790 .' CITY ".-'J " I
I'EDERAL m:PORTER,
vol. 49. Receiver.:
,
H
OF SOMERVILLE i/. BEAL,
D. MaB8achusettB, March 14, 1899.) CQLLllOTION-INSOLVENOT.,· .
L
Wbetber·tbe title to a cbeck depoBlted witb a bank passes to the bank before col· lectioD. ,so lUI todmmediately create the relation of debtor and Qreditor between it and tb, dllpoBltor, is '" question of fact, depending upon tbe, ciroumstances and course of delLling in eacb particular case. . . Certain marked" For deposit .. were deposited in.a bank at a, quarter to 8 oli Saturday, and credit was immediately given for the amount thereof on the pasabook. Tbe bank closed at 8, and tbe next day was declared insolvent with the ,checks still in its hands. It was the bank's custom, at the close of each day's business, to balance its books, creditiIlg depositors with tbe amount of tbeir checks, aIi'd, if aoheck Was subsequently returned unpaid from the clearing-house, it was chllorged oir to the depositors, The depositor in this instance did not know of this custom. He had made deposits with the bank for severallears without any spaci,1i1 arrangement, and hlld never drawn against U,ncollecte cberl[s, exoept by partioular understanding.lrleld that, on these facts, title had pass8ll to the bank so as \0 create the relation of debtor and oreditor·
,l1fD
.. SUI_RIGHTS' 0" DEPOSITOR.
But wbere tbe foregoing faots were alleged in the bUl, and conneoted with the .fur\ber Ii1legationstbat, at the time the ohecks were received. the bank was, "irre· . : trievably insolvent, and made so by tbe operations of the president and two others ,of the directors," and tbat the depositQr then believed it to be 1I0lvent, and had no means of knowing of its insolvency, this was sufficient to show fraud, and to render the bank liable to return the cbecks or their proceeds, " fUlda..was not necessary for the lim to specifically allege that the officers of tbe bank It had knOWledge of its insolvency, since sucb knOWledge would be .Implied from the .allegation \hat the insolvenoy was caused by the president and two directors.
.. B.urs-I'LEADING-FRAUD.
In;Equity. Suit.by the city of Somerville against Thomas P. Beal, receiver of the Maverick Nntional Bank, to .recover the proceeds of certainchecks; Heard on demurrer to the bill. Overruled. Selwyn Z. Bowman,Jor complainant. Hul.china and .l'l·ank D. Allen, U. S. Atty., for defendant. Cot,T, Circuit Judge. This is a bill in equity brought by the city of Somerville against Thomas P. Beal, receiver of the Maverick National Bank, claiming title to certain checks (or their proceedll) deposited in said bank on the afternoon of October 31, 1891, the day the bank closed its doors for business. The case was heard upon demurrer to the bill, the receiver ,contending that the title in the checks passed to the bank, and that the/city of Somerville must come in with' the general creditors. The mam allegations of the bill are, in substance, as follows: On Saturday. October 31, 1891, at about a quarter bei'ore 3 o'clock in the afternoon, tne treasurer of the city of Somerville deposited in the Maverick National Bank checks 011 difierent banks, amounting to $21.171.40, and $8,450 in cash. The bank closed its doors at3 o'clock on that day. The trell.sUrer, handed :the checks (with the other deposit) to the receiving teller,with ,a deposit: ticket, and at the same time his pass-book, and the teller at once credited the total amount of the (Ieposit therein. The treasurer stamped the following indorsement on the buck of each check: "For deposit. JOHN Jj'. COLE, Treas. & CoIl. City of Somerville." After
791 theba.nk closed its doors (1) that da.y, the booksofth6bank, according to the usual custom, were posted and balanced, and tha.amount of said checks was placed to the credit ohaid'city of Somerville; and the checks put in,the clearing-house dI'8wer,withotherchecks,intended forpresentation. at the clearing-house on the' following Monday.' On the following day, Sunday, the bank· WIlS declaredinsolvent,and the bank examiner tookpossASsion ofthe same. All the assets and property of the bank were held by the examiner until the time the receiver was appointed. On Monday the bank examiner caused the checks to be sentto the clear.;, ing-house, where they were paid, and the proceeds thereof were received by the examiner. Subsequently these proceeds were transferred to and are now held by the receiver. They have been kept: in the accounts of the separate and distinct irom the other funds of the bank.,' The eitytreasuter had for several years made deposits with said bank with· out anyspeoial agreEiment in regard thereto. ' Thetewas no agreement thatchetlks, when deposited, should be considered as cash, or that the treasurepoould draw against them before collection; and 'the treasurer never drew a check for which his deposit was not sufficient, without counting the proceeds of uncollected checks, except in 8 few instances, ' ",berea.