as preferred. Bank of Republic v. Republic State Bank, 328 Mo. 848, 42 S.W.2d 27; Bank of Poplar Bluff v. Millspaugh, 281 S.W. 733. (6) The record being complete and appellant being entitled to a preference, the court should correct the errors of the trial court by reversing the judgment and remanding the cause with appropriate directions to enter a new judgment granting the claim for a preference, as in Blackshaw v. French, supra.
Robt. J. Keefe for respondent.
Igoe, Carroll Higgs Keefe of counsel.
(1) The trial court correctly ruled that the so-called "amended claim" (which had never been presented to or approved by the Commissioner, but was presented directly to the Court) should be excluded from consideration. (a) The determination of preferences, as well as all other action in the liquidation of insolvent banks, is governed by the statutes. The circuit court has no jurisdiction with respect to it, except such as the statutes confer. R.S. Mo. 1929, secs. 5316-5339; Koch v. Missouri-Lincoln Trust Co. (Mo.), 181 S.W. 44, l.c. 48; Commerce Trust Co. v. Farmers Exchange Bank (Mo.), 61 S.W.2d 928, l.c. 930 — Pts. 3 and 4; Exchange Bank v. Turner (Mo.), 14 S.W.2d 425, l.c. 431. (b) Under the statute the court had jurisdiction only to pass on the claim which had been presented to the Commissioner and by him submitted for adjudication as to the asserted right of priority. R.S. Mo. 1929, sec. 5336. (c) At the time when the amended claim was presented to the court — June 11, 1934 (Abs. pp. 6 and 16) — it could not have been considered even by the Commissioner, since the time for filing claims had expired on August 7, 1933 (Abs. p. 31). The claim was barred by limitation. R.S. Mo. 1929, section 5333; Bowersock Mills Power Co. v. Citizens' Trust Co. (Mo. App. St. L.), 298 S.W., l.c. 1051-52; Commerce Trust Company v. Farmers Exchange Bank (Mo.), 61 S.W.2d 928, l.c. 930-931, syllabus pt. 4. (2) (a) A preference may be adjudged only where money or property of the claimant was held by the insolvent in trust and where that trust fund has augmented the assets in the hands of the Commissioner of Finance. In re Farmers Exchange Bank of Gallatin (Mo.), 37 S.W.2d 936, l.c. 943, syllabus pt. 7; Mann v. Bank of Greenfield (Mo.), 46 S.W.2d 874, l.c. 876, syllabus pt. 3. (b) Claimant has the burden of establishing the facts necessary to demonstrate the right to the preference sought. Smalley v. Queen City Bank (Mo. App.), 94 S.W.2d 954, l.c. 959, syllabus pts. 3 and 4; McPheeters v. Scott County Bank, 63 S.W.2d 456, l.c. 460, pt. 2. And a trial court's judgment denying preference will be upheld if sustainable upon any theory supported by the record. Smalley v. Queen City Bank (Mo. App.), 94 S.W.2d 954, l.c. 959, syllabus pts. 3 and 4; McEwen v. Sterling State Bank (Mo. App.), 5 S.W.2d 702, l.c. 705, pt. 2. (3) It is well settled that one accepting a cashier's or treasurer's check (excepting an agent for collection, who may not accept anything but cash) enters into a mere debtor-creditor relationship with the issuing bank. There is no element of trust in such a transaction in the absence of fraud. Bank of Republic v. Republic State Bank, 328 Mo. 848, 42 S.W.2d 27, 29; Smalley v. Queen City Bank, 94 S.W.2d 954; Cormany v. Wells-Hine Trust Co. (Mo. App.), 44 S.W.2d 172; In re Hodiamont Bank, 91 S.W.2d 127, pt. 2. But if a cashier's check or draft be issued by a bank by way of remittance of money collected by it upon an item entrusted to it for collection, the payee has a preferred claim not on the check or draft, but for the money collected by the issuing bank, which it holds as agent or trustee. Bank of Republic v. Republic State Bank, 328 Mo. 848, 42 S.W.2d 27, 29. Such a right of preference exists, too, where the payee of the check or draft was also only an agent for collection, since all who deal with him are bound to know that he has no authority to accept in payment anything but cash. Bank of Republic v. Republic State Bank, 328 Mo. 848, 42 S.W.2d 27, 29. (4) In this case the preference sought cannot be justified upon any theory of agency for collection because: (a) The item presented by the claimant was not "entrusted" to West St. Louis Trust Company, but was presented directly over the counter. It was presented not for collection but for payment. Bank of Republic v. Republic State Bank, 328 Mo. 848, 42 S.W.2d 27, 