U.S. Supreme Court WICHITA ROYALTY CO. v. CITY NAT. BANK OF WICHITA FALLS, 306 U.S. 103 (1939)

[Page 306 U.S. 103, 108]

sonal account and later withdrawn and used for his personal benefit. The state court had ruled that the bank was responsible for all such misappropriations as took place after it had knowingly accepted trust funds in payment of the trustee's personal debts. Pointing out that there was evidence of such transactions, it declared, 127 Tex. 158, 174, 175, 89 S.W.2d 402: 'the bank, after being charged with knowledge of Peckham's dishonest dealings, continued to credit Peckham's personal account with checks drawn on the trust account, and persisted in its course of dealings with respect to the two accounts. Having incurred the burden of ascertaining whether subsequent expenditures made by the trustee from the commingled funds were for authorized trust purposes, it cannot effectively complain of the weight of that burden'. And it concluded, 127 Tex. 158, 182, 89 S.W.2d 407: 'It is apparent from what has been stated that the amount of the bank's liability is the difference between the total amount of the deposits (of trust moneys) for which Peckham's personal account received credit after he began commingling trust funds with his own on October 8, 1925, and the total amount of withdrawals therefrom which the bank may show were used for authorized trust purposes.' [Footnote 1]

[Page 306 U.S. 103, 110]

In its final opinion in the Quanah Case it said: '... we have again carefully reviewed the opinion in the Wichita Royalty Co. et al. v. City National Bank of Wichita Falls Case (127 Tex. 158) 89 S.W.2d 394 (93 S.W. 2d 143), decided by this court on the same day the case at bar was originally decided. ... We are satisfied with our opinion in the Wichita Royalty Company Case as explained by our opinion on rehearing in that case.' Quanah, A. & P.R. Co. v. Wichita State Bank & Trust Co., 127 Tex. 407, 421, 422, 93 S.W.2d 701, 709, 106 A.L.R. 821. As there is no contention that the opinion of the Texas court in this case has in any other respect been modified by the Quanah or any other case in the Texas Supreme Court, we do not discuss other parts of the opinion below which it is argued fail to follow the opinion of the state court.

We think that the opinion of the Supreme Court of Texas in the present case has not been modified by the Quanah Case and must be accepted as stating the law of Texas; and that it affords the appropriate guide for the District Court so far as it may be applicable to the facts which have been developed on the trial there. As the court below properly directed the remand for a statement of findings and conclusions of law under the equity rule, the decree will be affirmed but the proceedings in the District Court will be in conformity to this opinion.

Affirmed. Footnotes

Footnote 1 The opinion assumed that all the funds in the personal account on October 8, 1925, were trust funds and that on November 17, 1925, the trustee paid his personal indebtedness to the bank from those funds. 127 Tex. 158, 168, 89 S.W.2d 394, 93 S.W.2d 143. In its opinion on the motion for rehearing the court stated that these assumptions were not to be taken as foreclosing proof of the facts upon the new trial. 127 Tex. 158, 184, 89 S.W.2d 394, 93 S.W.2d 143.