·special arrangement was made with the bll.t\k by which the bank agreed to him certain specified, amounts of money on his checks Qf deposits. There was no express understanding that the checks should or should not be credited to the city immediately on posit, but they were always so credited on the at the time of the deposit-The treasurer did not know whether th'e ,books of the bank were balanced after the close of business on each day,' and credit orlJtbe books of the bank for checks deposited on that day, but he did know that the amount of such checks was at once credited to him on his It was the custom of the balancing the books at the'closeof each day's busit1ess, to credit deposits ()n that day at their face value, and without discount; and it was also the custom of the bank, in case a 'check was returne4 from the clearing-house uncollected, forthwith to charge off to such depositor any such check, and thus cancel the credit. It was the practice of the Maverick Bank, and is the practice of the other banks in Boston, in some cases, to allow depositors to draw against checks deposited before such checks are collected, and in some cases not, depending upon the bank's opinion of the reliability of the dep08itorand the makers of the che'cks. The treasurer, at the time of making the deposit, believed the bank was solvent, and he had no knowledge, or means of knowing, of its insolvency. The bill further alleges thllt, at the time the checks were received by the bank, it was irretrievably insolvent, and made so by the:operation of the president and two others of the directors. Two questions are raised by thisd:emurrer: First. Did the title to these checks pass to the Maverick Bank. when it credited the amount of ,Second· .If the title to the sucb checks on the complainiint's checks would have passed under erdinary, circumstances, do not the aHegationsofthe bill as to the condition' of the bankat thetirue coIistilute
ae-
792
.FBDERAJ., REPORTER.
vol. 49.
.such a fraud upon the complainant as to entitle it to rel}over the ehecks or,their proceeds? As to the first question, whether the title in the checks passed to the Maverick Bank, Tam inclined to the opinion that it did. There are numerous decisions upon this general subject of the ownership of deposits in a bank which subsequently becomes insolvent, and eltqh case seems to turn upon the particular facts underlying it. The question is one of fact, rather than of law.· Railway 0'0. v. Johnston,133U. S. 566, 10 Ct. Rep. 390. If we take the simple case of a customer depositcredits. him with the ing .a .check with a bank. whiCh amount, allowing him to draw against it if he wishes, this being the usual course of dealing between the parties, it would se,em that the property in the check passes from the customer, and vests. in the bank, though there is no express agreement respecting the transfer of checks ISO deposited to the bank. Bankv. Lqyd, 90 N. Y. 530,:liffirming 25 Hun, 101. The supreme court in, Railway 0>. v. Joh'Mton. supra, cite the following language from the above case. as in 25 Hun: "Thl\t the iiltentionthat the check should be receivedasCRs'h is to be inferredfrointhefact tbaMhecheckwas due immediately, and was drawn on a bank, and for all pl,lrPo$es of the parties equivalent to sp; much money; * and such intentio,D is confirmed .by preceding transactions, admitted by the depositor; in which checks were deposIted as cash in his bankbook,a'nd that the custom of his bank in its dealings With him was to ctedit him with all checks as Dioney." . '
Railway v. John8ton was the case, qf a sight-draft,and Mr. Chief J ustiCEl ;FULLER, in theopinioD!lf the pourt, after referring to this fact and other circumstances, such as the right to charge exchange and est on large drafts taken for collection, says: "This was not tonsis1il'nt with the theory of an understanding between the should pass abbank and the company that the title to this ,and similar solutely to the .bank." " . The decision is finally made to rest mainly on the ground of fraud. Taking all the allegations of the present bill upon this particular point to be true) I am inclined to the opinion that this case comes within the principle laid down in Bank v. Loyd, and that, if the bill contained no other allegations, the demurrer should be sustained. But the bill further alleges that, when the checks were received by the Maverick Bank, "it was irretrievably insolvent, and made so by the operations of the president and two others of the directors." It also avers that the bank closed its doors within 15 minutes after this deposit was received. For the purposes of this demurrer, these allegations must be taken to be true. To receive a deposit under these circumstances (assuming these facts to be proved) would constitute such a fraud as would entitle the depositor to a return of his checks or their proceeds. Railway Co.v. Johnston y 133 U. S. 566,10 Sup. Ct. Rep. 390: Cragie v. Hadley, 99 N. Y. 131,1 N. E. Rep. 537; Anonymous Case, 67 N. Y. 598; Martin v. Webb, 110 U. S. 7, 15, 3 Sup. Ct. Rep. 428. It is contended by the defendant that the bill should have alleged. j
PO'.£TER '!1.BtAL.
