Fourth Street Nat Bank v. Yardley

• Decision Date: 01 March 1897
• Docket Number: No. 147,147
• Parties: FOURTH STREET NAT. BANK v. YARDLEY
• Court: U.S. Supreme Court

165 U.S. 634

17 S.Ct. 439

41 L.Ed. 855

FOURTH STREET NAT. BANK

v YARDLEY.

No. 147.

March 1, 1897.

By a bill filed in the circuit court of the United States for the Eastern district of Pennsylvania appellant sought to sub- ject moneys in the hands of the receiver of the Keystone National Bank to the satisfaction of an alleged equitable charge or lien thereon. From a decree dismissing the bill an appeal was taken to the circuit court of appeals for the Third circuit. The latter court thereafter certified to this court two questions of law arising upon the facts stated, which facts are set out in the margin hereof.¹

The following are the questions propounded:

'First. Do the above-stated facts show an equitable assignment by the Keystone National Bank to the Fourth Street National Bank of twenty-five thousand dollars of the fund, consisting of cash and collection items or drafts as aforesaid, belonging to the Keystone National Bank in the hands of the Tradesmen's National Bank?

'Second. If the stated facts do not show such equitable assignment of the whole twenty-five thousand dollars, do they show such equitable assignment of the cash so in the hands of the Tradesmen's National Bank, Namely, the sum of nineteen thousand seven hundred and tewnty-five and 62/100 dollars?'

Samuel Dickson and R. C. Dale, for appellant.

Silas W. Pettit, for appellee.

[Argument of Counsel from pages 638-643 intentionally omitted] Mr. Justice WHITE, after stating the case, delivered the opinion of the court.

As between a check holder an the bank upon which such check is drawn, it is settled that, unless the check be accepted by the bank, an action cannot be maintained by the holder against the bank. Bank v. Millard, 10 Wall. 152; Bank v. Whitman, 94 U. S. 343.

It is also settled that a check drawn in the ordinary form does not, as between the maker and payee, constitute an equitable assignment pro tanto of an indebtedness owing by the bank upon which the check has been drawn, and that the mere giving and receipt of the check does not entitle the holder to priority over general creditors in a fund received from such bank by an assignee under a general assignment made by the debtor for the benefit of his creditors. Florence Min. Co. v. Brown, 124 U. S. 385, 8 Sup. Ct. 531; Bank v. Schuler, 120 U. S. 511, 7 Sup. Ct. 644.

That the owner of a chose in action or of property in the custody of another may assign a part of such rights, and that an assignment of this nature, if made, will be enforced in equity, is also settled doctrine of this court. Trist v. Child, 21 Wall. 441, 447; Peugh v. Porter, 112 U. S. 737, 742, 5 Sup. Ct. 361. For recent cases maintaining this principle and referring to the present state of the law on the subject in the various states, see James v. Newton, 142 Mass. 366, 8 N. E. 122; Bank v. McLoon, 73 Me. 498; and Lanigan's Adm'r v. Bradley & Currier Co., 50 N. J. Eq. 201, 24 Atl. 505.

While an equitable assignment or lien will not arise against a deposit account solely by reason of a check drawn against the same, yet the authorities establish that if, in the transaction connected with the delivery of the check, it was the understanding and agreement of the parties that an advance about to be made should be a charge on and be satisfied out of a specified fund, a court of equity will lend its aid to carry such agreement into effect as against the drawer of the check, mere volunteers, and parties charged with notice.

This is but an application of the general doctrine of equitable assignments or lines announced by this court in Ketchum v. St. Louis, 101 U. S. 306, where it was held, citing various authorities and text writers, that: 'A party may, by agreemtne, create a charge or claim in the nature of a lien on real as well as on personal property whereof he is the owner or in possession, which a court of equity will enforce against him, and volunteers or claimants under him with notice of the agreement.' It is immaterial, for the purposes of this case, to draw a line of distinction between equitable assignments and equitable liens or charges.

In Risley v. Bank, 83 N. Y. 318, two counts of a complaint were based upon a check drawn upon the defendant bank by a depositor, in favor of plaintiff, while the third count based the right to recover upon an alleged oral assignment of a part of an indebtedness owing by the bank to such depositor, to the amount of the check. The check in question was drawn May 20, 1861, by a bank in South Carolina upon a bank in New York. The trial court ruled that the plaintiff was not entitled to recover upon the causes of action founded upon the check and the verbal promise of payment, but that plaintiff was entitled to recover upon the third cause of action if the jury should find the facts to be as therein averred. A judgment upon a verdict in favor of plaintiff was affirmed, it being held (page 327), to quote the language of the court of appeals in the subsequent case of Coates v. Bank, 91 N. Y. 26, 'in substance, that when, in addition to the check, there was an oral agreement between the drawer and payee, by which the former, for a valuable consideration, agreed to assign so much of the indebtedness of the bank to him as was represented by the check, and the check was given to enable the payee to collect and recover the portion of the debt assigned, the agreement operated as an assignment, and was sufficient to vest in the payee a title to that portion of the debt.'

