Fidelity & Deposit Co. v. Atchison, Topeka & Santa Fe Railway Co.

75 P.2d 283, 147 Kan. 127, 1938 Kan. LEXIS 23

• Court: Supreme Court of Kansas
• Decided: January 29, 1938
• Docket: No. 33,658
• Status: Published

Opinions

The opinion of the court was delivered by

HaRvey, J.:

In this case defendant appealed from an order of the court overruling its demurrer to plaintiff’s petition, in which, briefly stated, it was alleged:

That on January 25,1933, one Marie Yestring was duly appointed by the probate court of Marion county as administratrix of the estate of Frank Weik; that she gave bond, conditioned as provided by statute (G. S. 1935, 22-313), in the sum of $13,000, with plaintiff as surety; that there came into her hands as such administratrix a sum in excess of $10,000, which she deposited in a bank at Wichita in her name as administratrix; that on June 14, 1933, she drew a check on this account, signed by her as administratrix, for $1,555.20, payable to the order of defendant’s treasurer, and delivered the check to its livestock agent, a person authorized to act in that behalf; that defendant presented the check to the bank and received the money thereon; that the drawing of the check and payment thereof was a misappropriation, embezzlement, conversion and abstraction of the funds of the estate of Frank Weik not authorized by the probate court and not authorized or permitted by law; that the check was not given, nor the payment thereof made, for any debt, claim, demand, or liability of the estate or the administratrix thereof. On information and belief it was alleged that a partnership composed of Henry Vestring and Louis Vestring, doing business under the name of Vestring Brothers, was engaged in the cattle business, and that the check was given in payment of a freight bill for the shipment of livestock owed by the partnership to defendant. It was alleged that defendant knew, or should have known from the nature of the transaction and the signature on the check, that the giving of the check and the payment thereof was a wrongful appropriation of the funds of the estate, and that the money so received by defendant was not that of its debtor. It w"as further alleged that on May 3, 1934, by orders of the probate court of Marion county, Marie Vestring was removed as administratrix of the estate of Frank Weik (G. S. 1935, 22-323), and John E. Wheeler was appointed administrator de bonis non of that estate; that the condition of the bond upon which plaintiff was surety, having been broken by the action of Marie Vestring, administratrix, the administrator de bonis non made demand upon this plaintiff for payment to him, on behalf of the estate, of all the funds so wrongfully applied, including the sum represented by the check above mentioned; that about May 9,1935, plaintiff paid to such administrator de bonis non the sum of $10,000, which amount represented the wrongful appropriation of Marie Vestring, administratrix, and included the entire amount of the check to defendant, above mentioned ; that thereupon plaintiff became subrogated to the rights of the administrator de bonis non and to all claims, demands, or choses in action arising by reason of the facts stated; that on or about May 9, 1935, the administrator de bonis non, with the permission and ratification of the probate court of Marion county, made, executed and delivered to plaintiff an assignment in writing wherein and whereby he assigned, transferred and set over to this plaintiff all the right, title and interest in the estate of Frank Weik, deceased, and the administrator thereof, in and to all claims, demands, or causes of action arising out of the matters above stated, and that by virtue of the subrogation, and by virtue of the assignment above mentioned, plaintiff is the owner of the cause of action herein asserted against defendant. The prayer was for judgment for plaintiff in the sum of $1,555.20 with interest at six percent since May 9, 1935, and for costs.

Appellant argues that the giving of the check to it by Marie Vestring, administratrix, did not constitute notice to defendant of her wrongdoing. The point is not well taken. The check on its face indicated the money was to be paid out of an estate; the estate was not indebted to appellant. In Bank v. Myers, 65 Kan. 122, 69 Pac. 164, it was held:

“One who through the design or misdirection of another receives money which he knows belongs to a third person, cannot retain it for application on his own debt, due from the one who gave it to him.”

Here the situation is still further removed. Appellant did not apply the check on a debt to it of Marie Vestring; she owed it nothing. The application was made upon the debt of Vestring Brothers to appellant.

In 65 C. J. 992 the rule is thus stated:

“A transferee of trust property is chargeable with constructive notice of the trust where instruments or papers, so connected with the transaction that he is bound to take notice of them, show or indicate upon their face that the property is of a trust character. Thus a transferee is put upon constructive notice where an instrument or paper forming part of the chain of title, ... or other instrument by which the trustee purports to make the transfer, shows upon its face that the property is trust property.”

To the same effect is the American Law Institute, Restatement, Trusts, section 297, and the notes and comments upon the section.

The check by which appellant was paid showed upon its face that the fund out of which it was payable was the property of an estate being administered in a probate court. Appellant cannot be heard to say otherwise. It, of necessity, knew it was receiving funds of an estate which owed it nothing. Other authorities to the same effect are: Loan Co. v. Essex, 66 Kan. 100, 106, 107, 71 Pac. 268; Guernsey v. Davis, 67 Kan. 378, 73 Pac. 101; Hier v. Miller, 68 Kan. 258, 75 Pac. 77; Washbon v. Hixon, 86 Kan. 406, 121 Pac. 518; 87 Kan. 310, 124 Pac. 366; Bank v. Betts’ Estate, 103 Kan. 807, 176 Pac. 660.

See, also, New Georgia Nat. Bank v. Lippmann, 249 N. Y. 307, 164 N. E. 108.

It is argued on behalf of appellant that it had to collect its freight when payment was tendered, otherwise it would have violated federal statutes and regulations prohibiting preferences to shippers. This contention is beside the mark. It had a lien on the shipment for freight; it was under no compulsion to accept money of an estate which owed it nothing.

Appellant argues plaintiff cannot maintain this action upon the subrogation clause in its contract of surety. We see no reason to so hold, but the question .is not material, since plaintiff also predicates its action on an assignment, the validity of which is not assailed.

. It is next argued the equities of appellant are greater than those of appellee. This contention does not seem forceful. Each of the parties is a financial institution operated for profit. We see no reason why each is not' entitled to its rights under the law.

The judgment of the court below is affirmed.