450
94 FEDERAL REPORTER.
OF '(Circuit Court of Appeals, FlfiliCiJ.'cuit.' May 16, '1899.) ;;..,
TENN.
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BANK'S I 'i' :
Ancagreement two banks, by' 'Which one agrees' 'to ',"hanqle" the , ,itlmllJ,,:pf and ,cpmmercial paper of the' otherwlthina certain territorY" crediting the 'f!,qlPunt of, sucl:/.;items tq the account of; the other on receipt,.andunder which tb,e sending bank transmit!l suchitem!l as collections,Indorsedpayable to "a:ny naUpnill or state bank," with directions to protest and: return if unpaid,' is an agreement for the making of collections only; and not of paper, and does not create the the two banks as to items received and credited, but uncollected, at the time, of the failllre ,of, the receiving any such, items,or their, proceed:>, which 'can, be identified as h8.v1ng come into the,Mnds of its receiver, maybe recovered by the send' ing bank. i . .:
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Appea;lfr9n;l,the pourt ern District, pfLouisiana.( ,
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United States fOr the East-
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The object of tblssuit is to recover the proceeds of a large ,number of checks, notes" denominated, "items between July 31 and August 4,'1800, Py, the lIrJ;lpe,llee, complainant, to t11e AJl'lerlcaI,l,Natlolla} Bank for 'These proceeds, is averred,were collected after the ,faIlure of the insolvent-bank, 'and camle Into the hands of the receiVer" ,Q.ppellant. This is ;oot B. suit claiming any preference on the assets ,of 1;9.e in/ilolventbank, b1;1t simply for recovery 9f the proceeds of its failure, and certain ,Item's,Of, turned 'Ovel"I;to the receiV'erlater, of wpich asseJ;ted in thie by the below; 'appellee here. 'On AUgust 5, IS96, the American' National, Bank ,closed Its dilors at 3 'p. m.,and' never opened them again for 1Jusj,ness. The' ;f()llowlng day, by the comptroller of the currency, 1JJ4ward, I. Johnson" bank eXllminer;, took possession of the books, found,' the ,appellant qua.,lified assets, al'1'd, as receiver' lind toole possession 'of' 'the bank's property. The ,only arrangement eter entered into by the ,oomplainanf',and the Ainti!i'ica:n' National Bank, relacQur/le Of PUl3ineSS ,between, them, is embodied luand based upon' the tive '19 foll()wing two telegrams and complalnant's,letter, all dated July 31,IS00, to wit: Telegram. , ", " , , " M e m p h i s , July 31, 1896. , ,uTo Americ;ap.,National, Bank, New:Orlf,ans, La.: Have ,mislaid your recent terms handle our 0., La., and So. business. letter. ' Please write us May decide give you oUi" bUSiness immediately. , , ' , :, ,,' "0. F. M. Niles, President." Telegram. ' Orleans, La., July 31, 1896. "Continental 'National Bank, Memphis, 'ren;n.: Telegram, received. Will credit cash items on ,points named, also Texas, 'at par on receipt. Start the account. We will please you. ' American National Bank." Letter. "Memphis, Tenn., July 31, 1896. "American National Bank, New Orleans, La.-Gentlemen: I wired you this morning in regard to handling our account, and have received your wire, which Is satisfactory. We will commence sending you our business to-day, and hope you will be able to handle it satisfactorily, and that you will find the account a profitable one. 'We are obliged to send you a somewhat large item on Baton Rouge, but this will be an exceptional one, at least in amount, and I belieye
RICHARDSQN V.
BANK.
YO!1 will find· our acC()unt a, :valuable.one for your bank. We will endeavor to keep balances with you sufficiWt to; any small exp4;lllse in the. collection entering, into wlJ,l of some interior items. Hoping that the arrangement prove mutually advantageous, and with best wishes, believe me, "Yours, very truly,: , . ... ' C. lJ'. M.Nlles, 'President." It is true that the American National:Bank wrote a letter on the same date, .Tuly;n, 1896, proposing, in effect, amodificatjon of the telegraphic terms; but that letter, at all events, was never acted on by. complainant, and it is extremely doubtful whether it, ever reached Memphis in time to be considered before the failure of the bank. Accordingly, complainant commenced the same day to transmit to the American National Bank its Hems of exchange for collection, amounting to $5,020.88, and this was continued· by further remittances of items for collection on August 1st, 3d, and 4th, the 2d of August falling on were headed as follows: a Sunday. All letters "Protest, unless otherwise instructed, and return at once. We enclose for collection and credit. "Yours, respectfully, returns.
