
    GRAY v. ELLIOTT 
    
    (No. 1329;
    May 3, 1927;
    255 P. 593.)
    Appeal and Error— Banks and Banking.— Insolvent Bank — Trust Funds—Preferred Claim—Special Deposit—Note Deft for Collection.
    1. Court’s conclusión, supported "by substantial evidence, tliat proceeds of note 'and mortgage, delivered to bank by administrator for collection, constituted general deposit, not a special deposit to be paid to decedent’s widow and sole devisee as claimed by administrator, must be accepted by Supreme Court, unless facts directly show contrary.
    2. That bank was chargeable with knowledge that note, delivered to it by administrator for collection, belonged to him as administrator, did not make it a trustee of proceeds, so as to entitle him to preference on bank’s insolvency.
    3. Special deposits are those where bank becomes trustee for depositor by special agreement or under circumstances sufficient to create a trust, while general deposits are those where a bank merely becomes debtor of depositor.
    
      i. As respects priority, mere fact that depositor makes deposit in fiduciary, rather than individual, capacity, does not make deposit a special one; question being, not what relation he or his fund bears to some third party, but whether trust relation was created between bank and depositor.
    
      5. As respects priority to make deposit a special one, bank must be made agent rather than debtor, and its agency or trusteeship cannot be created by mere external relationship of debtor, unless law forbids bank from becoming debtor in such case.
    6. Proceeds of note and mortgage, delivered to bank by administrator for collection, with understanding that proceeds should be credited to his individual account, on which he drew individual checks, including one to widow of decedent for amount of mortgage loan, held not entitled to preference as special deposit on bank’s insolvency.
    Appeal from District Court, Platte County; William A. RiNER, Judge.
    Claim filed by Paul L. Gray, as administrator with, the will annexed of the estate of Irad Wilson Gray, deceased, with Joseph A. Elliott, receiver of the Platte County State Bank. From a judgment denying a preference, claimant appealed after which Rachel E. Gray was substituted as appellant.
    
      W. C. Mentzer, for appellant.
    The proceeds of the note and mortgage were a special deposit; Duncan v. Jaudon, (U. S.) 21 L. Ed. 142. The bank had knowledge of the fiduciary character of appellant, and that the funds belonged to an estate; Bank v. Ins. Co., 104 U. S. 54; Smith v. Ayer, 101 U. S. 320; Mfg. Co. v. Whitehurst, 72 Fed. 496; U. S. v. Dunn, 45 Sup. Ct. Rep. 451; Santa Marina Co. v. Bank, 242 Fed. 142; Smith v. Fuller, 86 O. S. 57. The bank had knowledge that appellant had no authority to deposit the fund to his own credit; Board v. Strawn, 157 Fed. 49; Turner v. Hoyle, (Mo.) 8 S. W. 157; Duckett v. Bank, (Md.) 38 A. 983; Allen v. Trust Co., (Mass.) 97 N. E. 916; Fidelity Co. v. Trust Co. (N. Y.) 123 N. E. 370; Ward v. Trust Co., 192 N. Y. 61; Hale v. Bank, (Yt.) 98 A. 993; Bixchoff v. Bank, (N. Y.) 112 N. E. 759; Mining Co. v. Stark, 106 Fed. 558; Smith v. Bnrgess, 133 Mass. 511. Authorities might be multiplied; Wilson Company y. Smith, 11 L. Ed. 820. Plaintiff testified that he informed the bank that the note belonged to the estate; it was therefore a special deposit; Foster v. Rincker, 4 Wyo. 484; Lusk Company v. Giinther, (Wyo.) 232 P. 518; Mfg. Co. y. Auld, (S. D.) 86 N. W. 21; State y. Bank, (Nebr.) 85 N. W. 43; Board y. District, 86 Fed. 375, and eases cited. The rule is discussed in Daughtry y. Bank, (N. M.) 134 P. 220.
    
