
    Fulton, Supt. of Banks, v. Campbell. Fulton, Supt. of Banks, v. Samiec. Fulton, Supt. of Banks, v. Buckenmyer.
    
      (Decided December 19, 1932.)
    
      Mr. Gilbert Bettman, attorney general, Messrs. Brown S Banger and Mr. 8. M. Douglas, for plaintiff in error.
    
      Messrs. Doyle S Lewis, Mr. Milo Warner and Mr. E. P. Buckenmyer, for defendants in error.
   By the Court.

These three cases were argued and submitted together. In the court of common pleas each case followed a similar course. After a demurrer in each case was overruled, an answer was filed, and then the plaintiff filed a motion for a judgment on the pleadings. On hearing, this motion was sustained and judgment entered in favor of the plaintiff.

In the Campbell case it appears that Campbell left with the bank a check received from the government for the amount of a loan on his adjusted service certificate, with instructions to deposit it in a commercial account in his name. Thereafter he made certain withdrawals and also made deposits in said account, and he seeks to have the balance, less dividends, declared a preference.

In the Samiec case, Samiec received a check from the government for the amount of a loan on his adjusted service certificate, and opened a savings account by depositing the check in the bank in the name of himself and wife jointly. There were thereafter no withdrawals or additions by way of deposit, so the fund remains in the identical form in which it was created, and Samiec desires to have the claim declared a preference for the full amount deposited, less the dividends paid.

In the Buckenmyer case it appears from the petition that Buckenmyer had a commercial account in the bank in his own name, in which was deposited $7.11. He received a check representing a loan on his adjusted service certificate, and deposited it in the same account. No other deposits were made in that account, but there were withdrawals from said account from time to time, and Buckenmyer seeks to have his claim declared a preferred one for the amount of the government loan less the $7.11 on deposit and less withdrawals and dividends received.

These deposits were all in the Security-Home Trust Company, and the dividends referred to are those which have been paid during the time the bank has been in liquidation.

In the Campbell and Buckenmyer cases, the accounts being commercial accounts, there was no interest payable, but in our judgment the identity of the fund was lost by reason of the fact of commingling the fund with other funds in a checking or commercial account. In the Samiec case the identity of the fund was lost by reason of the fact that it was loaned to the bank for interest; the same being a savings account. In our judgment, a deposit of a loan on an adjusted service certificate in a savings account at interest is of itself sufficient to destroy the identity of the fund and prevent preference, as it was loaned to the bank. The savings account, moreover, was jointly in the name of Samiec and his wife. It therefore appears that he had given an undivided interest in the fund to her.

We call attention to what this court has said in an opinion filed this day in the case of Fulton v. Stempien, ante, 373.

As none of the claims is entitled to preference, the petitions are demurrable, and the court below committed prejudicial error in overruling the demurrers and in sustaining the motions for judgment on the pleadings in favor of the plaintiffs.

For the. reasons given, the judgments will be reversed and the causes remanded, with directions to sustain the demurrers and overrule the motions for judgment on the pleadings, and for further proceedings not inconsistent with this opinion.

Judgments reversed and causes remanded.

Lloyd, Richards and Williams, JJ., concur.

On Applications por Rehearings and Motions to Certipy.

Williams, J.

An application for rehearing has been filed in each of these cases, and the sole authority cited is Second National Bank of Greenville v. Hoblit, 41 Ohio App., 126, 179 N. E., 812. This court has also been requested to certify the causes to the Supreme Court because the judgments of this court are in conflict with the judgment of the Court of Appeals of the Second District of Ohio in the Second National Bank v. Hoblit case, supra.

In the three instant cases this court, in its written opinion, laid down two principles: First, that where the proceeds of a loan from the government on an adjusted service certificate are deposited in a bank in a savings account, the depositor is not entitled to a preference on liquidation of the bank; and, second, that where such proceeds are deposited in a noninterest-bearing commercial account, and the depositor by having funds in that account, or thereafter making deposit therein and thus commingling the proceeds of the loan with other deposits, there can be no preference, if the bank goes info liquidation.

