National Bank v. Insurance Company

• Decision Date: 01 October 1881
• Citation: 104 U.S. 54,26 L.Ed. 693
• Parties: NATIONAL BANK v. INSURANCE COMPANY
• Court: U.S. Supreme Court

104 U.S. 54

104 U.S. 54

26 L.Ed. 693

NATIONAL BANK v. INSURANCE COMPANY.

October Term, 1881

APPEAL from the Circuit Court of the United States for the District of Maryland.

The Connecticut Mutual Life Insurance Company of Hartford, in the year 1864, appointed A. H. Dillon, Jr., its general agent for the territory consisting of the States of Maryland, Delaware, West Virginia, and the District of Columbia. He opened an office at No. 8 South Street, Baltimore, conspicuously designated by signs as his place of business as general agent of the Connecticut Mutual Life Insurance Company. It was his duty, among others, to collect and receive premiums on policies issued by the company, from persons residing within his territory, and remit the same to the company at Hartford. This he usually did twice a month, finally accounting for the business of each month at its close. The made of remittimed was by checks upon a Baltimore bank to the order of the secretary of the company. To this end he at first opened an account with John S. Gittings & Co., transferred afterwards to the Chesapeake Bank, and on April 1, 1871, to the appellant, a national bank, then recently organized, whose banking-house was across the street from his office. The account was designated on its books as follows: 'Dr. Central National Bank in account with A. H. Dillon, Jr., gen'l ag't. Cr.' To the credit of this account he deposited from time to time premiums collected for the insurance company, and remitted twice a month his checks, signed by him as general agent, and payable to the order of Jacob L. Greene, secretary of the appellee. When the premiums were paid by the checks of others, they were indorsed by him as general agent, and deposited to the credit of this account. In such instances an indorsement in this form was required by the bank. Dillon also deposited to the credit of this account, from time to time, various amounts of money received by him from other sources than from premiums belonging to the appellee, and drew upon this account checks for money applied and paid to his own use. The aggregate of the deposits made, as shown in this account, from the beginning till it was closed, amount to $470,753.05. There were drawn against it, in all, four hundred and eleven checks, of which sixty-eight were on their face payable to the order of Greene as secretary of the appellee, representing, however, much the larger part of the gross sum of the deposits.

On June 12, 1874, this account was finally closed, with a balance, as between deposits and checks, of $11,000.86. At that date Dillon owed an amount larger than this to the insurance company, and the proof is clear that the whole balance then shown by the account, as above stated, was the proceeds of collections of premiums made by him as its agent.

His current deposits of premiums in this account included his own commissions as agent.

Before opening this account with the Central National Bank, on March 9, 1871, Dillon had opened another account with it, in the name of his wife, Mrs. A. P. Dillon. This account was kept open until May 1, 1873, which is the date of the last entries, when it was balanced and closed. The deposits to the credit of this account were made by Dillon, and the checks were drawn by him in his wife's name. All the transactions represented in it were for his individual account. On both these accounts Dillon was, by agreement with the bank, allowed interest, which he collected for his individual use.

On March 14, 1872, Dillon was in distress for money to make good his margins on some speculations in stock, and applied to O'Connor, the president of the bank, for a loan. He explained the nature, extent, and cause of his necessity to O'Connor, who, indeed, was already aware that he was in the practice of stock speculation, having been interested with him in some ventures of that character. O'Connor testifies that he declined making the loan without security, when Dillon proposed his wife as security for the amount required, not to exceed $12,000, to be drawn upon checks in her name, which, if not made good in a few days, were to be taken up by a note signed by her, assuring O'Connor that certain real estate owned by her where they resided in Baltimore, with its furniture, was worth at least $15,000 or $20,000. He also urged, says O'Connor, that he kept a valuable account with the bank, and as he had never asked before for any loan, he thought he was entitled to it. The reference, doubtless, was to his agency account.

