Home/Idaho Supreme Court/Fralick v. Coeur D'Alene Bank & Trust Co.

Fralick v. Coeur D'Alene Bank & Trust Co.

210 P. 586, 36 Idaho 108, 1922 Ida. LEXIS 163
Idaho Supreme Court·Decided August 5, 1922·Published·Cited by 15 cases

Opinions

RICE, C. J.

The Interstate Telephone Company, a corporation, issued its negotiable bonds in the amount of $500,000, to secure which it executed and delivered to respondent Coeur d’Alene Bank & Trust Company, as trustee, a mortgage and deed of trust covering all of its properties. Thereafter, respondent Interstate Utilities Company purchased all the property and assets of the said telephone company, subject to said bond issue and the mortgage or deed of trust securing it, and guaranteed the payment of said bonds at maturity. Thereafter, said respondent Interstate Utilities Company issued $1,000,000 of its own negotiable coupon bonds, to secure which it executed and delivered to respondent Coeur d’Alene Bank & Trust Company, as trustee, a mortgage and deed of trust of all its properties. By the terms of these bonds and trust deeds the respondent Interstate Utilities Company was required to pay at the Hanover National Bank, New York, or at respondent Coeur d’Alene Bank & Trust Company, on April 1st and October 1st of each year, six per cent interest on the amount of the out[111]*111standing bonds. Said respondent Utilities Company deposited certain funds in tbe said Coeur d’Alene Bank & Trust Company, wbieb, it claims, constituted special deposits or trust funds, wbieb did not become general assets of tbe bank, and could be used only for the purpose of paying tbe interest coupons on said bonds. By tbe terms of the agreement under which respondent Interstate Utilities Company took over tbe assets of tbe telephone company it was provided that tbe bonds of the latter might be exchanged for bonds of tbe former. The Interstate Utilities Company deposited certain funds in the respondent Coeur d’Alene Bank & Trust Company, which, it claims, were deposited as a special fund for the adjustment of interest on the two issues of bonds when such exchanges were made. It claims that funds so deposited did not become a part of the assets of the bank, but constituted a special deposit or trust fund, which could be used only for the purpose of adjusting interest on exchange. Subsequent to such deposits the said bank became insolvent, and was taken in charge by appellants John G. Fralick, Commissioner of Finance, and Ezra R. Whitla, •his special deputy, in accordance with the statutes of this state, and an order of court based thereon. Respondent John F. Davies holds some of the bonds in question. He and the Interstate Utilities Company filed a petition, asking that all the deposits above mentioned be decreed to be special deposits or trust funds to be used only for the purpose of paying interest coupons on the bonds, and that a trust be declared and enforced upon all the assets of said insolvent bank in favor of said applicants to the extent of said deposits. The trial court found that the moneys so deposited were special deposits and trust funds, received and held by said bank for the sole purpose of paying the interest coupons or paying interest on exchange of bonds, and by its judgment impressed upon all the assets of said bank in the hands of appellants a trust to the amount of said funds so deposited, ordering that the appellants pay to the Interstate Utilities Company the amount of said funds, to \.lt, $12,258, to be held by it in trust for the use and benefit of the [112]*112owners and holders of the interest coupons on outstanding bonds. Appellants’ many assignments of error amount simply to this, that the court erred in finding that said deposits were special deposits or trust funds in giving applicants a preference over the other depositors and creditors of the bank.

- The president and cashier of the bank, and the president of the Utilities Company, all testified that the only agreement is such as is to be gathered from the letters, vouchers and receipts which passed between the bank and the company.

On April 30, 1920, the Interstate Utilities Company wrote the following letter to the bank: t

“Enclosed find check for $11,400 to cover Interest Coupons due May 1, 1920, on bonds of this company, second issue, in hands of public.
“Please open a special fund for this purpose and report to us at the end of each month on coupons paid from such fund, and oblige.”

In reply, on May 1, 1920, the cashier of the bank sent the following letter to the Interstate Utilities Company:

“We have your letter of April 30th, enclosing copy of letter from Lewis Williams and check for $11,400, for which accept our thanks.
“At present we have an Interest Coupon Bond Account thru which payment is made of interest coupons presented for payment. Is that the account to which the $11,400 is to be credited or should another account be.opened to take care of the May 1st, second issue coupons.....”

On May 4, 1920, the Interstate Utilities Company replied as follows:

“Replying to your favor of the 1st inst., we would ask that you open a new -account to take care of the Interstate Utilities Company Bond Coupons payable May 1st and November 1st.
“This will make four accounts with your bank — the General Account, the Interstate Telephone Company, Ltd., Bond Interest Fund, the Fund for payment of interest on Bonds [113]*113Exchanged, and the Interstate Utilities Company Bond Interest Fund.
“We enclose pass book, which you will kindly balance as at April 30th when reporting Interstate Telephone Company, Ltd., coupons paid in April.....”

On October 29, 1920, the Interstate Utilities Company sent the following letter to the bank:

“Let this be your authority to transfer from the General Fund of this company in your bank, to the Bond Interest Fund of this company for payment of Bond Interest Coupons on 2nd issue Bonds, the amount of $4,603.50.
“We enclose herewith our check in the amount of $7,015.50, which with the amount requested transferred as above, will total $11,619 for deposit in above fund, this being the amount of bond interest due on November 1st, on $387,300 bonds in hands of public.”

The check referred to in this letter was in the following form:

“INTERSTATE UTILITIES COMPANY,
DR To Coeur d’Alene Bank & Trust Company,
Coeur d’Alene, Idaho.
Oet. 29 — -For deposit in Interest Fund, this Company for Bond Coupons due Nov. 1, I. U. Co. bonds, 2nd issue .........................................$7,015.50
Void if above portion is detached.
Approved for Payment: Certified as Correct:
(Signed) JOHN F. DAVIES, . (Signed) C. C. LESTER,
Vice-President. Auditor.
RECEIVED of The Interstate Utilities Company........$7,015.50
in full of above ace’t.
This receipt duly executed, after having been properly approved and certified, becomes a cheek upon the funds of the company on deposit with
COEUR D’ALENE BANK & TRUST CO.,
(Signed) C. S. HAMMER.
EXCHANGE NATIONAL BANK
Spokane, Washington.

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Fralick v. Coeur D'Alene Bank & Trust Co., 210 P. 586, 36 Idaho 108, 1922 Ida. LEXIS 163 (Idaho 1922).

210 P. 586 (Fralick v. Coeur D'Alene Bank & Trust Co.) — published by Counsel Stack Legal Research, free access to 12M+ legal documents.

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