In the Coates Case the Emporia Bank interpleaded in an action brought by the assignee in insolvency of the Mastin Bank against Donnell, Lawson & Co., bankers in New York City, to recover a balance of a deposit account kept by the Mastin Bank with Donnell, Lawson & Co. The intervener, the Emporia Bank, claimed to be entitled to a part of such balance on the ground of an assignment thereof made to it by the Mastin Bank, under the following circumstances: The Mastin Bank owed the Emporia Bank, and was requested by the latter to transfer on account thereof funds to the credit of the Mastin Bank with Donnell, Lawson & Co. The Mastin Bank replied it would do so, and at once charged the Emporia Bank, and credited themselves with $5,000, and on the same day, by letter, informed the Emporia Bank that this had been done, and by letter also notified Donnell, Lawson & Co. to credit the account of the Emporia Bank with the sum named. The Emporia Bank also gave the Mastin Bank credit for the amount. The court of appeals said (pages 27, 28):

'These circumstances in the conduct of both parties establish an agreement, the effect of which, as between the Mastin Bank and the Emporia Bank, was to estop the former from setting up that so much of the credit to which they were before entitled from Donnell, Lawson & Co. did not belong to the Emporia Bank, and the Emporia Bank from saying that so much of the debt before due from the Mastin Bank to it had not been extinguished. Allen v. Culver, 3 Denio, 284-292. Written out, the contract indicated by the bank entries and the correspondence is one of assignment of so much of the credit or funds then to its credit with Donnell, Lawson & Co., to the Emporia Bank, and a discharge of a debt due by it to that bank. The whole was completed the moment the letter of the Mastin Bank to the Emporia Bank was placed in the post office. Graves v. Bank, 17 N. Y. 205; Brogden v. Railway Co., L. R. 2 App. Cas. 666, 692; Ex parte Harris, L. R. 7 Ch. App. 596; Barry v. Society, 59 N. Y. 587, 594; Bank v. Low, 81 N. Y. 566. * * * As between these parties the credit or funds had ceased to be the property of the Mastin Bank. The Emporia Bank was no longer creditor, because it was paid. The credit, or right to call upon Donnell, Lawson & Co. for the same amount, was the means of payment.'

It was also held (page 29), upon the authority of Heath v. Hall, 2 Rose, 271, and Burn v. Carvalho, 4 Mylne & C. 690, that, as rights of third parties were not involved, it was immaterial to plaintiff's right to recover that the Mastin Bank became insolvent, and made a general assignment for the benefit of its creditors, of which Donnell, Lawson & Co. were notified before receipt by them of the notice from the Mastin Bank to credit the Emporia Bank. The court found (page 30) that the entries made by the Mastin Bank on its books showed an intention on the part of the Mastin Bank to transfer to the Emporia Bank a specific amount of the deposit with Donnell, Lawson & Co., and, 'taken in connection with the letters between the parties, and the order and letter of advice sent to the New York firm, were equivalent to an actual transfer of credit, or of account, and therefore to an assignment, at least in equity, of the fund in the hands of Donnell, Lawson & Co.'

In Cleaner Co. v. Smith, 110 N. Y. 83, 88, 17 N. E. 671, it was again held, to quote from the syllabus in the case, that (page 83): 'While the mere delivery to a third person of a check or draft drawn by a creditor upon his debtor does not effect a legal transfer of the debt, where it appears that the intent was to make such a transfer, it is the duty of the court to carry out the intent.' The court, in that case, from a review of the evidence, deduced therefrom, as matter of law, an actual transfer of the debt owing by the parties upon which a check or draft had been drawn.

In the still more recent case of Bank v. Clark, 134 N. Y. 368, 32 N. E. 38, the doctrine of Risley v. Bank, and Cleaner Co. v. Smith, was expressly approved. 134 N. Y. 373, 32 N. E. 40. The controversy was between the payee of a check and a private banker upon whom it had been drawn, the defendant denying having been at any time indebted to the maker of the check. In affirming a judgment entered upon a verdict in favor of defendant, the court of appeals held, despite the fact that a check had been given, that the trial judge properly left it to the jury to determine under the particular...