H. L. Armstrong, Cashier."
All the items contained in these letters were Indorsed by a rubber stamp, as follows: I "Pay to the order of "Any National or State Bank. "[Date here.] "Continental National Bank, "fl. L. Armstrong, Cashier." This indorsement was for the purpose of vesting the said American Natlonal Bank with the necessary authority to receive and collect the same. The Items transmitted in these four several letters by complainant apparently reached the bank on August 1, 3, 4, and 5, 1896, respectively, and were by the note clerk, conformably to the usagell of that bank, credited to complainant on the books of the bank. Most of the items embraced in the first three letters, drawn on 0):' payable by parties in New Orleans, were collected by the bank. Those Items In the first two letters, payable at other polnts,-out of town items,-were sent by the bank to other banks for collection. All of the out of town items in the last two letters, of date. August 3 and 4, 1896, were retained separate by the bank, and passed into the hands of the bank examiner, who took charge of th.e insolvent bank on August 6, 189(i, and collected them through the medium of the Louisiana National Bank of New Orleans, for his account as examiner in charge. Some of the city items in these two letters were kept separate from the funds of the bank, and placed in the hands of the bank's attorney. )11'. George Denegre, on the,morning of Augl1st 6, 1896 (before the ban);: examiner took charge), who same, placed the proceeds in sealed envelopes, and indorsed thereon the amounts and the names of the parties for whose account he had so collected them. These identical proceeds, so collected by Mr. Denegre, were by him turned over, in those envelopes intact, to the examiner in charge, who them to the receiver. All of the out of town items, transmitted in the first two of complainant's letters were sent by the bank, before its announced failure, to other banks, its correspondents, for collection; and they were by them collected after the' failure of the bank, or if,in some few cases, they were collected before the failure, the proceeds were not forwarded to the ban!:l by its subagents prior to the failure. Such collections were remitted to,the examiner in charge, mainly, and by him paid over to the receiver. or they were, in a few instances, sent to the receiver directly. On August 5, 1896, the board of directors of the bank met and adopted. the . " ' following resolution: "Special meeting at 8:30 p. m., Wednesday, August 5, 1896. A quorum of directors met at 7:30 p. m. this day. Present: Messrs. Gardes,· Keiffer, RenaUd, and Dumas. Mr. Gardes stated what had taken place during the day, and that the deposits received during the day had been set aside. The directors approved of this action, and instructed the president to hold the said deposits
452
"94 FEDERALREPOR'rER.
SCI?Ilnl;te' an(ll,part from the banking funds, and to examine carefully the condition l)f 'the 'bank, and report at 'a meeting to be held at 8:30 a. m., August tltily moVt!d;' seconded, and' adopted. H. Gal,'des, President." tlle bank was hopelessly insolvent on August 5, 1800, but declares that defendant isnot fully advised as to knowledge by the managing officers Of the financlalcondltlon of the bank previously. On'he,aring in the circuit court, as shown by the amended record, the following jUdgment was rendered: "Thi,s'caiJsecameon to be heard on the. pleadings, exhibits, and evidence adduced, IlJ:\d wasl!-rgued by counsel. Whereupon, on consiqeration thereof. the courtoeiIlg satisfied that the relation of principal and agent existed between the complainant and the American National Bank of New Orleans; that said AmeriCan ,l'i"atlonal Bank was hopelessly insolvent, and that to the knowledge of the managing officers, the president, and cashier of said bank, on or before JUly 1;1896; that said American National Bank was guilty of fraud in accepting the collections of the complainant. transmitted in complainant's letters of, July 3l and August I, 3, ,and 4, 1896; that complainant has traced the items of collections' therein set forth to the hands of the defendant, the receiver, as aforel¥1::i,(I; that the same had come .into the possession of said receiver as follows, (0 wit: Items In Exhibit B, annexed to the blll of complaint, aggregating the sum of................·....·................... $B.I00 S7 Items In Exhibit D of the blll, ,amounting to. . . . . . . . . . . . . . . . . . 4(j2 81 Items In Exhibit F, amounting to , '" .. '" .. 4,351) 11 Items In Exhibit F, collected through W. L. Moody & Co., of 32(; 47 Galveston, Tex., amounting to:............................ $8,241) 26
'-A116f,wbichcame Into the hands ot the receiver, aggregating the sum total of ,$8,249:26, constituted and is a trust fund in the hand of said receiver as 'for the complainant;. and that complainant is entitled to be paid the same, with Interest, out of the funds which came into the hands of the defendant as such receiver. It Is therefore ordered,adjudged, and decreed that the coril:plainant and recover from the defendant, .B'. L. Richardson. receiver of the A,merican National Bank of New Orleans, the SUJll of $8,249.26, with interest at 5 per cent. per anfmm the date of the filing of the bill of complaint herein, together with all costs, whiCh is decreed to be paid within 10 days, by priority over all unsecured creditors; and that for the balance of the com-4llainant'll claim, to wit, $5,692.61, complainant be, and is hereby, recognized -as a general creditor, and entitled to participate pro rata with depositors and other general creditors of said American Nll.tional Bank of New Orleans iu the distribution of Its assets. And it is ordered, adjudged, and decreed that said defendant, receiver as aforesaid, pay to complainant such' pro rata thereof as has been or may: be paid to other unsecured creditors of said American tional Bank; , "F'ebrqary 15, 1899. [Signed] Aleck Boarman, Judge."