29; American Bank of De Soto v. People's Bank of De Soto (Mo. App.), 255 S.W. 943. (b) The item presented showed on its face that it was owned by the company presenting it (the claimant) and there was no indication, either by restrictive endorsement or otherwise, that it was acting as a collecting agent for an undisclosed principal. See Sec. 5569, R.S. Mo. 1929. Moreover, the present contention of the claimant that it was only an agent for collection of the item presented is contrary to its claim (Abs. pp. 2-4), and is not supported even by the evidence which it tendered in support of its amended claim (Abs. pp. 18, 22). (5) The transaction does not fall within the class as to which preference is accorded by the Bank Collection Code because claimant, by accepting, if it did not request, the cashier's check in payment of the item presented, "accepted an unconditional credit." which credit was entered on the books of West St. Louis Trust Company. See R.S. Mo. 1929, sec. 5575, div. 2; Ex parte Sanders, 168 S.C. 323, 167 S.E. 154: South Carolina State Bank v. Citizens Bank (S.C.), 176 S.E. 346; Lindsay v. Elliott (U.S.C.C.A., 4th Circuit), 77 F.2d 95, l.c. 96. The following decisions by this court are distinguishable on the facts. In re Hodiamont Bank (Mo. App.), 91 S.W.2d 127: Shell Petroleum Bank v. Sturdivant Bank (Mo. App.), 87 S.W.2d 1064. Unless the voluntary acceptance of a cashier's check (which is properly entered on the bank's books to the credit of the payee) is the acceptance of an unconditional credit within the meaning of the statute (section 5575), the statute will work an unjust discrimination as between a bank's creditors to such a degree as probably to render it unconstitutional — a result which must be avoided if, by a fair interpretation, it can be. Bassett v. Mockton, 308 Mo. 641, 649, 274 S.W. 404, 407.
By this action the Mississippi Valley Trust Company seeks to have its claim for $2.845 allowed as a preferred claim against the assets of the West St. Louis Trust Company, which is in charge of the finance commissioner for liquidation. The claim was duly presented to the finance commissioner, was by him duly allowed as a common claim, and was certified and presented to the circuit court for determination as to its priority of payment.
The claimant, Mississippi Valley Trust Company, in its claim filed with the finance commissioner, alleges that there is due the claimant, the said Mississippi Valley Trust Company from the West St. Louis Trust Company $2,845, being the amount due on January 13, 1933. on a cashier's check No. 79777, dated January 12, 1933, payable to the Mississippi Valley Trust Company; that said claimant is entitled to a priority of payment in preference to general creditors, said claim for preference being founded upon the following facts: The cashier's check No. 79777 of said West St. Louis Trust Company in the amount of $2,845, upon which said claim is hereby made, was issued to said claimant in payment of a check signed by Sol Serkes and Herbert F. Lewis for $2,845 drawn on said West St. Louis Trust Company, said check of Sol Serkes and Herbert F. Lewis having been presented for collection by said Mississippi Valley Trust Company by messenger on January 12, 1933; that the said check of Sol Serkes and Herbert F. Lewis for $2,845 was collected by said West St. Louis Trust Company, and that said cashier's check, in the amount of $2,845, represents the proceeds of such collection made by said West St. Louis Trust Company, and that said cashier's check was not paid upon presentation thereof for the reason that the said West St. Louis Trust Company was reported closed: that by reason of the facts above set out the assets of the said West St. Louis Trust Company are impressed with a trust in favor of the Mississippi Valley Trust Company, the owner of the proceeds of the item herein described, and that said claimant, Mississippi Valley Trust Company, is entitled to a preferred claim pursuant to paragraphs 2 and 3, of section 5575 of the Revised Statutes. State of Missouri, 1929; that said Mississippi Valley Trust Company is not indebted to said West St. Louis Trust Company in any sum and that said West St. Louis Trust Company is not entitled to any credits or offsets against this claim, and that the foregoing statements are true to the best of his knowledge and belief.
