
    Common Pleas Court of Montgomery County.
    G. H. Hammond Co. v. Ira J. Fulton.
    
    Decided November 11, 1932.
    
      Craighead, Cowden, Smith & Schnacke, for plaintiff.
    
      Ku&\w'orm & Shaman, and John W. Bricker, attorney general, for defendant.
    
      
       Affirmed, May 24, 1933.
    
   Snediker, J.

This case is before the court on a general demurrer to the petition on the ground that it does not state facts sufficient to constitute a cause of action.

The plaintiff sues on two drafts, one for $582.68 and the other for $567.49, asking that they be allowed as preferred out of the assets of the Union Trust Company which is now in liquidation. The facts are that these drafts were paid for in large part by the checks of depositors of the Union Trust Company other than the plaintiff. The plaintiff seeks the benefit of Section 713, General Code of Ohio, which reads:

“In any case where any bank incorporated under the laws of this state, or any unincorporated bank doing business within this state, shall have preseented to it for collection and payment a check drawn by a depositor in such bank or unincorporated bank who, at the time such check is presented to it for collection and payment, has on deposit an amount equal to such check, if after the receipt thereof such bank or unincorporated bank shall charge the account of such depositor with the amount thereof and shall in payment thereof draw a draft upon another banking institution, which draft shall remain unpaid at the time that such bank drawing same is closed by the superintendent of banks of Ohio or by action of its board of directors or other proper legal action, in such event the assets of such closed bank shall be impressed with a trust for the payment of such draft, and the superintendent of banks of Ohio or anyone legally charged with the liquidation of such closed bank shall pay such draft as a preferred claim out of the assets of such failed bank.”

Counsel representing the defendants insist that this section can only apply where the draft remaining unpaid at the time the bank is closed by the superintendent of banks is bought and paid for by the depositor himself.

The deposit on which the checks used by the plaintiff were drawn may for the purposes of this demurrer be presumed to be a general deposit. The items of such a general deposit are in the nature of a running account. The bank is the debtor to the depositor for the balance of his deposit account and the ownership of the money so deposited is transferred to the bank. A check drawn on a bank is in the nature of a bill of exchange on demand, and the bank owes no duty to the holder of such check until it is presented for payment. But when it is so presented and the amount is paid and a charge is made against the account of the depositor, the property, of course, in the money so paid is in the holder of the check. When a purchase of a draft is so made by a check the draft and what it represents become the property of the purchaser. The transaction is that of purchase and sale. The money paid by the purchaser of the draft becomes the bank’s money.- And if this condition exists in a specific case at the time the bank is closed by the superintendent of banks, very properly under Section 713, General Code, such a draft ought to be paid as a preferred claim.

The language of the section is: “shall have presented to it for collection and payment a check drawn by a depositor in such bank.” The depositor so mentioned must be one “who at the time such check is presented to it for collection and payment has on deposit an amount equal to such check.” There is nothing in all this section which limits its application to a draft drawn for the depositor or that specifies that the depositor shall purchase the draft. In order to give the meaning to this section which is contended for by counsel for the defendant it becomes necessary for us to interpolate in the section language which changes its sense and deprives the plaintiff of a property right which it has in its drafts which was not part of the assets of the Union Trust Company at the time the bank was closed by the superintendent of banks.

Under the provisions of Section 710-89 “the superintendent of banks may * * * take possession of the business and property of any bank.”

Several cases have been submitted by counsel representing the respective parties in none of which the facts are like those of the case at bar.

Fulton, Supt. of Banks, v. Hankey, 41 Ohio App. 577, decided by the Court of Appeals for Wood county, was a purchase of drafts for cash. In deciding the case the court say:

“By its (Section 713, General Code) terms it only applies to a case where a check is presented to a bank for collection and payment, and the statute can have no application to the case where draft is purchased and paid for in cash. Whether the statute applies to a case in which a draft was purchased with the depositor’s own check we need not now inquire because the question is not involved in the case at bar and any opinion thereon would be wholly obiter.”

Fulton, Supt. of Banks, et al v. D. R. Baker Toledo Co., 125 Ohio St., 518, related to the purchase of a draft by the check of the depositor presenting the check.

The case of Fulton, Supt. of Banks, v. Blodgett, 125 Ohio St., 518, was the purchase of a draft by one who had a savings account and had drawn a withdrawal check on the bank in which it was had, and herself used this check in the purchase of a draft. In the opinion Judge Marshall uses some language that may be helpful here. Although he did not decide the same question presented by this demurrer, He said:

“The section covers every instance where a draft is purchased by a depositor by issuing and delivering to the bank a check against his own account, whether in the checking account or savings account. It is the spirit of the statute that when the check drawn by the depositor shall be actually charged to the account of such depositor the draft drawn by the bank upon its funds in its depositary shall be constructively charged against the deposit.”

And again:

“It is the declared purpose of the statute, as expressed in its title, (112 Ohio Laws, 238), to ‘expedite and simplify the payment of checks.’ This purpose is plainly promoted by providing, in effect, that when the check is actually charged the draft shall be deemed to be charged and the entire transaction as to all parties made immediately effective.”

And:

“It is not the province of the court to justify this statute and yet it must be said in its favor that it encourages the use of depositaries for banking institutions, thereby keeping money in active use instead of accumulating in the vaults. It is also in harmony with modern methods of executing commercial transactions by means of credit exchanges instead of payments in money.”

The first syllabus of this case plainly says that the true intent and meaning of Section 713, General Code, is that where a check is drawn by a depositor against his deposit and is used in the purchase from a banking institution of a draft upon another banking institution the owner and holder of such draft is entitled to preference and priority of payment out of the assets of the bank from the time such check is charged to the account of such depositor.

Our opinion is that under this section the force and effect of the presentation of a check for the purchase of a draft which is in fact charged against the account of a depositor is to create a preference whether the check be used, by the depositor or by another in such purchase. The benefit of this preference is not extended to a payment in cash. We say this because we are of the opinion that this section of the General Code should be applied only to the very situation detailed therein; in other words, it should be strictly construed.

The demurrer is therefore overruled.  