Opinion
5 Div. 205.
May 16, 1935.
Appeal from Circuit Court, Macon County; W. B. Bowling, Judge.
Suit in equity by A. L. Screws against J. H. Williams, as Superintendent of Banks, liquidating the Bank of Tuskegee. From a decree sustaining a demurrer to the bill and dismissing it, complainant appeals.
Reversed and remanded.
Paragraph 7 of the amended bill is as follows: "7. Complainant further avers that said deposits of December 24, 1932, and December 27, 1932, were in cash and that the aggregate of said amounts were received by said bank in cash and applied by it in the special fund, to wit, in the cash in the vault of said bank, and the assets of said bank were augmented in said amount in cash, and that said special fund, to wit, the cash in the vault of said bank, remained in said bank until the affairs of said bank were taken over by the superintendent of banks, and that the superintendent of banks, when he took over the affairs of said bank, took over the cash in the vault of said bank, including the amount deposited by the complainant, as herein averred, less the withdrawals hereinabove recited, that is, the superintendent of banks received from the Bank of Tuskegee the sum of $774.05 in cash deposited by the complainant as aforesaid, and which remained as a part of said special fund, to wit, the cash in said vault in said bank."
Jacob A. Walker, of Opelika, for appellant.
Acceptance of deposits by a bank at a time when it is insolvent within the knowledge of its officers is a criminal offense and is such a fraud upon the depositor as will give him a preferential claim or create a trust ex maleficio which he may enforce against the assets of the bank, provided he can show that the deposit augmented the assets of the bank in the hands of the receiver and provided he can identify the proceeds thereof. Code 1923, § 3403; Woco Pep Co. v. Montgomery, 227 Ala. 261, 149 So. 692; Hutchinson v. National Bank of Commerce, 145 Ala. 196, 41 So. 143. Acceptance within ten days before a bank closes its doors of a deposit is prima facie evidence of knowledge on the part of its officers that the same was insolvent. This presumption applies in civil cases. Code, § 3403; Woco Pep Co. v. Montgomery, supra. When the misappropriated fund can be kept in view, traced, and ultimately located in some particular batch of money, it or its equivalent in value may be recovered by the wronged cestui que trust. Robinson v. Williams, 229 Ala. 692, 159 So. 239. The fact that only a short time elapsed between the receipt of the trust fund by the bank and final closing of the bank because of insolvency logically reduces the probability that the fund has been paid out or dissipated by the bank. It is only where there has been an indiscriminate intermingling of funds for an appreciable period of time that it can be said that the trust fund cannot be identified. In view of the short period shown by the bill in this case, it will not be presumed that the bank officers had in fact disposed of this trust fund. Robinson v. Williams, supra; 82 A.L.R. 93, and note.
Powell Powell, of Tuskegee, for appellee.
To establish a preference, it must be shown, first, that the trust relationship exists and that the fund in question was a trust fund; and, second, that the fund is traceable in some form in the hands of the bank's receiver. When as a matter of fact it cannot be traced, then the right of the beneficial owner to follow it fails. 82 A.L.R. 49, 52, 56, 208-210; Hanover Nat. Bank v. Thomas, 217 Ala. 494, 117 So. 42; Bank of Florence v. U.S. S. L. Co., 104 Ala. 297, 16 So. 110; St. Louis Brewing Ass'n v. Austin, 100 Ala. 313, 13 So. 908; Nixon State Bank v. First State Bank, 180 Ala. 291, 60 So. 868. The money in the vaults of a bank carrying on its ordinary business cannot properly be said to be the result of any one or more deposits put in it. Philadelphia Nat. Bank v. Dowd (C. C.) 38 F. 172, 2 L.R.A. 480; J. Allen Smith Co. v. Montgomery, 209 Ala. 100, 95 So. 290; Commonwealth v. Tradesmen's Trust Co., 250 Pa. 378, 95 A. 577, L.R.A. 1916C, 10. Merely showing that the receiver of an insolvent bank received a fund in which trust money had been placed, or with which it had been commingled, is not sufficient tracing or identification of the trust fund; and the fact that the amount of funds in the bank's custody at all times exceeded the amount of the trust fund does not serve the purpose of identification. Jones v. Merchants' Bank, 209 Ala. 20, 95 Ala. 274; Lummus C. G. Co. v. Walker, 195 Ala. 552, 70 So. 754; Bank of Florence v. U.S. S. L. Co., 104 Ala. 297, 16 So. 110; 3 R. C. L. 180; Robinson v. Williams, 229 Ala. 692, 159 So. 239; Maryland Cas. Co. v. Williams, 229 Ala. 663, 159 So. 242.
The bill seeks a preferential payment from funds of the Bank of Tuskegee, the affairs of which are now in liquidation by the state superintendent of banks. The averments that at the time of the two deposits the bank was insolvent, with knowledge on the part of its officials and unknown to complainant, suffice to show that relation of debtor and creditor did not arise. Receiving the money under such circumstances would constitute a fraud on the depositor, and the title thereto would remain in him. The money is therefore held in trust, and the depositor's rights rest upon the matter of ownership, and he is permitted to follow and recover it either in its original or some substituted form. Woco Pep Co. v. Montgomery, 227 Ala. 261, 149 So. 692; Hanover National Bank v. Thomas, 217 Ala. 494, 117 So. 42, 45; J. Allen Smith Co. v. Montgomery, 209 Ala. 100, 95 So. 290; Robinson v. Williams, 229 Ala. 692, 159 So. 239, 241; Maryland Casualty Co. v. Williams, 229 Ala. 663, 159 So. 242.
