Fidelity & Deposit Co. of Maryland v. Fidelity Trust Co.

• Decision Date: 25 January 1906
• Citation: 143 F. 152
• Court: U.S. District Court — District of New Jersey
• Parties: FIDELITY & DEPOSIT CO. OF MARYLAND v. FIDELITY TRUST CO. et al.

143 F. 152

FIDELITY & DEPOSIT CO. OF MARYLAND v. FIDELITY TRUST CO. et al.

United States Circuit Court, D. New Jersey.

January 25, 1906

Gans &amp Haman and James E. Howell, for complainants.

John R Hardin, for defendant Essex County Nat. Bank.

CROSS District Judge.

The bill of complaint in this cause is filed by the Fidelity &amp Deposit Company of Maryland, against Fidelity Trust Company the Essex County National Bank, and Anna J. Wilson, executrix of the last will of William B. Wilson, deceased, defendants, and prays for a discovery and an accounting, and for a decree that each of the defendants may be directed to pay to the complainant the amounts for which they may severally be found liable. There is also a prayer for general relief. Among the facts set forth in the bill of complaint, which is somewhat voluminous, the more important as related to the demurrant, are these: A beneficial order known as the 'Supreme Council of the Order Chosen Friends ' was incorporated under the laws of the state of Indiana some time prior to the year 1895. This corporation did business in the states of Indiana, Maryland, and New Jersey. On or about December, 1900, the corporation became insolvent, and a receiver was appointed of its assets by one of the courts of Indiana, and subsequently ancillary proceedings were taken in the state of Maryland and New Jersey, by virtue of which proceedings receivers were also appointed in those states. Before the insolvency of said corporation it transacted a large amount of business in the state of New Jersey, and in connection therewith had large deposits of money at various times with the defendants, the Fidelity Trust Company and Essex County National Bank. William B. Wilson, now deceased, and whose executrix is a defendant, was its supreme treasurer. The Order of Chosen Friends, in the conduct of its business, established various funds for which separate bank accounts were opened. One of the principal banks with which said order deposited its funds was the Essex County National Bank, and the funds there deposited went into and constituted what was known as the 'relief fund,' and the account was known as the 'relief fund account,' which account could only be drawn upon by check signed by the three principal officers of the order, to wit, the supreme councillor, the supreme treasurer, and the supreme recorder. Subsequently the order authorized the opening of an account with the Fidelity Trust Company (formerly the Fidelity Title & Deposit Company), which account was known as the 'general fund account,' and which was constituted by deposit from time to time of 10 per cent. of the moneys deposited in the Essex County National Bank and other banks to the account known as the 'relief fund.' Checks on the 'general fund account' were also required to be signed by the three officers above named. In 1896 another bank account was opened with the Fidelity Trust Company, called the 'special fund account.' This account was designed to be made up of monthly payments of $400, taken from the 'general fund account,' by checks bearing the three signatures above mentioned, which fund was intended to pay the expense of the meetings of the supreme council of the order. Still another account was opened by Wilson with the Fidelity Trust Company in the name of William B. Wilson, supreme treasurer. In this last-mentioned account were deposited sums of money belonging to the order, and which the bill charges the Fidelity Trust Company knew belonged to it, and which it also knew could only be drawn out by checks signed by the three officials above named, but which moneys it is alleged as a matter of fact were drawn out by the consent of the Fidelity Trust Company by checks signed only by William B. Wilson, supreme treasurer. It is further alleged that Wilson deposited large amounts of properly drawn checks of the order, as also checks drawn by different persons, to this account, with the object of drawing them out upon his own check as supreme treasurer, for the purpose of abstracting and embezzling the same, and that large amounts of such funds were drawn out by him by checks signed, 'William B. Wilson, Supreme Treasurer,' and made payable to his own order, which checks were thereafter deposited by him in his personal account in the Essex County National Bank, and which were subsequently drawn out by him and used for his own purpose. The bill of complaint charges that said bank knew that these checks were in fact the funds of the order; that the supreme treasurer's account was an account of the order; that Wilson had no authority to draw on such account personally, or deposit such checks to his own personal account, but was bound to deposit them to the credit of the order; and that the bank