Blakey v. Brinson

Decision Date16 May 1932
Docket NumberNo. 639,639
PartiesBLAKEY v. BRINSON
CourtU.S. Supreme Court

Messrs. Henry Eastman Hackney, of Uniontown, Pa., and George P. Barse, of Washington, D. C., for petitioner.

[Argument of Counsel from pages 255-256 intentionally omitted] Mr. L. I. Moore, of New Bern, N. C., for respondent.

[Argument of Counsel from pages 255-256 intentionally omitted] Messrs. George P. Barse and F. G. Awalt, both of Washington, D. C., amicus curiae.

Mr. Justice STONE delivered the opinion of the Court.

Respondent brought suit against the petitioner, receiver of the First National Bank of New Bern, N. C., an insolvent national bank, to recover money alleged to have been paid to the bank upon trust for the purchase, for respondent, of United States bonds. Judgment of the United States District Court for the Eastern District of North Carolina for respondent was affirmed by the Court of Appeals for the Fourth Circuit. 52 F.(2d) 821. This Court granted certiorari. Blakey v. Brinson, 285 U. S. 531, 52 S. Ct. 312, 76 L. Ed. —.

The case was tried to the court without a jury, and the facts are not in dispute. Respondent maintained an in terest-bearing savings account with the bank, in which his credit balance on October 14, 1929, was $1,961.31. Shortly before that date, respondent had had conversations with an officer of the bank, in the course of which the latter signified the willingness of the bank to purchase $4,000 of United States bonds for respondent. On October 10, he stated to respondent that the bank would send to Richmond for the bonds, and asked him to bring to the bank on the 14th such amount, in addition to his credit balance, as would be required to pay for the bonds. On the latter date respondent drew a check for $2,100 upon another bank, which he deposited in his savings account, thus increasing his deposit balance to $4,061.31. On the 15th, the same officer of the bank informed respondent that the bonds had been ordered, and on the 19th said to him, 'I have your bonds,' and handed to him a charge slip which stated: 'This is to advise you that we have this day charged your account as follows:

                           4,000 Fourth L. L. 4 1/4% Bonds............ $3,960.00
                           Acc. Int........................................  .60
                           Commission.......................................4.00
                                                                       $3,964.60"
                 

On October 21 the bank charged respondent's savings account on its books with $3,964.60, and credited a like amount as a 'deposit' in a 'bond account' appearing on its books. The bond account contained only a daily record of credits in the account of checks and deposits and their total, without any reference to respondent or any other customer of the bank. The nature and purpose of the account does not otherwise appear. When the bank closed its doors on October 26, it was discovered that in fact no bonds had been purchased, ordered, or received for the respondent. The only transactions had with respect to respondent or his account were the con- versations with the officer of the bank and the entry of the debit and credit items mentioned.

On these facts, the District Court concluded that the bank had received the $3,964.60 in trust for the purpose of purchasing the bonds, and that, as the funds in the hands of the receiver had been augmented by the wrongful commingling of the trust fund with the other funds of the bank, respondent was entitled to payment in preference to the general creditors of the bank. The Court of Appeals thought that the trust arose only on the 19th, when the bank stated that respondent's account had been charged with the purchase price of the bonds, but reached the same conclusion as respects the increase of the funds in the hands of the receiver and the right of respondent to preferential payment.

The petitioner insists, as matter of law, that no trust ever came into existence as the result of these transactions. He also relies on the facts that the $2,100 check credited to respondent's account had been included in a clearing house settlement of the bank with a correspondent, and its proceeds in the form of a draft for the balance due upon the settlement had been indorsed and turned over by the New Bern bank to a third bank in settlement of its account with the latter. From this it is argued that the check did not augment the bank's funds, and that the proceeds could not be traced into the hands of the receiver; hence as to them the respondent could not be preferred over general creditors.

As we conclude that petitioner's first position is well taken, it is unnecessary to consider the second. It would have been equally competent for respondent to have provided for the purchase of the bonds either by the creation of a trust of funds in the hands of the bank, to be used for that purpose, or by establishing with it a credit to be debited with the cost of the bonds when purchased. But only if the former was the method adopted could respond- ent, upon the bank's insolvency and failure to purchase the bonds, recover the fund or its proceeds, if traceable, in preference to general creditors. See Minard v. Watts (C. C.) 186 F. 245; Fallgatter v. Citizens' National Bank (D. C.) 11 F.(2d) 383; Northern Sugar Corp. v. Thompson (C. C. A.) 13 F.(2d) 829.

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