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ANNOTATION.

Accident insurance: aiding peace officer as voluntary exposure to unnecessary danger.

No cases other than the reported case (SACKETT v. MASONIC PROTECTIVE Asso. ante, 188) dealing with the question under annotation have been disclosed. In the absence of direct authority on the question, the court in the reported case reasoned by analogy and relied on the rule that exposure to danger in the effort to save human life is not an exposure to unnecessary danger within the meaning of an accident policy. This rule was applied in DaRin v. Casualty Co. of America (1910) 41 Mont. 175, 27 L.R.A. (N.S.) 1164, 137 Am. St. Rep. 709, 108 Pac. 649. The court said: "Contention is made that recovery cannot be had because it appears affirmatively that Pinazza voluntarily exposed himself to unnecessary danger, within the meaning of paragraph 10 of the General Agreements. When it became known to deceased and his companions that a fellow workman was in danger, and they went to his rescue, they found him lying about 5 feet from the entrance of the drift. They had hurried up a ladder to reach the place. Pinazza, apparently thinking that he could go in that distance with safety, did so, and, in attempting to drag the injured man out, was overcome, and, while the rest of the party were engaged in rescuing the two, he was so far injured that he died. The presence of gas was apparent as soon as the party reached the place. The general rule on this subject is that the law has so high a regard for human life that it will not impute negligence to one who attempts to save it, unless the attempt be made under such circumstances as to constitute it rashness in the estimation of prudent persons. 1 Labatt, Mast. & S. § 360; Thomp. Neg. 2d ed. 5435. Thus stated, the rule is broad enough to cover not only an attempt to save life under spontaneous impulse, aroused by sudden and unexpected perception of the peril, and without thought or calculation of the

chances of injury or loss of life to him who makes the attempt, but also an attempt which is made after such calculation as the circumstances permit, the rescuer acting upon the conclusion that he can save the life without the loss of his own. In the latter case the exposure is voluntary in a sense, yet, if, under the same circumstances, a prudent man would obey the impulse to save a life, the exposure ought not to be held to be voluntary, within the meaning of the contract. At any rate, the danger is not, under the circumstances, unnecessary. This rule, we think, is fairly deducible from the adjudicated cases.

. . The rule which applies to this provision of the policy is analogous to that which governs the defense of contributory negligence. The engineer who stands at his throttle, in the presence of imminent danger of collision, or the derailment of his train by an obstruction on the track, in an effort to save his passengers, and is killed or injured, cannot be said, as a matter of law, to be guilty of contributory negligence. He voluntarily exposes himself to the peril, but not unnecessarily so. The circumstances demand that he do his duty, and he does so in obedience to those higher impulses which must govern the conduct of the average prudent man. He may use his best judgment as to whether he can save his passengers by assuming the risk, and it is for the jury to say whether in doing so he is guilty of contributory negligence. So, also, in other practical affairs of life. Emergencies often arise calling for immediate action. In all such cases, though action may be accompanied by danger, yet, while the exposure to it is voluntary, the danger cannot in any sense of the term be said to be unnecessary. On this subject the court in Fidelity & C. Co. v. Sittig (1899) 181 III. 111, 48 L.R.A. 359, 54 N. E. 903,

said: 'For one to leap into a turbulent stream, rush into a burning building, or do any other hazardous thing to save human life, would be a voluntary exposure to danger, but not to unnecessary danger. So, too, many emergencies in the lives of men occur where the most urgent necessity requires their presence at some particular place at some particular time, and where to miss a train would involve serious consequences. In such a case a voluntary exposure to danger might not be unnecessary. The presence of a physician or surgeon at some critical period in the illness or injury of a human being might be necessary

to save life, and it might be necessary
for him to expose himself to danger to
reach his patient, or in some other
respect to perform his professional
duty. The necessity implied in the
provision of the policy does not mean
only that which is unavoidable or in-
evitable, but also any object or pur-
pose which men of moral responsibility
and prudence would regard as of such
serious importance in the performance
of duty as to demand or justify the
incurring of risk of danger to accom-
plish it.' Under the circumstances, the
question whether the exposure of him-
self, by Pinazza, was unnecessary,
was for the jury."
J. T. W.

F. ZIMMERLI

V.

NORTHERN BANK & TRUST COMPANY et al.

Washington Supreme Court (Dept. No. 2)-July 21, 1920.

(111 Wash. 624, 191 Pac. 788.)