793.
knowledge on the part of the officers of the batik-as to its insolvent conditionat'the time the -deposit was received, in order to' hring this case within the rule respecting fraud. But the bill alleges that the bank was irretrievabl)' insolvent a.tthe time the checks were,received, through the acts of the president and· two other officers. It must be presumed, therefore, that the officersknElw the condition of affairs and the coosequencesof their own acts. Under these circumstances" it was not necessary to aver specifically that the officers had knowledge of such insolvency. Upon this ground the demurrer is overruled.
POTTER fl.
BEAL et 'tJL
'(mrcuCt' Court, D. MaBBachmettB. February SIi, 189'1) CoNsTITt1TtONAL LAw-UNRBABONaLE BEARCR-PRIVATE PA1'EU-NATlO1!l'AL BA1rKI,
, In Equity. Bill by Asa P. Potter against P. Beal, receiver of the Maverick National Bank, and Frank D. Allen, United States district attorney, to obtain possession of a trunk alleged to contain private papers. HenryD. Hyde, M. F. Dickinson, and Elmer P. Hqwe, for complainant. Hutchins & Wheeler, for receiver. Frank D. Allen, U. S. Atty., pro se. ALDRICH, District Judge. This is a proceeding in equity, and the bill was filed on the 15th of February, 1892. At that tinie the only parties were Potter, plaintiff, and Beal; receiver, defendant., At a preliminary hearing, February 16th, the plaintiff and defendant were represented by counsel, and the United States attorney appeared, and claimed the right· to be heard on behalf of the governmeQt.. The bill, in effect, alleges that the plaintiff, who was the president and a· director of the Maverick National Bank, deposited in the vaults thereof certain private and personal books, papers, aud other. documents, which were bever the
The president of a national bank which had failed brought a bill againstj;he receiver, alleging that a certain trunk which was then in the vaults, and of whidh his private papers; tq.at the receivel!!. who complainant held the key, refusacl to ,surrender ,the same, was about to be summoned before the gI:and jUry with the papers, to investigate a'criminal charge against complainant. The' prayer was for an order for the delivery of the papers, an injunction against taking them· before tbe grand jury, and fOr general relief.. Complainant proved by the cashier that the trunk was kept in the .bank as the property of the presiden.J;. but the witness had no knOWledge of its contents. Held, that under the fourth and :flftbamendIUents to the federal constitution, the receiver could not give evidence as to the contents of tbe trunk, nor could a public investigation be bad; but, as tbe plaintift had voluntarily submitted his rights, and asked for affirmative relief, the courtwould appoint a master to examine it entirely alone, and turn over to complainant any PlWers belonging to bim, and to the recelvel\such as were the property of the bank, and were not material to the goverument's case against complainant; and that such ,1l,8 related to bank transactions, and were ml/.telial to the prosecution, for further consideration. B&Jia v. U. B., 6Bup. at. should be held by the Rep. 524" n6 U. B. 616, dlBtmguished. .
