Commercial Credit Co. v. Continental Trust Co.

• Citation: 295 F. 615
• Decision Date: 26 December 1923
• Docket Number: 4184.,4072
• Parties: COMMERCIAL CREDIT CO. et al. v. CONTINENTAL TRUST CO. CONTINENTAL TRUST CO. v. COMMERCIAL CREDIT CO. et al.
• Court: United States Courts of Appeals. United States Court of Appeals (5th Circuit)

295 F. 615

COMMERCIAL CREDIT CO. et al. v. CONTINENTAL TRUST CO.

CONTINENTAL TRUST CO. v. COMMERCIAL CREDIT CO. et al.

Nos. 4072, 4184.

Circuit Court, of Appeals. Fifth Circuit.

December 26, 1923

T. B Higdon, of Atlanta, Ga. (Alex W. Smith and Smith, Hammond &amp Smith, all of Atlanta, Ga., on the brief), for Commercial Credit Co. and another.

Robert C. Alston, P. H. Alston, and E. W. Moise, all of Atlanta, Ga. (Alston, Alston, Foster & Moise, of Atlanta, Ga., on the brief), for Continental Trust Co.

Before WALKER and BRYAN, Circuit Judges, and GRUBB, District Judge.

GRUBB District Judge.

These two appeals were from the same decree of the District Court for the Southern District of Georgia. The Continental Trust Company, appellee in No. 4072, and cross-appellant in No 4184 (hereinafter designated the Trust Company), filed a bill in equity in the District Court against the Commercial Credit Company (hereafter designated the Credit Company), the Salisbury Metal Culvert Company (hereafter designated the Culvert Company), appellants in No. 4072 and cross-appellees in No. 4184, and others who have not appealed, among them, Butts county, Ga., a municipal corporation. The named corporations, except Butts county, Ga., were nonresidents of Georgia, and an order was made for service on or notice by publication to them in the manner prescribed by section 57 of the Judicial Code (Comp. St. Sec. 1039). The two nonresident corporations appeared specially and moved that the order be vacated, and the attempted service by publication quashed, and that, as to said nonresidents, the bill be dismissed for want of jurisdiction. The District Court granted the motion and dismissed the bill as to the nonresidents for want of jurisdiction, and this court reversed the decree, holding that its allegations were sufficient to confer jurisdiction under section 57 of the Judicial Code. Continental Trust Company v. Shunk Plow Company (C.C.A.) 263 F. 873.

The original bill asserted a claim to a fund in the hands of Butts county, being the proceeds of special taxes levied to pay debts of the county, including debts evidenced by three county warrants, issued in 1914 to the Culvert Company. The bill alleged that the Continental Trust Company in May, 1915, bought from the Culvert Company three warrants, each for $2,200, which purported to evidence debts owing by Butts county; that the warrants were issued as duplicates of the three outstanding ones of like amount, issued to the Culvert Company by Butts county in 1914, which were agreed to be surrendered by the Culvert Company to the county for cancellation; that the surrender was never made, and that, when the duplicates were issued, the original warrants were outstanding in the hands of the Commercial Credit Company, to which they had been assigned by the Culvert Company, which had theretofore sold its account against Butts county, which was evidenced by the warrants, to the Credit Company.

The bill further alleged that the Trust Company was unaware of the issue of the original warrants, and believed that the warrants sold it by the Culvert Company were the original and valid ones issued by the county. The bill further alleged that the Credit Company redelivered the warrants to the Culvert Company for surrender to the county, the Credit Company having received an indorsed note of the Culvert Company in lieu of them; that the Culvert Company failed to make the surrender to the county of the original warrant, and finally turned them back to the Credit Company, as additional security to the indorsed note for the indebtedness of the Culvert Company to it, with knowledge on its part of the outstanding duplicate warrants, and of the fact that their issue had been procured by the Culvert Company on its promise to produce and surrender the originals. Under these allegations this court held that the Credit Company held the warrants in trust for the holder of the duplicate warrants, and that the holder of the duplicate warrants had a claim to the fund in Butts county, the proceeds of taxes, to pay the debt, evidenced by the warrants, which conferred jurisdiction on the District Court.

Upon the trial of the cause, the plaintiff failed to prove the case alleged in its bill. It failed to show that the Credit Company ever surrendered the original warrants assigned to it by the Culvert Company to that Company for cancellation by Butts county, and that the Credit Company had knowledge of the issue of the duplicate warrants or was in any way responsible for their issue, and that there was any return of the warrants to the Credit Company, through collusion with the Culvert Company, and in fraud of the rights of the Trust Company. The District Court found that the Credit Company was the owner of the original warrants as against any superior equities of the Trust Company, having purchased them for value, and having had no part in or knowledge of the issue of the duplicate warrants. The District Court, however, found that of the monies the Trust Company had paid to the Culvert Company, for the duplicate warrants, an amount of $3,041.68 was remitted by the Culvert Company to the Credit Company, and credited by the Credit Company to the amount due it from the Culvert Company, on an account of Gwinnett county due to the Culvert Company, which the Credit Company had also bought from the Culvert Company.

We think this amount was satisfactorily traced from the Trust Company through the Culvert Company and H. B. Smith, its officer, into the possession of the Credit Company through remittance to it at Baltimore, and that the District Court correctly so found. The money remained the money of the Trust Company, after its receipt by the Culvert Company, because of the fraud. The Culvert Company, as collecting agent for the Credit Company, remitted the Trust Company's money to its principal, the Credit Company, which applied it to the amount due it from the Culvert Company. It did not change its position in any way when it received and applied the money. The Trust Company therefore had the right to reclaim it, if it could be traced. Fulton National Bank v. Hosier et al. (C.C.A.) 295 F. 611, decided December 13, 1923. The District Court rightly held that the $3,041.68 came into the possession of the Credit Company, and that the Trust Company was entitled to reclaim it. The decree of the District Court held that the holder of the duplicate warrants had an interest in the tax fund in Butts county for the payment of the account due the Culvert Company and the warrants evidencing them, subject to the prior claim of the Credit Company upon that fund. One-fourth of the fund, which in all was $6,600, had already been paid the Credit Company as holder of one of the original warrants. Out of the balance the court directed that the Credit Company be paid $1,908.32, and that the Trust Company be paid $3,041.68, which was the amount of the purchase money paid by the Trust Company to the Culvert Company, and which was traced into the possession of the Credit Company.

The Credit Company also disputes the correctness of the decree upon the further grounds (1) that the pleadings did not present the issue, and (2) because the District Court had jurisdiction as against the interest of the Credit Company in the Butts county fund only, and not to render a general decree against it, and there being no connection between the money traced into the possession of the Credit Company and the Butts county...