We find it difficult to state our position with more clearness, but will endeavor in this opinion to make the fullest explanation possible.

Ordinarily a deposit in either a savings or commercial account would have no priority over other deposits. However, we are confronted with Section 618, Title 38, U. S. Code, which contains the following: “No sum payable under this chapter to a veteran or his dependents, or to his estate, or to any beneficiary named under Part V of this chapter, no adjusted service certificate, and no proceeds of any loan made on such certificate, shall be subject to attachment, levy, or seizure under any legal or equitable process, or to National or State taxation.”

In the case of Ramisch v. Fulton, Supt. of Banks, 41 Ohio App., 443, 180 N. E., 735, this court allowed a preference where a commercial account was opened by an ex-service man by the deposit of the check received by him from the Bureau of Veterans ’ Affairs for a loan on his adjusted service certificate and no further deposits were ever made in the account, and no withdrawals. In Fulton, Supt. of Banks, v. Ferguson, ante, 365, decided, December 19, 1932, this court, two judges concurring, held that, where the proceeds of a loan on an adjusted service certificate were deposited by an ex-service man in a commercial account in a bank, but there were never any other deposits made in the same account, a preference should be allowed, although there had been a withdrawal. These decisions approach, if they do not reach, the very limit.

The only existing differences of fact between the Ramisch and the Ferguson cases are that in the Ramisch case the government check was deposited for collection in a noninterest-bearing commercial account, whereas in the Ferguson case the proceeds of the check issued by the government to Ferguson were deposited in a similar commercial account, and were thereafter partially drawn on by Ferguson, who sought to have the balance thereof remaining in the account, no other moneys having been deposited therewith, declared exempt and awarded to him as a preferential claim.

A savings account stands on a different footing from a noninterest-bearing commercial account. As was pointed out by this court in Fulton v. Stempien, supra, the court will take judicial notice of the fact that a savings account draws interest. It has been pointed out by our Supreme Court that a deposit in an interest-bearing account contemplates the use of the fund by the bank. McDonald, Admr., v. Fulton, Supt. of Banks, 125 Ohio St., 507, 511, 182 N. E., 504; Smith et al., Trustees, v. Fuller et al., Assignees, 86 Ohio St., 57, 63, 99 N. E., 214, L. R. A., 1916C, 6, Ann. Cas., 1913D, 387.

It is thus apparent that an ex-service man who deposits the proceeds of a loan on his adjusted service certificate in a bank, in an interest-bearing account, lends the money to the bank, and, if the bank fails to pay the money to him when called for, he has no right to any specific money. He is in the position of a creditor, and has the rights and remedies of a creditor; on the other hand, he cannot bring an action to enforce a trust, and the reason lies in the fact that as between himself and the bank the relation of debtor and creditor subsists. It would seem to follow as a matter of course that, when the bank goes into liquidation, he is in the position of any other lender to the bank at interest.

As to the commingling of other deposits with the proceeds of a loan on an adjusted service certificate we are simply taking the position that, where the ex-service man voluntarily commingles other deposits with the deposit of the proceeds, the identity of the fund or proceeds is so far lost that no preference should be allowed. In a deposit such as is involved in these cases, there is no question of tracing trust funds, but the test that should be applied is, Has the identity of the fund been preserved? So long as the money remains in the pocket of the ex-service man, it cannot be reached on execution, nor can it be taxed, but if he lends it to another, or voluntarily mixes or commingles it with other funds, or invests it in a piece of real estate, even though title is in his own name, or buys a horse with it, or an automobile, the fund loses its identity. It would be strange indeed if an ex-service man could buy a piece of real estate or other property and so long as he owned the property hold it free from his creditors and from taxation. If he can, then he may trade the property so held for another piece of property, and that, in turn, would be exempt from execution and taxation. We are of the opinion that it was not the intention of the federal enactment to make anything but the proceeds of the loan so exempt, and when the proceeds lose their identity, as such, the statute has no application.