N. Butler, for appellant. I E. Hudson, John Rouse, and Wm. Grant, for appellee. Before PARDEE, McCORMICK, and SHELBY, Circuit Judg-es. After stating the facts, the opinion of the court was delivered by PARDEE, ,Circuit Judge. The queStions. presented on this appeal are identical with those presented .in case of Richardson v. nanking Co" (just decided) 94 Fed. 442. On the facts as, recited there is still less reason in claiming that under the contract between the parties the American NatiorialBank purchased the items forwarded, and that the relation of debtor and creditor ensued as soon as tIle items were credited on
RICHARDSON V. CONTINENTAL NAT. BANK.
4bi$
the of the American National Bank.. The correspondence between the parties was plainly and directly about collections only, and the course of business between the parties, so far as it was proved, prior to the failure of the bank, shows the full understanding of the parties that the business to be transacted was that of collection merely. All the items going to make up the sum of $8,249.26 are fully proven to have been collected subsequently to the failure of the American National Bank, and there is no dispute that the respective amounts thereof came to the hands of the receiver, and were sufficiently identified to show on what claims and for whose account they were collected. The objections as to the allowance of interest and the form of the judgment are allowed, for the reasons given in Richardson v. Banking Co., just decided. There has been much unnecessary trouble to the judges of this court, and probably to the judges in the circuit court, from the neglect of the parties to follow the usual rule in such cases, and have the accounting done contradictorily before a master. The decree of the circuit court should be reversed, and the cause remanded, with instructions to enter a decree as follows: It is ordered, adjudged, and decreed that the complainant, the Continental National Bank of Memphis, do have and recover from the defendant, Frank L Richardson, receiver of the American National Bank, the sum of $8,249.26, which said receiver is ordered to pay, out of the funds which have come to his hands as receiver, within 30 days from the signing of this decree, and by priority over all unsecured creditors of the American National Bank, or that he do within said delay eel': tify the same to the comptroller of the currency, with a copy of this decree; and it is· further ordered and decreed that for the of complainant's claim, to wit, the sum of $5,692.61, the said Con· tinental National Bank of Memphis be, and is hereby, recognized as a general creditor, entitled to participate pro rata with the depositorE'. and other general creditors of said American National Bank of 1'1 ew Orleans in the distribution of its assets; and it is ordered and decreed that the said defendant receiver pay to said Continental National Bank of Memphis, Tenn., such pro rata thereon as has been or may be paid to other unsecured creditors of said American :Kational Bank, or do certify the same to the comptroller, to govern his action in the premises. And it is so ordered.
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otl\er,,:ise ot; t,bem., default has no. other (!ffeft than to render the in the .pll,yment' of mterest priJiCipal' ptesently colIec'tilJre; iand the' provMon oitlie bdndsfi'±ing the rate of interest thereoru:dUl'ingltheentbe.:tet·!.tl to run con. tinnes'in dec:rooj butr,jas tq"iutel'e$ticou'ppns W1Iich have mab..;l'j, terxps, lin the of ,fJ.ny woyi&iO;J;l ophe contract , ,the tile legal will A decree tn ia S'uit; to' it/reclase a rlrllrolltlmort'gage,) which at the instance of tke' trustee· in' the mortgage' determmes: the 'IIlJmaunt' due· on tbe mort,gage daM, illclQdingintercEl!>t on. the and ;J;llatured couf1-11, pons, renders' the amount of such interest res judi\?IJFlI-,!a& , the and allothers 'rho are'6r may' thereafter be, co'mepartles the suit, lind 'cbrrechiess Of the in that respect . cannot be qHestioned In:Snpplementalproceedlngs brought thereunder.. I, ',' :
OF DECI{EE- IMPEAcItMEN1'. IN. SUPPLE1I;lENTAI, PJlOCEEDINGS.
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of, the. on Sullivan'&'CromweU, fol'! exceptank u. w' . to ;tbe iJ;e.pp.. 20, i18V8", ,."rJ)e::Nor!hepl N PaCific, ',Y".: .
ber purchaser unp.e,r t1).e decree of filed Il}.; ,lliitEfr:fOJ;p,npClpal . .. ,.d, seques n proceedings a:Q:l0lljutdue upon the cons()lidat,ed Raitrol;la Co,mPl1ny owned by clai!Ua l1 t'l by the of the, rate/ofl ;s,)iquldbe of the bonds au<l.1l'pQJ1; the c()upons, ,!lfter ve dates of 'maturitj;.;, special" m.ltster :the at, the rate of $ per JU/iists thltt Jt,should be cast at the rate of 6 per cent. per annum; and this is the contention. the two rates The difference in the amount of interest, mentioned, is $1,664,382; so that the question; 'alfhou'gh one of no great difficulty, is of moment to the claimant. The bonds in question bear date December 2, 1889, and are respectively payable on the 1st day of December, 1989, "and interest thereon in the meantime at the rate of five per cent. per annum, * * * semiannually, on the first day of June and on the first day of December in each year." Coupons were attached to each bond for the semiannual interest contracted to be paid for the entire period of 100 years. By article 16 of the trust deed securing these bonds it was provided that in case of default in the payment of any installment of interest, or of any coupon annexed to the bonds, such
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