Fidelity & Deposit Co. of Maryland v. Redfield

• Decision Date: 12 October 1925
• Docket Number: No. 4490.,4490.
• Citation: 7 F.2d 800
• Parties: FIDELITY & DEPOSIT CO. OF MARYLAND v. REDFIELD.
• Court: U.S. Court of Appeals — Ninth Circuit

7 F.2d 800 (1925)

FIDELITY & DEPOSIT CO. OF MARYLAND v. REDFIELD.

No. 4490.

Circuit Court of Appeals, Ninth Circuit.

August 24, 1925.

Rehearing Denied October 12, 1925.

Frank T. Wyman, of Boise, Idaho, for plaintiff in error.

Charles A. Sunderlin, of Los Angeles, Cal., and Wm. M. Morgan and E. B. Smith, both of Boise, Idaho, for defendant in error.

Before GILBERT, HUNT, and RUDKIN, Circuit Judges.

GILBERT, Circuit Judge (after stating the facts as above).

The principal contention of the surety company is that it was error to deny its motion for an instructed verdict in its favor. Upon some of the facts the evidence was conflicting. The defendant in error resided in California. During the year 1921 he was represented by his brother, who resided at Burley, Idaho, to whom he had given a power of attorney to execute a bond to the surety company to secure it against liability on its undertaking on the appeal. Neither he nor his brother had any control over the certificate of deposit issued to the clerk of the state court, and when the certificate was issued in the name of the surety company neither he nor his brother was consulted, or was aware of the exact nature of the transaction. The surety company directed the form of the certificate. There was evidence that the surety company could have collected the money, if at any time prior to the day preceding the date of the closing of the bank it had made demand therefor, and evidence tending to indicate that the surety company assumed the responsibility of leaving the money on deposit. There is absence of evidence to show that it consulted the defendant in error as to the disposition of the money. The surety company knew of a run on the bank in April, 1921, and there was evidence tending to show that it knew that by general reputation of the bank in the community it was considered of doubtful solvency. The court below carefully instructed the jury as to the issues and the evidence, and duly safeguarded the rights of the surety company.

We find no warrant for saying that the court, which heard the testimony and thus submitted the cause to the jury, erred in denying the motion for an instructed verdict. The surety company was a trustee of the money so deposited in the bank. It was bound to the exercise of ordinary prudence and diligence both in making and continuing the deposit, 26 R. C. L. 1314; Norwood v. Harness, 98 Ind. 134, 49 Am. Rep. 739; Philadelphia Finance Co.'s Appeal, 144 Pa. 499, 22 A. 831, 14 L. R. A. 103. It is held that the amount which a trustee may leave lying in a bank at one time must not be too great (note, 14 L. R. A. 103, 105), and that he must not keep money on deposit for an unreasonable time (Barney v. Saunders, 16 How. 536, 14 L. Ed. 1047), and that, by depositing trust money in a bank and taking a certificate of deposit payable in 12 months, a trustee becomes liable for the same in case of its loss through the insolvency of the bank before the time of payment (Baer's Appeal, 127 Pa. 360, 18 A. 1, 4 L. R. A. 609). If he deposits the money in his own name, thereby vesting himself with legal title, he is likewise responsible in case of loss. Naltner v. Dolan, 108 Ind. 500, 8 N. E. 289, 58 Am. Rep. 61; Williams v. Williams, 55 Wis. 300, 12 N. W. 465, 13 N. W. 274, 42 Am. Rep. 708. See, also Corya v. Corya, 119 Ind. 593, 22 N. E. 3; O'Connor v. Decker, 95 Wis. 202, 70 N. W. 286; Re Arguello, 97 Cal. 196, 31 P. 937.

We are not impressed with the argument that the defendant in error is in no position to charge the surety company with negligence in leaving the money in the bank, for the reason that he had first deposited the money there, taking a certificate of deposit in the name of the clerk of the court, and had permitted it to remain in the bank, and at no time demanded that it be taken therefrom, or protested against the issuance of the certificate to the surety company, or demanded that the surety company withdraw the money. At the time when the defendant in error deposited the money, so far as the evidence goes, no question had been made of the solvency of the bank. The certificate of deposit then issued was accepted by the clerk as cash, and was by him renewed as cash, and so remained until more than a year later, when the surety company executed the appeal bond and took over the money so deposited. It was after that date that questions arose as to the solvency of the bank, and explanation of the silence and nonaction of the defendant in error may be found in the fact that during the whole of the time involved in the controversy he resided in California, and that his power of attorney, executed to his brother in Idaho, was but a power to assign certain collaterals, in addition to the money deposited in the bank, to secure the surety company against loss upon the bond.

It is said that it was error to permit the receiver to state the cash balances, as shown by the daily statements of the bank, when the figures thus given were admittedly incorrect, and to permit him to testify that the bank could have paid the certificate at any time after August 16, 1921, on 30 days' notice, except possibly the last day before the bank closed. The receiver admitted that the bank's statements, purporting to show the amount of cash in the bank at the close of business each day, included cash items which were not cash, and that he could not say, nor did the books from which he was testifying show, the amount of actual cash in the bank. But he testified that the bank had reserves in other banks, from which it could have drawn to meet its demands, and it was shown that the bank had such a reserve in the Federal Reserve Bank of San Francisco and other depositories. The evidence was admissible to show that the capacity of the bank to pay the deposit, if the surety company had demanded payment, did not depend upon the actual cash in the bank, but upon its ability to obtain money from all sources. The receiver's testimony that the certificate could have been paid was the expression of his judgment, derived from an examination of the books and records of the bank and the bank's condition covering several months of investigation. We think there was no error, therefore, in admitting the testimony.

Nor do we think it was error to refuse to strike out the receiver's testimony that on August 16, 1921, the bank had $111,450.61 in certificates of deposit outstanding; whereas, on November 19, 1921, it had but $67,847.51. The purpose of the testimony was to show that the surety company was negligent in failing to withdraw the money on its maturity, August 16, 1921, for, as we read the certificate of deposit, it was payable on ...