Andrews v. Hood, 207 N.C. 499 (1935)

Jan. 1, 1935 · Supreme Court of North Carolina

207 N.C. 499

ALEXANDER BOYD ANDREWS, 3RD, v. GURNEY P. HOOD, Commissioner of Banks, NORTH CAROLINA BANK AND TRUST COMPANY, and THE RALEIGH SAVINGS BANK AND TRUST COMPANY.

(Filed 1 January, 1935.)

1. Banks and Banking H e — Savings deposit to be held by bank and paid to depositox-’s grandson upon his majority held a trust fund.

Where a deposit is made in a savings bank under an agreement, entered in a deposit pass book, that the funds should be held by the bank at interest until depositor’s grandson reached the age of twenty-one,'and then paid to him, or if the grandson should die before attaining his majority, the funds, upon his death, should be paid his mother, the deposit is not subject to the check of the depositor, but is held by the bank for a particular purpose, and constitutes a trust fund which, if the bank should become insolvent, would entitle the beneficiary of the deposit to a preference in its assets.

2. Banks and Banking J c—

Where a bank holds a sum of money as a trust fund, and thereafter the bank is merged with another bank, the merged bank also holds the funds as a trust fund.

Appeal by plaintiff from Grady, J., at Chambers in Raleigh, N. C., on 22 May, 1934.

Reversed.

This is an action to have plaintiff’s claim against the North Carolina Bank and Trust Company, which is now in process of liquidátion by the defendant Gurney P. Hood, Commissioner of Banks, because of its insolvency, adjudged a preferred claim and ordered paid as such claim by the defendant out of the assets of the North Carolina Bank and Trust Company.

It is alleged in the complaint and admitted in the answer that the North Carolina Bank and Trust Company is a corporation, organized under the laws of this State, and that prior to its insolvency the said corporation was engaged in business as a commercial bank, a savings bank, and a trust company, as authorized by its certificate of incorporation.

It is also alleged in the complaint and admitted in the answer that the Raleigh Savings Bank and Trust Company was a corporation, organized under the laws of this State, and that prior to its merger with the North Carolina Bank and Trust Company the said corporation was engaged in business as a savings bank and trust company, as authorized by its charter. The said corporation was not authorized by its charter to engage in business as a commercial bank.

In their answer the defendants admit that the claim of the plaintiff against the North Carolina Bank and Trust Company is a valid claim; they deny that said claim is a preferred claim, and as such entitled to preferential payment.

At tbe bearing before Judge Grady it was admitted that tbe facts with respect to plaintiff’s claim are as follows:

“On 15 September, 1913, Col. A. B. Andrews, now deceased, deposited in tbe Raleigb Savings Bank and Trust Company tbe sum of $500.00, and took from tbe proper official of said company a receipt, wbicb was written in a pass book, and is in words as follows:

“ ‘Tbis $500.00 is deposited in tbe Raleigb Savings Bank and Trust Company to tbe credit of Alex Boyd Andrews, 3rd, son of Mr. John H. Andrews and Mrs. Mabel Y. Andrews, by bis grandfather, A. B. Andrews, of Raleigb, N. C., to remain at interest until be arrives at tbe age of twenty-one (21) years (12 January, 1934), at wbicb time tbe principal and interest is to be paid to tbe order of tbe said Alex Boyd Andrews, 3rd; if be should die before be arrives at tbe age of twenty-one (21) years, tbe principal and interest upon same shall upon bis death be paid to bis mother, Mabel Y. Andrews, or as she shall direct.’

“Said deposit remained in said Raleigb Savings Bank and Trust Company until tbe year 1929, when tbe said company was merged with tbe North Carolina Bank and Trust Company, and said deposit, with whatever character it originally bore, was delivered and transferred to said North Carolina Bank and Trust Company. Thereafter tbe North Carolina Bank and Trust Company rendered its statement to tbe plaintiff, as of 1 January, 1933, showing that said deposit, with accrued interest, then amounted to $1,062.06.

“On 28 December, 1933, tbe plaintiff, through bis attorney, Hon. James S. Manning, filed with said Gurney P. Hood, Commissioner of Banks, a claim for tbe full amount of said deposit, with all accrued interest thereon, contending that tbe same was a preferred claim in law, and on 24 January, 1934, tbe said Commissioner declined to allow said claim as a preferred claim.