In the circuit court the claimant offered to file an amended claim, which was rejected by the court on objection of the finance commissioner on the ground that it was a departure from the original claim. It is clear, however, that the evidence adduced was admissible under the original claim filed with the finance commissioner, and supported its allegations.
Upon the trial of the cause the court gave judgment denying the claim as a preference and classifying it as a general or common claim. Claimant appeals.
Appellant contends that on the facts it is entitled to a preference under the second subdivision of section 5575. Revised Statutes 1929, Mo. St. Ann., sce. 5575, p. 7715.
The evidence shows that on January 12, 1933, appellant received from Sol Serkes and Herbert F. Lewis their check for $2,845, drawn on the West St. Louis Trust Company, and made payable to the order of appellant. The check was given in payment of the balance due on a note which appellant held for collection for a customer. The appellant endorsed the check and sent it by messenger to the West St. Louis Trust Company for payment. The messenger received from the West St. Louis Trust Company its treasurer's check for $2,845, made payable to the order of the appellant. The West St. Louis Trust Company was closed for business a little before regular closing time on the afternoon of January 12, 1933. The appellant tried to collect the treasurer's check through the Federal Reserve Bank the following day by presenting the check there for credit, but appellant did not receive credit, and the treasurer's check was never paid. At the time the Serkes and Lewis check for $2,845 was presented to the West St. Louis Trust Company for payment said trust company had on deposit to the credit of said Serkes and Lewis an amount more than equal to the amount of said check. When said trust company made and delivered its treasurer's check for $2,845 to the messenger it charged said check to the account of said Serkes and Lewis, and made an entry on its treasurer's check register showing the issuance of its treasurer's check in the amount of $2,845, payable to the order of appellant in exchange for a check of Serkes and Lewis.
The evidence shows that when the Serkes and Lewis check was forwarded to the West St. Louis Trust Company it was either endorsed. "Pay in Federal Reserve Funds," or was endorsed. "Pay in Cashier's Check."
Paul Speakman, an employee in the collection department of the appellant, testified that he used a stamp in making the endorsement, and after stamping the endorsement on the check struck out the words, "cashier's check" and wrote in "Federal Reserve Funds."
George II. Scherrer who issued the treasurer's check, testified to the effect that when he received the Serkes and Lewis check, it was endorsed. "Pay in Cashier's check."
It appears to be agreed that the endorsement. "Pay in Federal Reserve Funds," means a draft on the Federal Reserve Bank.
Paul Speakman also testified that the Serkes and Lewis check was presented by Serkes in person that he checked the balance due on the note for which the check was tendered in payment, and told Serkes that he would not deliver the note until he had the funds immediately available.
The Bank Collection Code was enacted in 1929, and appears at page 205 of the Session Laws of that year. It is entitled as follows: "An act to expedite and simplify the collection and payment by banks of checks and other instruments for the payment of money." It is now embodied in article 8 of chapter 34 of the Revised Statutes of 1929.