Bank receipt of check on itself in payment of mortgage of another trust priority.

1. The owner of a mortgage in possession of a bank is not entitled to preference in case of its insolvency, for the amount of a check drawn by the mortgagor upon his account in the bank in payment of the mortgage, and not turned over to the mortgagee, since the bank's funds were not augmented by the payment.

[See note on this question beginning on page 196.]

liability for representations of officer.

2. A bank which is merely the agent for the collection of principal and interest on certain bonds is not liable as for fraud, for the representations

of one of its officers that they are A-1 in making a sale of them to a purchaser.

[See 3 R. C. L. 457; 12 R. C. L. 281 et seq.]

CROSS APPEALS from a judgment of the Superior Court for King County (Dykeman, J.) in favor of plaintiff in part only, in an action brought to recover preferred claims upon two certain causes of action; defendants appealing from so much of the judgment as allowed the claim on the first cause of action; and plaintiff appealing from so much as denied any relief upon the second cause of action. Reversed on main appeal. The facts are stated in the opinion of the court. Messrs. Bausman, Oldham, Bullitt, & Eggerman and Walter L. Nossaman, for defendants:

Plaintiff was not entitled to recover the $1,000 preferred claim.

Empire State Surety Co. v. Carroll County, 114 C. C. A. 435, 194 Fed. 593; Beard v. Independent Dist. 31 C. C. A. 562, 60 U. S. App. 372, 88 Fed. 375; American Can Co. v. Williams, 101 C.

(111 Wash. 624, 191 Pac. 788.)

C. A. 634, 178 Fed. 420; Slater v. Oriental Mills, 18 R. I. 352, 27 Atl. 443; City Bank v. Blackmore, 21 C. C. A. 514, 43 U. S. App. 617, 75 Fed. 771; St. Paul v. Seymour, 71 Minn. 303, 74 N. W. 136; Cherry v. Territory, 17 Okla. 213, 89 Pac. 190; United States Nat. Bank v. Centralia, 153 C. C. A. 129, 240 Fed. 93; Schuyler v. Littlefield, 232 U. S.. 707, 58 L. ed. 806, 34 Sup. Ct. Rep. 466; Rugger v. Hammond, 95 Wash. 85, 163 Pac. 408; Heidelbach v. Campbell, 95 Wash. 661, 164 Pac. 247; Willoughby v. Weinberger, 15 Okla. 226, 79 Pac. 777; Re Seven Corners Bank, 58 Minn. 5, 59 N. W. 633.

Allowance to plaintiff of interest is improper.

Richardson v. Louisville Bkg. Co. 36 C. C. A. 307, 94 Fed. 442; Merchants' Nat. Bank v. School Dist. 36 C. C. A. 432, 94 Fed. 705; White v. Knox (United States ex rel. White v. Knox) 111 U. S. 784, 28 L. ed. 603, 4 Sup. Ct. Rep. 686; Merrill v. National Bank, 173 U. S. 131, 43 L. ed. 640, 19 Sup. Ct. Rep. 360; American Nat. Bank v. Williams, 42 C. C. A. 101, 101 Fed. 943.

There was no fraud shown as to the second cause of action.

Baker-Boyer Nat. Bank v. Hughson, 5 Wash. 100, 31 Pac. 423; Biel v. Tolsma, 94 Wash. 104, 161 Pac. 1047; Peterson v. Jahn Contracting Co. 96 Wash. 210, 164 Pac. 937; Glaze v. Pullman State Bank, 91 Wash. 187, 157 Pac. 488; Hunley v. Ingle, 88 Wash. 446, 153 Pac. 313; Uhlbright Mulcahy, 78 Wash. 9, 138 Pac. 314; Aurora Land Co. v. Keevan, 67 Wash. 305, 121 Pac. 469; Pigott v. Graham, 48 Wash. 348, 14 L.R.A. (N.S.) 1176, 93 Pac. 435.

V.

Plaintiff, having in 1916 merely obtained a renewal of the securities which he formerly held, sustained no damage.

Deering v. Holcomb, 26 Wash. 588, 67 Pac. 240, 561; Irwin v. Holbrook, 32 Wash. 349, 73 Pac. 360; Poynter v. Mallory, 20 Ky. L. Rep. 284, 45 S. W. 1042; Black v. Black, 64 Kan. 689, 68 Pac. 662.

