Bank of Vass v. Arkenburgh

• Decision Date: 12 January 1932
• Docket Number: No. 3217.,3217.
• Citation: 55 F.2d 130
• Parties: BANK OF VASS v. ARKENBURGH et al.
• Court: U.S. Court of Appeals — Fourth Circuit

55 F.2d 130 (1932)

BANK OF VASS v. ARKENBURGH et al.

No. 3217.

Circuit Court of Appeals, Fourth Circuit.

January 12, 1932.

U. L. Spence, of Carthage, N. C. (H. F. Seawell, Jr., of Carthage, N. C., on the brief), for appellant.

Pou & Pou, of Raleigh, N. C. (John J. Crawford, of New York City, on the brief), for appellees.

Before PARKER, NORTHCOTT, and SOPER, Circuit Judges.

PARKER, Circuit Judge.

This is an appeal by the Bank of Vass, of Vass, N. C., from a decree holding it liable for trust funds deposited to the personal account of an executrix and her husband, and paid out on personal checks drawn against the account. The suit was instituted to recover the amount misappropriated by the executrix; and the bank was made a party for the purpose of charging it with the funds belonging to the estate which had been deposited with it. From a decree in favor of complainants, the bank has appealed.

It appears that a Mrs. Emily Salmon, a resident of the state of New York, died in the year 1920 leaving a last will and testament in which she named her two daughters executrices of her estate, and directed that, after the payment of debts and legacies, the residue of the estate be equally divided among these daughters and a grandson. One of the daughters, a Mrs. Florence Dunlop, qualified as executrix; and to her, as executrix, a check in the sum of $6,795.78 on the United States Mortgage & Trust Company of New York was drawn and delivered by Richard F. Weeks, referee. This check was indorsed by Mrs. Dunlop, as executrix, and same was deposited by her husband, Edward D. Dunlop, in the Bank of Vass to the joint personal account of himself and wife. When he made the deposit, he stated to the officials of the bank that the check belonged to himself and wife; and the bank had no knowledge of any circumstances sufficient to put it on notice that this statement was not correct, or that the check constituted a trust fund held for the benefit of other persons. It received no such notice until after the funds so deposited had been checked out by checks drawn in the name of Dunlop and wife. It received no part of the funds, and in nowise profited by reason of the deposit.

After the funds had been checked out of the bank, the surrogate of Kings county, N. Y., found a balance due from Florence S. Dunlop to the estate of $6,770.88; and this suit was instituted by her sister and co-administratrix to recover from her and the bank the portion of the balance belonging to the sister, and also the portion belonging to the grandson of Mrs. Salmon, which was to be held in trust for him under the terms of the will. The court rendered a decree for complainant in accordance with the prayer of the bill; and the bank has appealed, denying that it is responsible to the legatees under the will for the funds deposited with it, as it had no knowledge of the trust attaching to the funds, or of the fact that same were being converted by Mrs. Dunlop, when it honored the checks drawn against the account in which same were deposited.

We think that the position of the bank must be sustained. The case is not one where the bank has violated its contract of deposit, as by charging personal checks of a fiduciary against a trust account. It is not one where trust funds have gone to pay a debt due the bank or where the bank has otherwise profited from the deposit of such funds. It is not one where the bank, with knowledge that a fiduciary is defrauding an estate, has aided in the perpetration of the fraud either by collecting checks or by honoring checks drawn against a deposit. But it is a simple case of where a bank, without knowledge of any misconduct on the part of the fiduciary, has credited a check drawn to and indorsed by the fiduciary to the individual account of the fiduciary...