Fed. Reserve Bank Of Richmond v. Peters

• Decision Date: 12 June 1924
• Parties: FEDERAL RESERVE BANK OF RICHMOND. v. PETERS et al.
• Court: Virginia Supreme Court

123 S.E. 379

FEDERAL RESERVE BANK OF RICHMOND.

v.PETERS et al.

Supreme Court of Appeals of Virginia.

June 12, 1924.

Appeal from Circuit Court, Lunenburg County.

Proceeding by the Federal Reserve Bank of Richmond against H. D. Peters, receiver of the Prince Edward-Lunenburg County Bank, and another. From an adverse decree, the plaintiff appeals. Reversed, and final judgment.

M. G. Wallace, of Richmond (George Bryan, of Richmond, amicus curiæ), for plaintiff in error.

Geo. E. Allen, of Victoria, for defendants in error.

WEST, J. On and before January 5, 1922, the Federal Reserve Bank of Richmond was engaged in the business of banking, as defined in a certain act of Congress know as the Federal Reserve Act. The Prince Edward-Lunenberg County Bank was a state banking corporation engaged in the business of banking at Meherrin, Va. The Prince Edward-Lunenburg County Bank was not a member bank, and maintained no deposit account with the Federal Reserve Bank of Richmond, and the Federal Reserve Bank of Richmond maintained no deposit account with the Prince Edward-Lunenburg County Bank, but the Federal Reserve Bank of Richmond was authorized to receive and did receive from various member banks and other persons checks and drafts drawn upon and payable by the Prince Edward-Lunenburg County Bank. In order to collect the amount of such drafts, the Federal Reserve Bank of Richmond had agreed with the Prince Edward-Lunenburg County Bank that all such checks and drafts should be sent by the Federal Reserve Bank of Richmond, from its office in Richmond, by mail, to the Prince Edward-Lunenburg County Bank, at its office in Meherrin, Va., and that the Prince Edward-Lunenburg County Bank, when the said checks and drafts were received, would present or cause them to be presented to itself, and would pay such as were good and It desired to pay, and would return properly protested such as it was unwilling to pay, and would immediately remit the amount of the checks which it paid by means of a shipment of currency or money to the Federal Reserve Bank of Richmond or by means of a draft drawn by the Prince Edward-Lunenburg County Bank upon some other bank with which it had funds upon deposit.

The two banks had done business under the above arrangement for some time, and on the 5th day of January, 1922, the Federal Reserve Bank of Richmond sent to the Prince Edward-Lunenburg County Bank a letter containing checks drawn upon the Prince Edward-Lunenburg County Bank to the amount of $2,295.10. The Prince Edward-Lunenburg County Bank received the above-mentioned letter on the 0th day of January, 1922. Apparently the drawers of the checks had sufficient balances with the bank to have required it to pay, and the bank had on hand a sufficient sum to have enabled it to have paid the checks had they been presented at its counter and cash demanded.

The Prince Edward-Lunenburg County Bank accordingly canceled the checks sent to it by the Federal Reserve Bank of Richmond, and charged them to the accounts of the several drawers of the said checks, and deducted them from the balances of such drawers.

The Prince Edward-Lunenburg County Bank thereupon drew in favor of the Federal Reserve Bank of Richmond a draft upon the Bank of Commerce & Trusts, of Richmond, Va., for the sum of $2,295.10, and sent it to the Federal Reserve Bank of Richmond in settlement for the amount which the Prince Edward-Lunenburg County Bank bad collected upon the checks sent to it by the Federal Reserve Bank of Richmond. This draft was dated and apparently mailed on the 6th day of January, 1922. At that time the Prince Edward-Lunenburg County Bank had on deposit to its credit with the Bank of Commerce & Trusts the approximate amount of $11,000. As soon as the said draft was mailed to the Federal Reserve Bank of Richmond and certain other drafts apparently given under like circumstances were mailed to the payees thereof the Prince Edward-Lunenburg County Bank deducted the amount of the said drafts from its balances with the Bank of Commerce & Trusts and charged the amount of the said drafts to the persons to whom they were payable, just as if cash had actually been withdrawn from the Bank of Commerce & Trusts and delivered to the payees of the several drafts.

The said draft for $2,295.10 was received by the Federal Reserve Bank of Richmond in due course of mail and was presented by it to the Bank of Commerce & Trusts, and demand was made for the payment. Payment was refused because in the meantime a receiver had been appointed for the Prince Edward-Lunenburg County Bank by a decree entered by the judge of the circuit court of Lunenburg county. At the time the said draft was so presented the said Bank of Commerce & Trusts had in its hands the sum of approximately $11,000, payable to the order of the Prince Edward-Lunenberg County Bank, but it refused to pay this sum to the Federal Reserve Bank because of the fact that a receiver had been appointed, andthe said sum has since been paid over to the receiver in this cause.

