Burket v. Bank of Hollywood

California Supreme Court Jun 23, 1937 No. L. A. 15902Published

Before: Edmonds

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Holding. The court held that funds held in an escrow account constitute a special deposit to which the bank does not take title, entitling the depositor to a preference over general creditors even if the preference was not explicitly demanded in the initial timely claim.

Issues

Whether a depositor is entitled to a preference for funds held in an escrow account upon the bank's insolvency.
Whether the failure to explicitly demand a preference in an initial timely claim bars a later assertion of that preference.
Whether the acceptance of liquidating dividends and delay in asserting a preference constitutes laches or estoppel.

Disposition. affirmed

Quotations verified verbatim against the opinion

“The failure of the claimant to specifically state that she demanded a preference cannot bar her recovery if the facts as stated by her entitle the claims to payment before those of general creditors.”

“Under such circumstances it was a special deposit, title to which did not pass to the bank.”

“Being a special deposit, the owners are entitled to it in preference to the bank’s general creditors and the original claims filed with the superintendent of banks are a sufficient basis for recovery.”

EDMONDS, J.

At the time the Bank of Hollywood was taken over by the superintendent of banks, it held certain money on deposit in an escrow account. The question upon this appeal is whether the respondents are entitled to pay

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ment of the money in full and in preference to the claims of the general creditors of the bank.

The escrow deposit was received by the bank in a transaction with F. O. Burket, Sr. He died shortly thereafter. The bank issued checks against the deposit made payable to Mr. Burket, Sr., and these came into the possession of respondent Virginia Burket, his widow, as the executrix of his estate. She filed claims for the amount of the checks and the balance of the escrow account remaining after their deduction. These were approved and allowed as general claims. In 1935, four years after the filing of the claims and after certain liquidating dividends had been paid thereon, the respondents, to whom Mr. Burket’s estate had been distributed, delivered amended claims to the appellants. In the amended claims the respondents set forth more fully the facts surrounding the transaction between Mr. Burket, Sr., and the bank and demanded payment of the account in full and in preference to the claims of the general creditors. The superintendent of banks refused to allow the amended claims. In the action subsequently brought, the trial court rendered judgment that the respondents are entitled to a preference in the assets of the bank.

The question at issue is one of law only. The appellants admit that prior to the failure of the bank it had entered into an agreement to receive certain money in escrow and pay it out to the persons entitled thereto. It is also admitted that at the time the bank closed the money then on deposit in the escrow account belonged to the estate of F. 0. Burket, Sr., deceased.

The respondent executrix within the time fixed by the bank act therefor (Deering’s Gen. Laws, vol. 1, p. 215) presented four claims to the superintendent of banks, one for each of the three checks which had been issued against the escrow account and one for the balance of the account, all on printed forms furnished by the superintendent of banks. Each of the claims based upon a check recited as a statement of the claim that it was for “Escrow check . . . made payable to F. O. Burket, Sr., signed by Bank of Hollywood, W. T. Tickle, escrow officer”. The original check on which the claim was based was attached in each instance. Each of these checks has on its face the notation “Escrow No. 937” and also “Charge to Escrow Account”. The claim for the

Burket v. Bank of Hollywood

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EDMONDS, J.

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