Section 5575 is as follows:
"1 — When the drawee or payor, or any other agent collecting bank shall fail or be closed for business by the commissioner of finance or by action of the board of directors or by other proper legal action, after an item shall be mailed or otherwise entrusted to it for collection or payment but before the actual collection or payment thereof, it shall be the duty of the receiver or other official in charge of its assets to return such item, if same is in his possession, to the forwarding or presenting bank with reasonable diligence. 2 — When a drawee or payor bank has presented to it for payment an item or items drawn upon or payable by or at such bank and at the time has on deposit to the credit of the maker or drawer an amount equal to such item or items and such drawee or payor shall fail or close for business as above, after having charged such item or items to the account of the maker or drawee thereof or otherwise discharged his liability thereon but without such item or items having been paid or settled for by the drawee or payor either in money or by an unconditional credit given on its books or on the books of any other bank, which has been requested or accepted so as to constitute such drawee or payor or other bank debtor therefor, the assets of such drawee or payor shall be impressed with a trust in favor of the owner or owners of such item or items for the amount thereof, or for the balance payable upon a number of items which have been exchanged, and such owner or owners shall be entitled to a preferred claim upon such assets, irrespective of whether the fund representing such item or items can be traced and identified as part of such assets or has been intermingled with or converted into other assets of such failed bank. 3 — Where an agent collecting bank other than the drawee or payor shall fail or be closed for business as above, after having received in any form the proceeds of an item or items, entrusted to it for collection, but without such item or items having been paid or remitted for by it either in money or by an unconditional credit given on its books or on the books of any other bank which has been requested or accepted so as to constitute such failed collecting or other bank debtor therefor, the assets of such agent collecting bank which has failed or been closed for business as above shall be impressed with a trust in favor of the owner or owners of such item or items for the amount of such proceeds and such owner or owners shall be entitled to a preferred claim upon such assets, irrespective of whether the fund representing such item or items can be traced and identified as part of such assets or has been intermingled with or converted into other assets of such failed bank."
It will be observed that this section covers two classes of transactions, one where items are presented to the drawee or payor bank for payment, and the other where items are entrusted to an agent collecting bank for collection. The transaction involved here belongs to the first class, and the solution of the question as to whether or not appellant is entitled to a preference involves a construction of the second subdivision of the section.
The allowance of a preference is defeated, under this subdivision, where an item is presented to a drawee or payor bank for payment, if it appears that the item has been paid or settled for by the drawee or payor bank, either in money, or by an unconditional credit given on its books or on the books of another bank, which has been requested or accepted so as to constitute such drawee or payor bank or other bank debtor therefor. It is this provision that respondent here particularly relies on to defeat the allowance of a preference. Respondent insists that the treasurer's check issued by the West St. Louis Trust Company which treasurer's check was requested and accepted by appellant, constitutes an unconditional credit given appellant by the West St. Louis Trust Company. In this insistence respondent overlooks that it is an unconditional credit, given on the books of the drawee or payor bank or other bank, requested or accepted, and not a check or draft requested or accepted, given in exchange for the item presented to the drawee or payor bank for payment, that defeats a preference. To hold that a check or draft requested or accepted, in exchange for an item presented to the drawee or payor bank for payment, constitutes an unconditional credit on the books of the drawee or payor bank or other bank, would defeat the manifest purpose of the statute. It is through just such means of payment that the statute intends that payment of items presented to a drawee or payor bank is to be expedited. If such means adopted to accomplish payment fails on account of the closing of the drawee or payor bank the statute accomplishes the payment intended by the allowance of a preference against the assets of the closed drawee or payor bank.
If, when the West St. Louis Trust Company received the Serkes and Lewis check, it had charged the check on its books to the account of Serkes and Lewis and had instead of issuing its treasurer's check given appellant credit on its books for the Serkes and Lewis check, such credit having been requested or accepted by appellant, this would have constituted payment of the check by an unconditional credit on the books of the West St. Louis Trust Company. If appellant after receiving the treasurer's check from the West St. Louis Trust Company had presented it to the Federal Reserve Bank which at the time had on deposit to the credit of the West St. Louis Trust Company $40,000, and the Federal Reserve Bank had charged the treasurer's check to the West St. Louis Trust Company's account and had given appellant credit on its books for the check, said credit having been requested or accepted by appellant this would have constituted payment of the Serkes and Lewis check by an unconditional credit given on the books of the Federal Reserve Bank that is it would have constituted payment of the Serkes and Lewis check presented to the West St. Louis Trust Company by an unconditional credit given on the books of another bank.
In Shell Petroleum Corporation v. Sturdivant Bank (Mo. App.) 87 S.W.2d 1064, the Shell Petroleum Corporation presented to the Sturdivant Bank in Cape Girardean checks drawn on the Sturdivant Bank, made payable to the Shell Petroleum Corporation, and received in exchange therefor drafts drawn on the First National Bank in St. Louis. The Shell Petroleum Corporation was not a depositor of the Sturdivant Bank. The Sturdivant Bank was closed and the drafts were on that account never paid. It was held that the Shell Petroleum Corporation was entitled to a preference.