Messrs. F. W. Moore and Charles H. Miller, for plaintiff :

There is no doubt but the bank received the $1,000 in question, and while defendants concealed that fact from plaintiff, it became a trust fund, and the lower court did not err in allowing it as a preferred claim.

17 A.L.R.-13.

Carlson v. Kies, 75 Wash. 171, 47 L.R.A. (N.S.) 317, 134 Pac. 808; State ex rel. Titlow v. Centralia, 93 Wash. 401, 161 Pac. 74; Rugger v. Hammond, 95 Wash. 85, 163 Pac. 408.

There is sufficient evidence in the record to show that the assessments and taxes, which were prior liens, exceeded the amount of the mortgage bonds.

Crawford v. Armacost, 85 Wash. 622, 149 Pac. 31; Gray v. Reeves, 69 Wash. 374, 125 Pac. 162; Blum v. Smith, 66 Wash. 192, 119 Pac. 183; Wooddy v. Benton Water Co. 54 Wash. 124, 132 Am. St. Rep. 1102, 102 Pac. 1054; Daniel v. Glidden, 38 Wash. 556, 80 Pac. 811; Grant v. Huschke, 74 Wash. 257, 133 Pac. 447; Carpenter v. Wright, 52 Kan. 221, 34 Pac. 798; Hanson v. Thompkins, 2 Wash. 508, 27 Pac. 73; Sears v. Stinson, 3 Wash. 615, 29 Pac. 205.

Mount, J., delivered the opinion of the court:

The plaintiff brought this action against the Northern Bank & Trust Company (now insolvent) and the state bank examiner (now commissioner) liquidating that bark, to recover a preferred claim of $1,000 upon a first cause of action, and to recover a preferred claim for $2,000 upon a second cause of action. The case was tried to the court without a jury, and resulted in a judgment establishing the claim upon the first cause of action as a preferred claim and denying any relief upon the second cause of action. The defendant has appealed from that part of the judgment establishing the $1,000 claim as a preferred claim, and the plaintiff has appealed from that part of the judgment denying any relief upon the second cause of action. We shall therefore refer to the parties as plaintiff and defendant.

The facts upon the first cause of action may be briefly stated as follows: In January of 1913 one H. Ryan and his wife executed and delivered to the Northern Bank & Trust Company four promissory notes, in the form of bonds, for $500 each. These bonds were made payable to the Northern Bank &

The

Trust Company, or bearer. They were secured by a mortgage upon certain real estate. Thereafter the Northern Bank & Trust Company sold two of these bonds to the plaintiff. Afterwards the Northern Bond & Mortgage Company acquired the interest of Ryan and wife in the mortgaged property. Northern Bond & Mortgage Company was a depositor in the Northern Bank & Trust Company. The plaintiff was also a depositor in that bank. After the Northern Bond & Mortgage Company had acquired the interest of Mr. Ryan in the real estate, that company deposited its check with the Northern Bank & Trust Company in satisfaction of the mortgage which had been executed by Ryan and wife. The officers of the bank thereupon satisfied the mortgage. The plaintiff

was not notified that the bonds had been paid and the mortgage released. The check drawn in payment of the bonds was drawn upon funds on deposit in the Northern Bank & Trust Company. Thereafter, and before the plaintiff was notified that the bonds had been paid, the bank examiner (now commissioner) took charge of the bank as an insolvent institution and proceeded to its liquidation. The plaintiff seeks upon these facts to have his claim for $1,000 declared a preferred claim, upon the theory that the check for the payment of his bonds was a trust fund to be paid to him, and because it was not paid to him that he is entitled to a preferred claim for that amount. It is stipulated that the bank commissioner has on hand more than $1,000 of the bank's assets. The trial court was evidently of the opinion that the check deposited in payment of the bonds was a trust fund, and for that reason ordered the plaintiff to have a preference right to his money.

The counsel for the defendant make the contention here that, because the assets of the bank were not augmented by the transaction, there could be no preference right

on the part of the plaintiff, and cite a number of cases to that effect. The rule seems to be as stated in 14 R. C. L., at page 664: "But where a trustee has mingled the trust funds with his individual money, the cestui que trust is not generally allowed to follow and hold it as against the creditors of the trustee, unless he can trace it and show that the estate has been increased by the misappropriation."

