Washington Loan & Banking Co. v. Fourth Nat. Bank

• Decision Date: 07 March 1930
• Docket Number: No. 5762.,5762.
• Parties: WASHINGTON LOAN & BANKING CO. v. FOURTH NAT. BANK OF MACON et al.
• Court: U.S. Court of Appeals — Fifth Circuit

38 F.2d 772 (1930)

WASHINGTON LOAN & BANKING CO. v. FOURTH NAT. BANK OF MACON et al.

No. 5762.

Circuit Court of Appeals, Fifth Circuit.

March 7, 1930.

W. A. Slaton, of Washington, Ga., for appellant.

Scott Russell and C. Baxter Jones, both of Macon, Ga. (Jones, Jones, Johnston & Russell, Geo. S. Jones, and Scott Russell, all of Macon, Ga., on the brief), for appellees.

Before BRYAN and FOSTER, Circuit Judges, and SIBLEY, District Judge.

SIBLEY, District Judge.

The bill of Washington Loan & Banking Company of Washington, Ga., against the receiver of Fourth National Bank of Macon, Ga., sought to impress a trust on the funds of the latter bank upon the ground that at the time of the failure, November 26, 1928, there were identifiable funds in the hands of the Macon bank, which equitably belonged to the Washington bank, and which passed into the hands of the receiver. The bill was dismissed as without equity upon its face. The facts alleged, generally stated, are these: For a long time before the failure of the Macon bank, the Washington bank had sent to it checks and drafts indorsed in blank, and inclosed in a form letter as follows: "Enclosed find for collection and credit items enumerated below. * * * Return promptly if unpaid." The form of the Macon bank's acknowledgment is not stated. The items so sent were at once entered by the Macon bank to the credit of the Washington bank, no separate collection register apparently being kept; but the Washington bank did not check against them until sufficient time had elapsed for the drafts to be collected and the funds or the uncollected drafts to be actually returned to the Macon bank by its correspondents. Uncollected items were, when returned, charged to the Washington bank without previous notice to or consent by it. Just prior to the failure, a number of drafts on points in Massachusetts, Pennsylvania, and New Jersey were thus sent by the Washington bank to the Macon bank. Those on Pennsylvania and New Jersey were by the Macon bank sent to the First National Bank of Philadelphia, where the Macon bank had a general deposit account. What special instructions were given the Philadelphia bank do not appear, but the proceeds of these drafts so far as collected were all put to the general credit of the Macon bank on or before November 24, 1928, two days before the failure, but were not checked out by the Macon bank. The drafts on Massachusetts were sent by the Macon bank to the Federal Reserve Bank of Atlanta, no special instructions appearing, and by it forwarded to the Federal Reserve Bank of Boston for collection for the account of the Macon bank. The Macon bank had no account with the Federal Reserve Bank of Boston, so that collections made by it were customarily remitted to the Federal Reserve Bank of Atlanta and credited there to the general account of the Macon bank. Some drafts were collected in Boston the very day of the failure of the Macon bank, and their total of $856.48 was on that date in the hands of the Federal Reserve Bank of Boston, not yet remitted to Atlanta. The Macon bank, after its failure, had large balances both at the First National Bank of Philadelphia and the Federal Reserve Bank of Atlanta, and its receiver received also the funds in the hands of the Federal Reserve Bank of Boston. All drafts remaining uncollected have been returned to the Washington Bank as its property by the receiver. The controlling question is whether any of the collected funds which came to his hands were then the legal or equitable property of the Washington bank, and can be traced as such.

There is really no problem of tracing. Identifying coin or currency is impossible, for no coin or currency was probably ever handled in the transactions. Tracing credits under modern doctrine is sufficient. Richardson v. New Orleans Coffee Co. (C. C. A.) 102 F. 780, 52 L. R. A. 67. The Macon bank's general accounts with the Atlanta and Philadelphia banks were equivalent to separate vaults or drawers in which some of its funds were kept, and if funds of the Washington bank are shown to have gone into one of them and no withdrawal has since been made which must have taken these funds out, equity concludes that the fund which the Macon bank did not withdraw was that which it ought not to have used. If...