Continental Commercial Trust Savings Bank v. Chicago Title Trust Company
Decision Date | 10 June 1913 |
Docket Number | No. 741,741 |
Citation | 57 L.Ed. 1268,33 S.Ct. 829,229 U.S. 435 |
Parties | CONTINENTAL & COMMERCIAL TRUST & SAVINGS BANK, Appt., v. CHICAGO TITLE & TRUST COMPANY, Trustee in Bankruptcy of Earl H. Prince, Bankrupt |
Court | U.S. Supreme Court |
Messrs. Horace Kent Tenney and Roger Sherman for appellant.
Messrs. Edwin Terwilliger, Jr., and William J. Pringle for appellee.
[Argument of Counsel from pages 436-438 intentionally omitted] Mr. Justice Day delivered the opinion of the court:
This is a controversy arising in a bankruptcy proceeding, and involves questions of the right to certain property, as between the appellant, the Continental & Commercial Trust & Savings Bank, and the Chicago Title & Trust Company, as trustee in bankruptcy of Earl H. Prince, bankrupt. Two items are involved: first, the sum of $4,250, the amount of certain margin certificates issued by the predecessor of the appellant bank to the bankrupt Prince; and second, a balance of $575.79 remaining in Prince's checking account with the bank of the predecessor of the appellant, therein deposited by the bankrupt. The trustee brought the suit to recover the amount of the margin certificates and the bank balance as having been preferentially transferred within the terms of the bankruptcy act. The district court held the trustee entitled to recover, and this decree was affirmed by the circuit court of appeals (199 Fed. 704), and the case comes here.
There is no controversy as to the facts. A petition in bankruptcy was filed against Prince February 15, 1905. He had been for several years a member of the Board of Trade of Chicago, buying and selling on the Board and subject to its rules. The Federal Trust & Savings Bank, the predecessor of the appellant, was engaged in the gen- eral banking business in the city of Chicago, and Prince did his banking business at that bank, and had a general deposit and checking account therein. By the rules of the Board of Trade, purchasers and sellers might require of the other party to the trade a deposit of 10 per cent of the contract price of the property bought or sold, and further security from time to time as the margin might require. Certain banks, of which the Federal Trust & Savings Bank was one, were authorized to issue margin certificates, which were in the following form:
Federal Trust and Savings Bank,
Chicago, No. ...
Deposited by E. H. Prince, $..... Dollars As security on a contract or contracts between the depositor and . . ., which amount is payable on the return of this certificate, or the duplicate of the same (one of which being paid, the other shall become void), duly indorsed by both of the above-named parties, or on the order of the president of the Board of Trade of the city of Chicago, indorsed on either of the original or duplicate hereof, as provided by the rules of said Board of Trade under which the above-named deposit has been made.
Original.
Not negotiable or transferable.
........
Cashier.
Margin certificates on various days from September 15, 1904, to February 9, 1905, in the form above set forth, had been issued to Prince, to procure which he had drawn his check against his checking account with the bank, or deposited with it the requisite sum of money. Each of the said certificates evidenced a liability of the bank to Prince for the amount stated in the certificate, unless, because of the default by Prince on the contract for which the certificate was held by the other party as security, it was paid to such other party. The record of certificates was kept in the margin register of the bank.
On the 14th of February, 1905, the vice president of the bank and Prince had a conference concerning the financial troubles of Prince, and one W. P. Anderson, of W. P. Anderson & Company, was called to the bank. A conference was had as to the best way of closing out Prince's open trades, with the result that Anderson agreed to act in the premises, and on the same day, February 14th, and the day following, Prince transferred all his open trades in accordance with the rules of the board to Anderson, for his company, and the latter agreed to carry out Prince's contracts, and proceeded to do so. Anderson & Company, on February 15, 1905, substituted its own securities for Prince's trades, and thereby recovered the certificates deposited by Prince, which were turned over to the Federal Trust & Savings Bank. Prince was at that time indebted to the bank in the sum of about $37,000, and the bank, upon the return of the certificates from Anderson & Company, applied the money secured by the certificates to Prince's indebtedness to the Bank. The master found:
'That taking the said open trades so transferred as a whole, the condition of the market at the time of the transfer was such that the aggregate sum of the amounts due thereon to Earl H. Prince from members of the Board of Trade, if he had then settled the trades, would have been greater than the aggregate sums of the amount then due thereon from Prince to others of said members of the Board; that among the open trades so transferred and settled were trades with the said members of the Board who held securities or margin certificates furnished by the said Prince.
Furthermore:
The facts with respect to the bank balance of $575.79 are: On February 10, 1905, the bank called the loans of Prince, and, such loans not being paid, the bank applied to them the sum of $3,095 then on deposit in Prince's checking account, leaving the sum of $3.25 in that account. On the same day the bank agreed with Prince that, if he would thereafter make deposits for such purpose, it would pay certain salary and pay roll checks of Prince and checks issued to the Board of Trade Clearing House. Checks were paid on divers days between the 4th and 14th of February, 1905, to the amount of $2,506.46, and Prince deposited with the bank between the 10th and 14th of February a total of $3,079 all such items being entered upon the books of the bank as of February 14, 1905. The amount deposited exceeded the amount checked out by $572.54, and this amount, with the $3.25 remaining to the credit of Prince, as above set forth, left a balance of $575.79, which the bank, on February 14th, applied to Prince's general indebtedness to it.
The bank had...
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