And the same view of the statute appears to have been taken by our Supreme Court in Bank of Republic v. Republic State Bank, 42 S.W.2d 27, l.c. 31.
To the same effect are the following cases ruled on statutes similar to ours: The People ex rel. Nelson v. Dennhardt, 354 Ill. 450; State ex rel. Sorensen v. Farmers State Bank, 125 Neb. 427; Madden v. Wilde (Wyo.), 38 P.2d 603; Fulton v. Baker-Toledo Co., 125 Ohio St. 518.
In Ex Parte Sanders, 168 S.C. 323, the court construing a statute like ours held that a checkholder accepting from the drawee bank a draft in exchange for the check thereby received such unconditional credit as defeated the allowance of a preference. The court said that the checkholder having accepted from the drawee bank a draft on another bank, this was an unconditional credit on the books of such other bank given by the drawee bank and accepted by the checkholder. We do not understand how the issuance of a draft by the drawee bank on another bank may rightly be regarded as the giving of an unconditional credit on the books of such other bank. There were two dissenting opinions in that case, one by Chief Justice BLEASE and the other by Associate Justice COTHRAN. The Associate Justice, in his dissenting opinion, vigorously asserted that the draft was not a credit on the books of any bank.
In the present case respondent appears to draw a distinction between a case where the holder of an item presenting the item to the drawee or payor bank expressly demands payment thereof and afterwards accepts a check or draft in payment, and a case where the holder presenting the item does not expressly request payment, but on the contrary expressly requests and accepts a check or draft, contending that in the one case the holder is entitled to a preference and in the other he is not. We do not think the statute should be so narrowly and technically construed. It is true the statute requires that the item be presented for payment, but this does not mean that payment must be expressly requested or that a request for a check or draft is to be regarded as showing that the item is not presented for payment. Where the holder of an item, who is not a depositor of the drawee or payor bank, presents the item to the drawee or payor bank and requests and accepts a check or draft therefor the item, we think, is presented for payment within the meaning of the statute, and the check or draft is issued and taken as a means to be used to accomplish payment of the item.
In this case the Serkes and Lewis check was manifestly presented to the West St. Louis Trust Company for payment, whether a cashier's check, or a draft on the Federal Reserve Bank, was requested. In either event the treasurer's check was issued and accepted as a means to be used to accomplish payment of the Serkes and Lewis check. The means thus adopted having failed to accomplish that end because of the closing of the trust company, the payment intended will be accomplished by the allowance of a preference.
Respondent contends, however, that the entry made by the West St. Louis Trust Company upon its treasurer's check register was an unconditional credit on its books within the meaning of the statute. To this we cannot agree. Surely the decision of the question here involved is not to turn on the mere circumstance as to whether the trust company upon the issuance of the treasurer's check did or did not enter upon its books a record of the transaction. The rights and relations of the parties are determined by the treasurer's check issued by the trust company and not by the entry made on the books of the company. The effect of the issuance of the treasurer's check would be precisely the same whether the entry was made or was not made. If no treasurer's check or other like instrument had been issued and the transaction had been represented by a credit entered on the books requested or accepted by appellant, then, as already said, the credit on the books would be determinate.
Respondent further says that unless the voluntary acceptance of a check or draft is to be regarded as an acceptance of an unconditional credit within the meaning of the statute the statute will work an unjust discrimination between creditors of the closed bank so as to render the statute unconstitutional — a result which must be avoided if by fair interpretation it can be. In this connection it should be observed that the statute is not designed in its primary purpose to give preference to one class over another but its real purpose is to expedite and simplify the collection and payment by banks of checks and other instruments for the payment of money. We do not think that construing the statute so as to carry out this purpose renders it unconstitutional. But, be this as it may, we are not permitted to rewrite the statute in order to save it from the condemnation of the constitution.
The Commissioner recommends that the judgment of the circuit court be reversed and that the cause be remanded to that court with directions to enter judgment in accordance with the views herein expressed.
The foregoing opinion of SUTTON, C., is adopted as the opinion of the court. The judgment of the circuit court is accordingly reversed and the cause remanded to that court with directions as recommended by the Commissioner. Hostetter, P.J., and Becker and McCullen, JJ., concur.