In the case of Empire State Surety Co. v. Carroll County, 114 C. C. A. 435, 194 Fed. 593, it was said: "It is indispensable to the maintenance by a cestui que trust of a claim to preferential payment by a receiver out of the proceeds of the estate of an insolvent, that clear proof be made that the trust property or its proceeds went into a specific fund or into a specific identified piece of property which came to the hands of the receiver, and then the claim can be sustained to that fund or property only, and only to the extent that the trust property or its proceeds went into it. It is not sufficient to prove that the trust property or its proceeds went into the general assets of the insolvent estate, and increased the amount and the value thereof which came to the hands of the receiver."

But

On page 606 of 194 Fed., the court said: "Proof that these checks augmented the cash that went into the hands of the receiver, or that they produced cash which he obtained, was indispensable to any preference on their account. checks of third persons on the bank with which they are deposited, which are paid by crediting the bank and charging the drawers on its books, fail to increase the cash in its possession, and form no basis for a preferential payment to the depositor. Beard v. Independent Dist. 31 C. C. A. 562, 60 U. S. App. 372, 88 Fed. 375, 382. Moreover, the deposit of checks of third persons, which are credited to the depositor and used by the bank to pay its debts, bring no money into its fund of cash, and form no founda

(111 Wash. 624, 191 Pac. 788.)

tion for preferential payment to the depositor. City Bank v. Blackmore, 21 C. C. A. 514, 43 U. S. App. 617, 75 Fed. 771, 773.

In Beard v. Independent Dist. 31 C. C. A. 562, 60 U. S. App. 372, 88 Fed. 375, it was said: "The foundation of the right on part of the owner of a trust fund to a preference over general creditors in payment out of a fund or estate that has passed to the assignee or receiver of an insolvent person or corporation is that the trust fund has been wrongfully confused or intermingled with the property of the insolvent, or has been used to increase the value of property, thereby increasing the amount or value of the funds or estate passing into possession of the assignee or receiver; that, if this intermingling had not taken place, the fund passing to the receiver would have been so much less; that the creditors have only the right to subject the proper ty of the debtor to the payment of their claims, and therefore the creditors cannot complain if the total fund coming into the hands of the receiver is reduced by the amount necessary to make good to the owner of the trust fund the sum which was wrongfully used in augmenting the fund or property passing to the receiver. Unless it appears that the fund or estate coming into possession of the receiver has been augmented or benefited by the wrongful use of the trust fund, no reason exists for giving the owner of the trust fund a preference over the general creditors, and this we understand to be the doctrine recognized by the supreme court of Iowa and the Supreme Court of the United States alike."

The evidence in this case fails to show that there was any augmentation of the funds of the bank by the payment of the bonds in this case. The payment was made by a check drawn upon funds already in the bank. Both the drawer and the payee of the check were customers at the bank. The utmost duty of the officers of the bank, on receiving

the check in satisfaction of the
bonds and mortgage, was to pass
the amount of the check to the cred-
it of the plaintiff. This was not
done. If it had been done, the plain-
tiff would have been a general cred-
itor and nothing more. The fact
that it was not done
did not place him in check on itself
any better position in payment of
mortgage of
than if the officers another-trust-
priority.
of the bank had
done their duty and placed the
amount of the check to his credit.

Bank-receipt of

The defendant relies upon the case of Carlson v. Kies, 75 Wash. 171, 47 L.R.A. (N.S.) 317, 134 Pac. 808. That was a case where there was a special deposit of $3,070 in the bank to be held for a stated purpose. The deposit in that case clearly augmented the assets of the bank. The point made here was not in that case. Counsel also cite the case of State ex rel. Titlow v. Centralia, 93 Wash. 401, 161 Pac. 74. That was also a case where the funds were augmented by the receipt of money. The case of Rugger v. Hammond, 95 Wash. 85, 163 Pac. 408, is also cited by the defendant. That was a case where certain rugs had been intrusted to the insolvent corporation to be sold. Part of the rugs were sold, and the money received therefor was mingled with the assets of the insolvent corporation. It was held in that case that there was no preferential right of the creditor. In none of these cases was the point now under consideration discussed.

We think it is clear that there could be no preferential claim of the plaintiff upon the funds of the insolvent bank, even if the deposit of the check by or on behalf of the maker of the bonds might be held to be a trust deposit, because the deposit of this check did not increase or augment the funds of the bank, and we see no good reason for giving the plaintiff a preference over general creditors. Furthermore, we are of the opinion that if the officers of the bank had performed their whole duty they would have deposit

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