      J. E. Jacobson•, W. B. Jones, and O. 0. Natwick, for respondent.
    Appellant directed the funds to be deposited to his personal credit; the bank deducted $150 therefrom to pay a personal debt of appellant to the bank; it was not a special deposit; 7 C. J. 633; 3 R. C. L. 555; Tardy’s. Smith on Receivers, 2nd Ed., Yol. 2, Sec. 461; Guaranty Co. y. Bank, (Cal.) 123 P. 353. Most of the courts have rejected the rule in Smith v. Fuller, 86 O. S. 57; Ann. Cas. 1913 D. 387, 391 and note; Morse on Banks and Banking, pp. 589, 590. The three leading cases to the contrary are: Surety Co. v. Marlow, (Okla.) 190 P. 676; Mott Iron Works v. Bank, (Wash.) 139 P. 36; Bank v. Claxton, (Tex.) 65 L. R. A. 825. The bank did not become privy to a misappropriation by paying checks drawn upon appellant’s account; Bixchoff v. Yorkville Bank, (N. Y.) 112 N. E. 759; Holden v. Bank, L. R. A. 1915 E, 310; Yalentine v. Duke, (Wash.) 222 P. 495; U. S. F. & G. Co. y. Adoue, 37 L. R. A. (N. S.) 417. The rule in Foster v. Rincker and Lusk Co. v. Giinther, does not apply to the case at bar; 3 R. C. L. 261; 7 C. J. 634. The bank was without actual notice that the proceeds belonged to-an estate; there was sufficient evidence to sustain the judgment; Land Co. v. Beckstead, 27 Wyo. 177; Bes-singer and Co. v. Weiss, 27 Wyo. 262; Hunt v. City, 26 Wyo. 160; 13 A. L. R. 327; 3 R. C. L. 553; Shotwell v. Bank, 34 S. D. 109; 147 N. W. 288. The evidence showed that Rachel E. Gray had acquiesced and accepted a check from Paul L. Gray, drawn upon his personal account, and she is now estopped from asserting a preference; 10 R. C. L. 694.
    
      
      See Headnotes: (1-3) 4 CJ p. 878 n. 82; p. 880 n. 98; 7 CJ p. 628 n. 91; p. 630 n. 95, 1, 3; p. 641 n. 1; p. 642 n. 2; p. 751 n. 78. (4-6) 7 CJ p. 633 n. 15; p. 750 n. 60, 61 New; p. 752 n. 84.
    
   Blume, Chief Justice.

Paul L. Gray, as Administrator with the will annexed of the Estate of Irad Wilson Gray, filed a claim with the receiver of the Platte County State Bank, an insolvent bank, in the sum of $1572.30, asking to be made a preferred creditor. The court allowed the claim as a general claim, but denied the preference, and from this judgment the administrator appealed. Rachel E. Gray has, by agreement of parties, been substituted as appellant herein. A few days prior to February 13, 1923, Paul L. Gray delivered to the bank aforesaid, for collection, a note and mortgage owned by him as administrator, and made by one Nordstrom and wife. The note and mortgage was collected by said bank on February 13, 1923. On February 16, 1923, the bank became insolvent and went into the hands of a receiver. The administrator claims that the note and mortgage aforesaid was delivered to said bank upon condition to collect the same and pay the proceeds over to Rachel E. Gray, the widow of Irad Wilson Gray, and sole legatee and devisee under the last will and testament of'^aid deceased. There is testimony in the record to sustain that claim. Two witnesses for respondent, on the other hand, positively testified that the note and mortgage aforesaid was in fact delivered to the bank with the understanding that the proceeds thereof should be credited to the account of Paul L. Gray, as a general depositor, after deducting therefrom a small amount which had been loaned to him by the bank. The .administrator aforesaid never carried an account in said bank as such, but he had an individual account therein during the year 1922. On January 2, 1923, he checked out the balance of $61.88, and the account was left without any funds between that date and February 13, 1923, when the proceeds of the loan aforesaid were credited to him. Various loans had been collected by the bank for him prior to February 13, 1923. The proceeds thereof had been checked out, most of it having been paid upon his individual check to Rachel E. Gray. Sometime after the bank failed, Rachel E. Gray presented to the receiver a check made by Paul L. Gray individually, covering the amount of the Nordstrom loan, but payment of the check was refused by the receiver.