“Again, on 17 January, 1934, tbe plaintiff, being then of full age, presented bis claim to tbe said Gurney P. Hood, Commissioner of Banks, and demanded that tbe total amount of said deposit, with accrued interest, be paid to him as a preferred claim. The claim of tbe plaintiff was rejected by tbe said Commissioner of Banks as a preferred claim.”

On tbe foregoing facts, tbe court was of opinion that “tbe deposit in question was nothing but a savings account, and that it was not impressed with any trust or other quality wbicb entitled tbe plaintiff to a preference in its payment.”

It was accordingly ordered and adjudged by tbe court that “tbe plaintiff is entitled to recover of tbe defendants tbe sum of $1,062.06, with interest thereon at six per cent per annum from 1 January, 1933, as a simple contract debt; and tbat tbe plaintiff is not entitled to any preference over and above other unsecured creditors of tbe defendant North Carolina Bank and Trust Company.”

Tbe plaintiff excepted to tbe judgment and appealed to tbe Supreme Court, assigning as error tbe bolding of tbe court tbat plaintiff’s claim is not a preferred claim.

Manning <& Manning for plaintiff.

Brooks, McLendon & Holderness for defendants.

CoNNOR, J.

Tbe sum of $500.00 was not deposited by Colonel Andrews or accepted by tbe Ealeigh Savings Bank and Trust Company as a savings deposit, subject to tbe control of Colonel Andrews as a depositor. Tbe receipt signed by an official of tbe company and delivered to Colonel Andrews, for the plaintiff, although written in a pass book, shows tbat it was tbe intention of both Colonel Andrews and tbe company tbat said sum should be held by tbe company as a trust fund, and, with interest, should be paid to tbe plaintiff upon bis arrival at tbe age of twenty-one years, or if tbe plaintiff, who was at tbe date of.tbe deposit an infant, should die before arriving at tbe age of twenty-one years, should be paid to bis mother, Mrs. Mabel Y. Andrews. Tbe said sum of $500.00 remained with tbe Ealeigh Savings Bank & Trust Company as a trust fund until 1929, when tbe said Savings Bank and Trust Company was merged with tbe North Carolina Bank and Trust Company. At tbe date of said merger tbe said sum, with interest, which bad been credited on said sum from time to time, was delivered to tbe North Carolina Bank and Trust Company, which thereafter held said sum as a trust fund for tbe plaintiff. For this reason tbe plaintiff’s claim is entitled to preferential payment out of tbe assets of tbe North Carolina Bank and Trust Company, which are now in tbe bands of tbe defendant Gurney P. Hood, Commissioner of Banks, for liquidation, because of tbe insolvency of tbe North Carolina Bank and Trust Company.

In Flack v. Hood, Comr., 204 N. C., 337, 168 S. E., 520, it is said: “In tbe liquidation of insolvent banks, tbe general depositors are entitled to no preference, and must share pro rata with tbe general creditors. Corp. Com. v. Trust Co., 194 N. C., 125, 138 S. E., 530. But when tbe deposits are made with tbe distinct understanding tbat they are. to be held by tbe bank for the purpose of furthering a transaction between tbe depositor and a third person, or where they are made under such circumstances as give rise to a necessary implication tbat they are made for such a purpose, tbe deposits become impressed with a trust which entitled tbe depositor to a preference over tbe general creditors of tbe bank in case tke bank becomes insolvent while bolding the deposits. Corp. Com. v. Trust Co., supra."

This principle is applicable to the admitted facts' with respect to the plaintiff’s claim in the instant case. There is error in the judgment denying the plaintiff the right to preferential payment of his claim against the North Carolina Bank and Trust Company.

The principle on which the judgment in Underwood v. Hood, 205 N. C., 399, 171 S. E., 364, was reversed is not applicable in the instant case. In that case the Bank of Clinton had deposited with itself funds which it held as a fiduciary. It held these funds as a general deposit, and not as trust funds. For that reason it was held that the beneficiaries of said funds were not entitled to preferential payment. As said in the opinion, that case was governed by Bank v. Corp. Com., 201 N. C., 381, 160 S. E., 360, and In re Garner Banking and Trust Company, 204 N. C., 791, 168 S. E., 813.

The judgment in the instant case is

Reversed.