Equitable Trust Co of New York v. Rochling 14 17, 1927, 34

• Decision Date: 21 November 1927
• Docket Number: No. 34,34
• Parties: EQUITABLE TRUST CO. OF NEW YORK v. ROCHLING et al. Argued Oct. 14-17, 1927
• Court: U.S. Supreme Court

275 U.S. 248

48 S.Ct. 58

72 L.Ed. 264

EQUITABLE TRUST CO. OF NEW YORK

v ROCHLING et al.

No. 34.

Argued Oct. 14-17, 1927.

Decided Nov. 21, 1927.

Mr. Godfrey Goldmark, of New York City (Messrs. George G. Ernst and Ralph F. Colin, both of New York City, of counsel), for petitioner.

Mr. Henry G. Hotchkiss, of New York City, for respondents.

[Argument of Counsel from pages 249-250 intentionally omitted] Mr. Justice STONE delivered the opinion of the Court.

Respondents, bankers of Frankfort-on-Main, maintained a general deposit account with the bankrupts, who were private bankers in New York City. On instruction of Lloyds Bank, Limited, London, which was requested by respondents 'to procure this amount for us' on June 15, 1923, 'at Knauth, Nachod & Kuhne, New York,' the National Bank of Commerce in New York on that day delivered to Knauth, Nachod & Kuhne, the bankrupts, its cashier's check for $30,000, payable to them 'for account of Rochling Bank, Gebr. Frankfort-on-Main,' and took from them their receipt for the check 'for account of Rochling Bank.' On instruction of the Swiss Bank, London, the National City Bank, New York, on the same date delivered its cashier's chock for $30,000, payable to the order of Knauth, Nachod & Kuhne, 'A/C Gebr. Rochling, Frankfort A/M,' taking from them a receipt in like form. On that day, too, the bankrupts credited the account of respondents with the two checks and made an entry on their books indicating that respondents were entitled to interest on the amount of the checks from that date. The checks were deposited by Knauth, Nachod & Kuhne in their own deposit accounts in other banks and were there credited to those accounts. On the following day, June 16, 1923, before the collection of the checks, the petition in bankruptcy was filed.

In receiving these checks, forthwith crediting respondents with them, and in crediting interest from the date of their receipt, the bankrupts followed the established course of their business with respondent which had extended over a period of more than two years. Periodic statements of the account rendered to respondents showed that interest was credited from the day of deposit, and that on occasion drafts were made against deposits before they had been collected.

Respondents' petition, filed in the district court for southern New York, for reclamation of the proceeds of checks, was dismissed. The order of the district court was reversed by the Circuit Court of Appeals for the Second Circuit. 10 F.(2d) 935. This court granted certiorari. Borland v. Rochling, 271 U. S. 653, 46 S. Ct. 483, 70 L. Ed. 1133.

The proceeds of the two checks concededly have come into the hands of the petitioner, the bankrupts' trustee, and the sole question presented is whether the bankrupts on receipt of the check and before the filing of the petition in bankruptcy became the owners of them or whether, as the court of appeals held, Knauth, Nachod & Kuhne were respondents' agents to collect them. If the former, respondents were creditors of the bankrupts, Douglas v. Federal Reserve Bank, 271 U. S. 489, 46 S. Ct. 554, 70 L. Ed. 1051; Burton v. United States, 196 U. S. 283, 25 S. Ct. 243, 49 L. Ed. 482, entitled to share only on an equal footing with other creditors. If the latter respondents were entitled to reclamation from the petitioner since the checks had not been collected at the time of the petition in bankruptcy. St. Louis & San Francisco Ry. v. Johnston, 133 U. S. 566, 10 S. Ct. 390, 33 L. Ed. 683; White v. Stump, 266 U. S. 310, 313, 45 S. Ct. 103, 69 L. Ed. 301; Bankruptcy Act, § 70(a), c. 541, 30 Stat. 565, as amended, section 16, c. 487, 32 Stat. 800 (11 USCA § 107).

Ordinarily, where paper is indorsed without restriction by a depositor and is at once placed to his credit by the bank, the inference is that the bank has become the purchaser of the paper and in making the collection is not acting as the agent of the depositor. Douglas v. Federal Reserve Bank, supra; Burton v. United States, supra; In re Jarmulowsky (C. C. A.) 249 F. 319, 321, L. R. A. 1918E, 634. But the court below thought, and respondents argue here, that the form of the check directing payment to be made to the bankrupts...