The finding of the trial court, implied in its general finding, that the note was not delivered to the bank upon the condition claimed by the administrator, appears to be supported by substantial evidence, and we must accept the court’s conclusion that the deposit made in the bank was a general and not a special deposit, unless the facts mentioned directly make it different. Ve may further assume as true, for the purposes of this case, that the bank was chargeable with knowledge of the fact that the Nordstrom note belonged to Gray as administrator and not in his individual capacity, and the case may be treated, under the facts shown, as if the deposit had been made in the name of Paul L. Gray, as administrator. Paul v. Draper, 158 Mo. 197, 59 S. W. 77, 81 Am. St. Rep. 296. It seems to be the theory and claim of counsel for appellant that in such a situation the bank became a trustee of the funds and that the right of preference exists. But we do not think so. Counsel for appellant seems to have overlooked the fact in his brief, judging from the character of most of the cases cited by him, that to have a claim against a bank is one thing, and to have a preferred claim is another. There are but two kinds of deposits, special and general — those where the bank becomes a trustee for a depositor by special agreement or under circumstances sufficient to create a trust, and general deposits where the bank merely becomes the debtor of the depositor. In the case of City of Sturgis v. Mead County, 38 S. Dak. 317, 161 N. W. 327, the court said:

“As a rule, when money is deposited in a bank, title to such money passes to the bank. The bank becomes the debtor of the depositor to the extent of the deposit, and to that extent the depositor becomes the creditor of the bank. * * * Such deposit then constitutes a part of the assets of the bank and in case of insolvency belongs to the creditors of the bank in proporition of the amount of their respective claims. Exceptions to this rule are, first, where money or other thing is deposited with the understanding that that particular money or thing is to be returned to the depositor; second, where the money or thing deposited is to be used for a specific designated [purpose; and third, if the deposit itself was wrongful or unlawful. ’ ’

The same language was used in the case of Kies v. Wilkinson, 101 Wash. 340, 172 Pac. 351, 353. Under the finding of the court, neither the first or the second exceptions apply, and no statute and no facts have been pointed out making it unlawful for the administrator in this ease to deposit the money in the bank. The mere fact that a depositor makes a deposit in a fiduciary rather than individual capacity, -does not make the deposit a special one. 3 R. C. L. 518. The question is not what relation he or his fund bears to some third party, but rather whether a trust relation has been created between the bank and the depositor in connection with the fund. In order to make a deposit a special one, the bank must be made an agent, rather than a debtor, and its agency or trusteeship cannot be created by mere external relationship of the debtor, unless, perchance, the law forbids the bank from becoming a debtor in such case. If the claim of counsel for appellant were correct, every person who would make a deposit as agent, thereby charging the bank with knowledge of the agency, would have the right to have bis deposit treated as special, giving bim a preference right in case of tbe insolvency of tbe bank. With few exceptions, courts bave beld against sucb contention, and bave treated a deposit made by an administrator or executor in a manner similar to that found herein by the trial court, as a general and not a special deposit. Pethybridge v. Bank, 75 Mont. 173, 243 Pac. 569, and cases cited; Thompson v. State Bank, 76 Colo. 20, 227 Pac. 827; 37 A. L. R. 115; Officer v. Officer, 120 Iowa 389, 94 N. W. 947, 98 Am. St. Rep. 365; Paul v. Draper, 158 Mo. 197, 59 S. W. 77, 81 Am. St. Rep. 296; Valentine v. Duke, 128 Wash. 128, 222 Pac. 494; Leach v. Beazley, 201 Iowa 337, 207 N. W. 374; Fletcher v. Sharpe, 108 Ind. 276, 9 N. E. 142. Tbe foregoing cases involved deposits made by an administrator or executor, but tbe same principle has been applied in many other cases where a similar trust relation existed. City of Sturgis v. Bank, supra; Kies v. Wilkinson, supra; In Re Nichols, (D. C.) 166 Fed. 603; Hansen v. Rousch, 139 Iowa 58, 116 N. W. 1061; Brown v. Sheldon State Bank, 139 Iowa 83, 117 N. W. 289; Smith v. Arnold, 165 Ky. 214, 176 S. W. 983; Butcher v. Butler, 134 Mo. App. 61, 114 S. W. 564; Philip v. Bank, 98 Kan. 383, 158 Pac. 23; L. R. A. 1917 A, 680; Incorporated Town of Conway v. Conway, 190 Iowa 563, 180 N. W. 677; Cox v. Bank and Trust Co., 41 Idaho 776, 242 Pac. 785; William R. Compton Co. v. Farmers Trust Co. of Grant City, (Mo. App.) 279 S. W. 746; Rainwater v. Davis, (Ark.) 289 S. W. 471; 3 R. C. L. 518; 7 C. J. 633.

It follows from what we have said that the judgment of the District Court must be affirmed, and it is so ordered.

Affirmed.

Potter, J., and Kimball, J., concur.  