Prior to the closing of the Prince Edward-Lunenburg County Bank the Federal Reserve Bank of Richmond had been directed by the Secretary of the Treasury of the United States to make for the public, through a branch which the Federal Reserve Bank of Richmond maintains in the city of Baltimore, exchanges of different kinds of United States coin and currency for other kinds of coin and currency, and it had accordingly issued a circular addressed to all the banks in the Fifth federal reserve district, in which the Federal Reserve Bank of Richmond did business, stating that it was ready and willing to exchange any kind of United States coin and currency for any other kind of coin and currency for which it might properly be exchangeable, provided the persons shipping the coin and currency for exchange would pay the cost of such shipment.

On the 6th day of January, 1922, the Prince Edward-Lunenburg County Bank shipped to the Federal Reserve Bank of Richmond, at its Baltimore branch, the sum of $510.82 in 5-cent and 1-cent pieces of United States coin. At the time that this shipment was made the Prince Edward-Lunenburg County Bank requested the Federal Reserve Bank of Richmond to send to the Prince Edward-Lunenburg County Bank a check in settlement for the amount of coin so shipped. The amount due for said shipment, after deducting express charges, was $505.45, but the check requested by the Prince Edward-Bunenburg County Bank was not sent, because before the coin could be counted and the check prepared and sent the Federal Reserve Bank of Richmond was informed that the Prince Edward-Bunenburg County Bank had been placed in the hands of a receiver.

In due time the Federal Reserve Bank of Richmond presented its claim to the commissioner to whom this cause was referred, and contended that the Prince Edward-Lunenburg County Bank was its agent for the purpose of transmitting to it the money collected upon the several checks sent to it by the Federal Reserve Bank of Richmond, and that by reason of the fiduciary relationship of the Prince Edward-Lunenburg County Bank the cash in its vault was impressed with a trust in favor of the Federal Reserve Bank of Richmond, or that the cash in the Bank of Commerce & Trusts, against which the draft sent to the Federal Reserve Bank of Richmond was drawn, was impressed with a trust. The said Federal Reserve Bank of Richmond further admitted that it held in its hands the sum of $505.45, which should in a settlement of its account between itself and the receiver be properly a credit upon the amount due by the said failed bank to it. The commissioner to whom this cause was referred sustained the contention of the Federal Reserve Bank of Richmond, and reported that it was entitled to receive payment in full out of the cash in the hands of the receiver, or out of the funds in the Bank of Commerce & Trusts.

In apt time Crag C. Hatchett, by his attorney, filed in the circuit court of Lunenburg county his petition alleging that he was a depositor of the failed bank, and therefore interested in the administration of its estate, and further asking that he be allowed to become a party defendant to the claim of the Federal Reserve Bank of Richmond, and to object and to make exceptions to certain portions of the report of Commissioner Nelson, including the portion which determined that the Federal Reserve Bank of. Richmond was entitled to a secured or preferred claim.

Thereupon, the Federal Reserve Bank of Richmond filed in court its petition, alleging, in substance, the above-mentioned facts, and praying that the report of Commissioner Nelson be approved and confirmed so far as it dealt with its claim. Further evidence was taken by both Crag C. Hatchett and the Federal Reserve Bank of Richmond, but no specific conflicts of testimony appeared from such evidence.

The foregoing statement of facts, taken from the petition, is sustained by the record.

Upon the final hearing the court entered a decree denying the claims of the Federal Reserve Bank of Richmond to a preference, establishing its claim as an unpreferred debt for $2,295.10, adjudging that it is not entitled to set off against the indebtedness due it by the Prince Edward-Lunenburg County Bank the sum of $505.45, referred to in the •petition, and directing the Federal Reserve Bank to pay the same to the receiver of the Prince Edward-Bunenburg County Bank. The case is before us upon an appeal from that decree.

The appellant assigns as error the action of the court;

First. In denying the claim of petitioner to be a lien upon the cash which was in the vault of the Prince Edward-Bunenburg County Bank at the time that the receiver took charge and in refusing to direct that so much of such cash as was necessary to pay in full the claim of petitioner should be paid over to it.

Second. In denying the claim of petitioner to be an equitable lien upon the deposit of the Prince Edward-Lunenburg County Bank...