also knew that funds of the order on deposit with any bank or trust company could only be lawfully drawn by the signature of the three officers as above stated. The bill then alleges that the Essex County National Bank and the Fidelity Trust Company, two of the defendants, participated with Wilson in the misappropriation of the funds of the order to a large amount, and charges that they are jointly and severally liable to repay the same to the said order or its assigns. The bill also alleges that the demurrant, its officers and directors had full and ample notice of the provisions, constitutions, and by-laws of the order, providing that none of its funds could be drawn out except by checks signed by the three officials above named, and, further, that they received from said order a written notice to the effect that no moneys belonging to the said order could be drawn from said bank except upon checks signed by said officials. Then follow somewhat similar allegations with reference to the knowledge possessed by the Fidelity Trust Company. The bill also states that the Maryland receivers of the insolvent Order of Chosen Friends brought suit against Wilson's surety, the complainant herein, in which suit a consent judgment was entered in a Maryland court for $23,000 and costs; that in a settlement agreement between the receivers and the surety company it was provided that the receivers of the order in the various jurisdictions should assign to the complainant herein whatever claims the Order of Chosen Friends had against the defendants herein; that such assignments were subsequently made and copies are appended to the bill; that the settlement of the suit was approved by the various courts appointing the receivers of the order, and that it is under and by virtue of those assignments that this suit has been instituted. No attempt has been made to give a summary of the entire bill, but only and briefly its main features in so far as they attempt to charge the bank and connect it with the accounts of Wilson and the trust company. It thus appears that the bill seeks to charge the Fidelity Trust Company with liability for moneys wrongfully misappropriated and paid out by Wilson, in addition to those for which it seeks to hold the trust company and the bank jointly. There is no allegation of wrongdoing upon the part of the officials of the bank with reference to the payments made from the only fund of the order deposited with it, to wit, the 'relief fund.' That the payments from this fund were all made regularly by three signature checks is admitted. The charge of joint liability of the two defendants just named consists according to the bill of complaint, in this: that the Fidelity Company, with knowledge that it had no right to do so, permitted Wilson to draw checks as supreme treasurer to his own order, which checks, after deposit in said bank to his personal account, it paid, while the liability of the bank is predicated upon the fact that it knew that these funds belonged to the Order of Chosen Friends, that they were being wrongfully drawn by the check of the supreme treasurer alone, and that with the knowledge it possessed it participated with the trust company and Wilson in the embezzlement of these funds; that is to say, that the negligence and wrongdoing of the trust company and of the bank, enabled Wilson to abstract for his own use the funds of the order. The Fidelity Trust Company has answered the bill of the complaint. The Essex County National Bank has demurred, and assigns several grounds therefor.

1. The first ground of demurrer is that the Supreme Council of the Order of Chosen Friends and its receivers in the three states above referred to are necessary parties to the bill. I think this ground of demurrer is not well taken. The assignments made by the receivers to the complainant by direction of the several courts appointing the receivers are absolute on their face, and conveyed to the complainant whatever rights the Order of Chosen Friends or its receivers had in and to their claims against the defendants. The settlement agreement, it is true, provided that one-quarter of whatever amount should be recovered by the complainant in this suit or otherwise, from the defendants, should go to the receivers in Maryland, but that is merely an executory agreement creating a right in the receiver of the order in Maryland to demand and have of the complainant one-quarter of whatever it may collect or receive on account of the assigned claims. As said above, the assignments made in pursuance of the agreement of settlement are absolute on their face. The Maryland receiver of the order and the order itself are therefore not essential or necessary parties. They may be proper parties, but that is the utmost that can be claimed. In this connection, it may also be added that the parties are not citizens of this state or within this jurisdiction.

2. The chief ground of demurrer is that the bill is multifarious. As an abstract proposition, it is...