But, as observed in Lusk Development Improvement Co. v. Giinther, 32 Wyo. 294, 232 P. 518, if the trust fund no longer exists, but has been dissipated, there remains nothing to be subject to the trust, and to determine its continued existence it must be made to appear that it is capable of ascertainment and identification. So long as that can be done, the money remains the property of the depositor, but when these means fail, the trust itself fails, and there would be no justification in taking the property of others in order to satisfy the claim arising out of such a trust. 39 Cyc. 531, 541, 551. But upon the question of ascertainment and identification, the authorities widely differ. See the helpful and exhaustive note found in 82 A.L.R., beginning at page 47, where numerous cases are collated with appropriate comments.
Authorities from other jurisdictions, however, need not be here reviewed, as those of our own appear to have settled all principles applicable to the instant case.
It should be observed at the outset that we are here concerned only with the question of pleading — the sufficiency of the bill as against the demurrer interposed thereto. And, in this connection, the general rule of pleading may well be kept in mind, that it is not sufficient to plead the existence of facts which prima facie or presumptively establish the ultimate fact, but the ultimate fact should be averred.
But in Sims v. Tigrett, 229 Ala. 486, 158 So. 326, was the observation that it may be sufficient if the ultimate fact is necessarily implied from the averments as made.
The above-noted general rule as to pleading was given recognition in Hanover National Bank v. Thomas, supra (a case similar in principle to that here presented), where the court stated: "And we might add, the case being on demurrer, the rules of good pleading required this much to appear by affirmative averments, and not by mere inference or intendment."
Upon the matter of identification, our decisions are to the effect that it will not suffice merely to show the trust fund in question has gone to augment the face value of the assets on hand, even to the amount of such funds. And that while such trust funds need not be "ear marked," so that the whole, or some definite portion thereof, may be assorted, separated, and withdrawn from the commingled funds, yet it must appear that such trust fund, or a definite portion of the same, is to be identified as included in the funds on hand at the time they were taken over by the superintendent of banks, or in some specific property coming into his hands. Maryland Casualty Co. v. Williams, supra. "But when the misappropriated fund can be kept in view, traced, and ultimately located in some particular batch of money, it or its equivalent in value may be recovered by the wronged cestui que trust." Robinson v. Williams, supra.
Considering first the sufficiency of the original bill, some of the authorities relied upon by complainant lay stress upon the fact that the assets of the bank were augmented by the deposit [Salzburger v. Standard Oil Co., 173 Ga. 722, 161 S.E. 584, 84 A.L.R. 403; Widman v. Kellogg, 22 N.D. 396, 133 N.W. 1020, 39 L.R.A. (N.S.) 563], a theory at variance with our own decisions (Maryland Casualty Co. v. Williams, supra), and these authorities, together with that of Lusk Development Improvement Co. v. Glinther, supra, also relied upon by complainant, give recognition to the principle of a presumption that a trustee who mingles trust funds with his own, and subsequently pays out a portion of the commingled fund, will be presumed to have paid the same from funds of his own, and retained the trust fund which did not belong to him. But, as applicable to a banking concern, this court, in J. Allen Smith Co. v. Montgomery, 209 Ala. 100, 95 So. 290, declined to give assent to this theory and quoted approvingly from the Pennsylvania court (Commonwealth v. Tradesmen's Trust Co., 250 Pa. 378, 95 A. 577, L.R.A. 1916C, 10) holding to this effect.
For the tracing and identification of this trust fund, the bill as originally filed merely discloses the deposits in the insolvent bank on December 24 and December 27, 1932; that the bank closed its doors at the regular closing hour on December 31st, and that at the time the superintendent of banks took over the affairs of the bank (January 2, 1933) there was on hand in cash $8,312.50, and amounts due from banks $4,264.
Complainant lays stress in argument upon the short period of time from the dates of deposit to the closing the bank. But this is matter of evidentiary character only to be considered in connection with all the facts in the case (Robinson v. Williams, supra; 82 A.L.R. p. 93), touching the matter of probability that the fund has been paid out or been dissipated by the bank.
It thus appears that the original bill rests solely, in this respect, upon inference, which, as above noted, will not suffice in pleading, and upon theories of presumption not here obtaining. Demurrer to the original bill was properly sustained.
But complainant amended the bill by the addition of paragraph 7, wherein it is specifically averred that this trust money went into a specific fund — cash in the vault — and that said cash in the vault remained in the bank until its affairs were taken over by the superintendent of banks; that the superintendent took over this cash in the vault, including these deposits, and thus received the said sum deposited by complainant. These averments clearly meet the requirements of our decisions. The case of Hanover National Bank v. Thomas, 217 Ala. 494, 117 So. 42, 45, is conclusive to this effect. There the court said "that the claimant must go further and show, as averred here, that the claimant's property remained in the fund into which it had been traced, and, thus commingled, passed into the hands of the respondent."
These averments are of facts, and not mere conclusions, and must be held to meet the test of our decisions, for the rule of this state does not require that the funds be "ear marked," as previously observed. Defendant makes reference to the answer filed, along with the demurrer, as demonstrating the impracticability of the identification of these funds. But this appeal involves only the sufficiency of the bill's averments, and is to be determined without consideration of the allegations of the answer.
The demurrer to the bill as amended should have been overruled.
For this error, the decree is reversed, and the cause remanded.
Reversed and remanded.
ANDERSON, C. J., and BOULDIN and FOSTER, JJ., concur.