
    The Union Savings Bank of Bryan v. Department of Commerce.
    (Decided December 12, 1927.)
    
      Mr. D. A. Webster, for plaintiff.
    
      Mr. Edward C. Turner, attorney general, Mr. L. F. Laylin, Mr. J. A. Godown and Mr. H. H. DeMuth, for defendants.
   Williams, J.

This cause comes into this court on

appeal from the court of common pleas. The agreed statement of facts and the evidence disclose the following :

Peter Gentit and his wife, Sadie Gentit, deposited with the plaintiff, the Union Savings Bank of Bryan, Ohio, certificates of deposit issued by the State Exchange Bank of Stryker, Ohio, aggregating $1,-180.44, and there were issued therefor to Gentit and his wife certificates of deposit on the Union Savings Bank for $1,145. The Union Savings Bank forwarded the said certificates, issued by the State Exchange Bank to the Ohio Savings Bank & Trust Company, at Toledo, which in turn .forwarded them to the Federal Reserve Bank at Cleveland, which in turn forwarded them to the State Exchange Bank at Stryker, “with notice to collect and remit as provided by the rules and laws governing the banking business.” Upon receipt of the certificates, the State Exchange Bank, by rubber stamp, marked the certificates “Paid,” and drew a draft upon the Farmers’ National Bank of Bryan, Ohio, in payment therefor, and forwarded it to the Federal Reserve Bank at Cleveland, which, in due course of business, mailed the draft to the Farmers’ National Bank at Bryan. On the same day that the latter bank received the draft it also received notice from the superintendent of banks not to honor the draft, for the reason that the State Exchange Bank of Stryker had been taken over by the state banking department for liquidation. The Farmers’ National Bank refused payment of the draft, and it was protested and returned to the Federal Reserve Bank. There were sufficient funds in the possession of the Farmers’ National Bank to the credit of the State Exchange Bank to pay the draft at the time it was received and at the time the notice was given as aforesaid by the superintendent of banks.

The plaintiff in this case seeks to have its claim for the amount of the certificates of the State Exchange Bank adjudged and decreed to be a preferred claim against the assets of that bank.

Most of the cases cited by counsel dwell upon the question whether or not a bank which receives from a forwarder for collection drafts drawn on claims against a third person, and collects money thereon from such third person, to be remitted to the forwarder, is agent or debtor of the forwarder. These cases are not strictly applicable to the case at bar, for we have presented to us the question whether or not a trust arises in the proceeds of a collection, made by, a collecting bank, by marking “Paid” certificates of deposit issued by it, charging the debtor’s account therewith, and forwarding draft on another bank for the amount of the proceeds. In other words, in the instant case, the bank'received certificates of deposit issued by it, and paid them by issuing a draft on another bank. The question presented is, Did the relation of debtor and creditor or that of principal and agent arise between the owner of the certificates and the bank issuing the draft? If the relation of principal and agent arose, there was a trust relation as to the proceeds.

It is true that a majority of the early cases take the view that the relation of debtor and creditor arises after the collection has actually been made by charging the debtor’s account and issuing a draft for the amount of the collection. The recent cases, however, have generally held that, after that is done, a trust relation exists. Federal Reserve Bank of Richmond v. Peters, Recr., 139 Va., 45, 123 S. E., 379, 42 A. L. R., 742; Bank of Poplar Bluff v. Millspaugh, Commr. of Finance, 313 Mo., 412, 281 S. W., 733, 47 A L. R., 754.

In the annotations to Bank of Poplar Bluff v. Millspaugh, supra, and those found in 24 A. L. R., 1152, and 42 A. L. R., 754, the authorities are collected, and the annotator and compiler points out correctly, as we believe, the trend of modern authorities upon this question.

Our investigation leads us to believe that the reason and weight of authority sustain the rule that a trust relation exists, although a majority of the early cases hold to the contrary. The question was an open one in Ohio at the time the transaction in question occurred, and we have taken the position that this court ought to adopt the rule which is the more salutary and better supported by considerations of equity and justice.

Since the transaction in question occurred, the General Assembly of Ohio has provided that under such circumstances the assets of a closed bank shall be impressed with a trust for the payment of the draft. Section 713, General Code (112 Ohio Laws, 239). Such action, however, has no bearing upon the question at hand.

The defendant has cited Sections 8232 and 8294, General Code, under which a bill of exchange does not operate as an assignment of a fund until accepted, nor a cheek so operate until it is accepted or certified. We think these sections are not of controlling importance in the instant case.

For the reasons indicated, it will be ordered and adjudged that the claim of the plaintiff shall be a preferred claim upon the funds of the bank in litigation in the hands of the superintendent of banks.

Decree accordingly.

Richards and Lloyd, JJ., concur.  