Great Atlantic & Pacific Tea Co. v. CITIZENS'NAT. BANK

• Decision Date: 17 November 1932
• Docket Number: No. 2625.,2625.
• Citation: 2 F. Supp. 29
• Parties: GREAT ATLANTIC & PACIFIC TEA CO. v. CITIZENS' NAT. BANK et al.
• Court: U.S. District Court — Western District of Pennsylvania

2 F. Supp. 29

GREAT ATLANTIC & PACIFIC TEA CO. v. CITIZENS' NAT. BANK et al.

No. 2625.

District Court, W. D. Pennsylvania.

November 17, 1932.

John A. Metz and William C. McClure, both of Pittsburgh, Pa., for plaintiff.

Henry Eastman Hackney (of Shelby, Hackney & Ray), of Uniontown, Pa., for defendants.

McVICAR, District Judge.

This is a suit for the purpose of recovering a deposit which the plaintiff claims is held in trust for it. Issues were formed by the bill and answer. The following findings of fact and conclusions of law are made:

Findings of Fact.

The facts are found as stated in the "Agreed Statement of Facts" of the parties filed herewith.

Conclusions of Law.

1. The contract between the plaintiff and the Citizens' National Bank did not create an express trust.

2. The bank was not hopelessly or irretrievably insolvent when the deposits of October 3 and 5, 1931, were made, therefore an implied trust did not arise in favor of the plaintiff.

3. The bill should be dismissed at the costs of the plaintiff.

Opinion.

The Great Atlantic & Pacific Tea Company, plaintiff, is the owner of a chain of stores, several of which are located at or near Vandergrift, Pa. In order to take care of the banking for the stores at or near Vandergrift, plaintiff, in May, 1931, entered into a contract with the Citizens' National Bank of Vandergrift, a National Banking Association, whereby plaintiff agreed to maintain in said bank an open dormant deposit of $2,000. The managers of plaintiff's stores aforesaid were to make daily deposits in said bank. The bank was to remit each day the amount of the daily deposits to the First National Bank of Pittsburgh, Pa. In pursuance of this contract, the dormant deposit of $2,000 was made and maintained. Daily deposits were made by the managers. The amount of the daily deposits was transmitted by draft at the close of each day's business to the First National Bank of Pittsburgh, Pa. The manner in which the remittances were made was known to plaintiff who made no objection thereto. The bank received deposits from the managers aforesaid, after the close of banking business for Saturday, October 3, 1931, and also received deposits from the managers on October 5, 1931. Drafts for the amount of these deposits were mailed to the First National Bank of Pittsburgh, after the close of business October 5, 1931. Before the drafts were received by the First National Bank of Pittsburgh, the Citizens' National Bank suspended business and was placed in the hands of the comptroller of the currency, who afterwards appointed a receiver therefor. The Citizens' National Bank was insolvent when the aforesaid deposits of October 3d and 5th were made, and its financial condition at the time these deposits were received was known by the board of directors and the officers of said bank. During this time negotiations were pending for consolidation with another bank and also for the procuring of additional funds. The futility of these negotiations was not known by the Citizens' National Bank until after the drafts aforesaid were mailed.

Plaintiff contends, under the facts aforesaid, that the bank held said deposits under an express trust in its favor; also that an implied or constructive trust arose from the receiving of the deposits by the bank while insolvent and with a knowledge of its financial condition at the time the deposits were received. Where a national bank receives money on deposit which is to be mingled with its other assets and become a part thereof, the relation created by the deposit is that of creditor and debtor although the amount represented by the deposit is to be used and applied to a specific purpose. Comment to section 15 of the Trusts Restatement of the American Law Institute, p. 44; Article by the now Mr. Justice Stone of the Supreme Court (then Dean of the Columbia Law School) 21 Columbia L. R. 511, 514, 515; In re A. Bolognesi & Co., 254 F. 770, 772 (C. C. A. 2); Strohmeyer & Arpe Co. v. Guaranty Trust Co. of New York, 172 App. Div. 16, 157 N. Y. S. 955; Beecher v. Cosmopolitan Trust Co., 239 Mass. 48, 131 N. E. 338; In re Gubelman, 9 F.(2d) 486 (C. C. A. 2); Equitable Trust Co. v. First National Bank of Trinidad, Colo., 275 U. S. 359, 48 S. Ct. 167, 72 L. Ed. 313; General Baking Co. v. Gordon, ___ F. Supp. ___,¹ Eastern District of Pennsylvania, opinion by Judge Kirkpatrick, October 11, 1932; Blakey v. Brinson, 286 U. S. 254, 52 S. Ct. 516, 76 L. Ed. 1089. In comment to section 15 of the Trusts Restatement of the American Law Institute, it is stated: "If money is deposited in a bank for a special purpose, the bank is a trustee or bailee of the money if, but only if, it is the understanding of the parties that the money deposited is not to be used by the bank for its own purposes."

In 21 Columbia L. R. 507, Mr. Justice Stone stated, p. 511: "Thus one who is permitted to use money entrusted to his care as his own, is liable as a debtor or contractor and not a fiduciary."

And also the same author stated, p. 515: "When the customer pays money to the banker for transmission it would seem that the same principles of interpretation should control. Every consideration which would lead to the conclusion that the collecting banker is a debtor when the collection is complete and there is no stipulation to the contrary would lead to the like conclusion when money is deposited, in the ordinary course of business, for transmission. As has already been pointed out the depositor does not contemplate physical transmission of the money deposited by him. He must contemplate that the payment will be effected in the customary manner and that the money deposited, upon being credited to the customer will be used by the banker as his own as a part of the common mass of money received from his depositors. The necessary legal conclusion from such an intention, acted upon, is that the banker's obligation is purely contractual, unless it is expressly stipulated that the money is to be set apart as a quasi-trust fund and held as such for the account of the depositor or the payee."

In Re A. Bolognesi & Co., supra, Circuit Judge Hough stated: "But those claimants who came to the bankrupt to buy drafts and the like, and got what they bargained...