The loan was made, the money being paid by the bank on checks drawn in the name of Alice P. Dillon, to the amount of $13,000, on March 14, 15, and 16, 1872. These checks were debited to the bank account in her name, and constituted an overdraft of $12,067.14. On April 2, 1872, the bank discounted Mrs. Dillon's note for $12,000, and carried the proceeds to the credit of this account, in order to change the form of the debt. This note was renewed from time to time, the interest being paid in some instances by Dillon's check as general agent, charged to the account kept by him in that name. It was reduced at one time by a payment of $2,000, paid in money. It was then carried in the same way until Dec. 11, 1873, when the note of Mrs. Dillon for $10,000 was given, dated Nov. 29, 1873, at six months, falling due June 1, 1874. This note was signed by Dillon and his wife, in their own handwriting, both as makers and indorsers. The discount upon it, and the interest accrued on the prior note, overdue for some time, of which it was the renewal, making in all $333.34, was paid to the bank by Dillon's check as general agent. The account in the name of Mrs. Dillon was balanced on May 1, 1873, by two entries of $12,000 each, representing the debt as it then stood; and that account was closed. The note thereafter appeared only in the discount ledger, until it was charged up, as hereafter stated. It was expressed to be payable at the Central National Bank of Baltimore. The same day this note was given, Nov. 29, 1873, an agreement was made in writing between the bank, by resolution of the directors, and Dillon and his wife, 'that in consideration of Alice P. Dillon being a stockholder in this bank, and of A. H. Dillon, Jr., being a customer of the bank, their note for $10,000, dated November 29th, 1873, at six months, be discounted at 6 per c. per annum, provided only that it be agreed in writing between the makers and indorsers of said note and the bank, that at the maturity of the note $5,000 must be paid, and a new note at 6 months, to be discounted at 6 per c., which at its maturity must be paid in full, being in full payment of the loan.'

In addition to these two accounts there was a third, entitled on the books of the bank, 'A. H. Dillon, Jr.,' spoken of in the testimony as his individual account. The first entry is dated Oct. 15, 1873, the last, Dec. 11, 1873. There are eight items on each side, amounting to $28,337.50. In the first three items it is testified that Dillon had no interest at all. They represent transactions made by him for the bank itself. The last item in the account is $10,000, being proceeds of his note discounted, which were used to take up a prior one, then matured.

On June 1, 1874, the note given by Dillon and his wife for $10,000, dated Nov. 29, 1873, at six months, became due and was not paid. By order of the bank it was that day charged to Dillon in his account as general agent. In ignorance of that fact, he continued to make deposits in that account and draw checks upon it till June 12, 1874, when it was closed, showing a credit balance at that date, if the note of $10,000 was not properly chargeable, of $11,000.86.

On June 10, 1874, Dillon drew his check as general agent on the bank for $8,000 to the order of Greene, the secretary of the insurance company, and remitted it to him at Hartford. On June 13 it was presented to the bank for payment, and payment refused, on the ground that there were not funds to the credit of the drawee sufficient to pay it.

In the settlement of his agency accounts with the company for May and June, 1874, he was allowed a credit for the amount of this balance in the Central Bank, $11,000.86, and paid in addition, in full of his account to June 30, $4,550.66.

On June 11 the directors of the bank, by resolution, recite the agreement made in respect to the $10,000 note, on Nov. 29, 1873, when it was discounted; that it had not been complied with; that the note was made payable at the bank; and declare that 'this board approve of the act of the acting cashier in charging said note in full to the account and funds of A. H. Dillon, Jr., general agent,' &c.

On July 18, 1874, the insurance company filed a bill in equity in the Circuit Court of Baltimore City against the bank to recover the balance, which it alleged remained in the account of A. H. Dillon, Jr., general agent, $11,000.86, claiming it to be a fund, received by him in his fiduciary character, as its agent, which they had a right to follow and reclaim as against the bank.

To this bill the bank appeared and answered, denying its equity.

The insurance company filed an amended bill on March 4, 1875, in which it repeated the allegations of the original bill, and further averred that the defendant bank had taken proceedings under the National Bank Act to wind up its business and cease to act as a national bank in the city of Baltimore, and that if it be permitted to do so, distributing its assets among its stockholders, the complainant will have no remedy except by a multiplicity of suits against individual stockholders, many of whom are not within the jurisdiction. It therefore prays, in addition to an account and a declaration that the fund in question is a trust fund, of which the complainant is beneficial owner, that an injunction may be granted restraining the bank from paying to its stockholders its assets without retaining a sufficient amount...