It may readily be seen that many lawyers would seek to apply the principle that an ordinary deposit of the proceeds in a noninterest-bearing commercial account is a loan to the bank and creates only the relation of debtor and creditor as between the bank and the depositor, and would therefore maintain that a deposit in such a commercial account changes the character of the proceeds so far that the statute would not apply. At first blush this argument rings true, but we still adhere to the view that a liberal interpretation of the statute for the purpose of securing and preserving to the soldier his bonus warrants the conclusions that we have reached in the Ramisch and Ferguson cases, and the application of the principle declared therein to all cases where the money is not deposited at interest and there is no commingling of deposits, upon the plain theory that the fund preserves its identity as proceeds. To hold otherwise would be to say to the ex-service man: “ There is no way you can pnt your money in a bank without losing the protection the federal statute has thrown around it. You had therefore better keep it intact in your pocket, or retain it in your possession for safekeeping in some other way.” Hoarding is inimical to the public weal, and public policy demands a construction consonant with public well-being, when possible. Certainly the law is satisfied by an interpretation of the federal statute which protects the “proceeds” of the loan where the deposit is without interest and is not commingled with other deposits in the same bank account.

What about the contention that the judgments of this court in the instant cases are in conflict with the judgment in Second National Bank v. Hoblit, supra? Hoblit received a check from the government as a loan on his adjusted service certificate and cashed the certificate at a bank. He then paid off some small bills, and delivered the balance, amounting to about $300, to his wife in trust for the use and benefit of himself and family, which consisted of a wife and eight small children. Out of the money Mrs. Hoblit purchased three shares of stock in an electric light company. Three months later she returned the stock and received the amount of the cash paid therefor, and deposited it in the Second National Bank at Greenville, Ohio, subject to check. A part of it was used, and $274.66 still remained in the account when the bank in which it was deposited brought suit against the husband and caused the money to be attached. On error the court held that the money was exempt from execution and that the judgment of the court below should be affirmed. It will be observed that this case is more like the Ferguson case than the cases at bar or any other bonus cases cited above. There is, however, a distinction between the two, in that for a time the bonus money was invested in stock, but it appears that the stock was turned back to the company from which it was bought and the money returned. There is also a distinction in this, that Mrs. Hoblit held the money in trust for her husband and his family. In each case the account was a noninterest-bearing account. In each case there was no commingling of the fund with other deposits. The court in the Hoblit case says, at page 129: ‘ ‘ There was no other fund commingled with this fund, nor was the title to the stock adverse to the trust.”

At this point the court is attempting to point out that the fund could still be claimed as proceeds, notwithstanding the fact that Mrs. Hoblit purchased the stock out of it, and they say, in that connection, that it is a doctrine of equity that money will be traced to any investment where there is no inconsistent title or any repudiation of the trust. The court was discussing the trust relation between husband aiid wife as to the fund which was held by her as trustee. In the instant cases there was no such trust relation. The court in the Hoblit case also had the question whether deposits in the wife’s name, and held in trust for the husband, could be reached by a writ of attachment, but had no question as to conflicting claims of depositors in like position.

Counsel for defendant in error Buckenmyer complains that we lay emphasis upon the fact that the fund preserves its identity, but we call attention to the fact that in the Hoblit case it is beyond question that the money involved was traced into the stock and then into the bank deposit. It is thus apparent that that court placed emphasis upon the fact that the money or fund preserved its identity. We think we have pointed out clearly why the judgment of this court is not in conflict with the judgment in the Hoblit case. There are many reasons, but two are paramount: In the Hoblit case the deposit was not in a savings fund, but in a noninterest-bearing account, and there was no commingling of other deposits in the account.

The Hoblit case was considered by this court at the time the questions involved in the instant cases were originally examined, and this court was then of the opinion that the judgment in that case was not inconsistent with the judgments herein. There is no reason why we should change our views, but what is said in this opinion should not be construed as approving or disapproving the decision in the Hoblit case. We shall determine the question presented therein if we should be met with it in the consideration of some case in the future.

For the reasons given the applications for rehearing and the requests for certification will be denied.

Applications denied.

Lloyd and Richards, JJ., concur.  