First Nat. Bank & Trust Co. v. Manning

• Decision Date: 28 February 1933
• Citation: 116 Conn. 335,164 A. 881
• Parties: FIRST NAT. BANK & TRUST CO v. MANNING et al
• Court: Connecticut Supreme Court

164 A. 881

116 Conn. 335

FIRST NAT. BANK & TRUST CO v. MANNING et al

Supreme Court of Errors of Connecticut.

February 28, 1933

Appeal from Court of Common Pleas, New Haven County; Walter M Pickett, Judge.

Action by the First National Bank & Trust Company, receiver, against Carrie Manning and another to recover an alleged preferential payment by a bank to a depositor. Judgment for plaintiff, and defendants appeal.

No error.

William S. Hyde, of South Manchester, for appellants.

Frederick C. Hesselmeyer and Thomas A. Grimes, both of New Haven, for appellee.

Argued before MALTBIE, C.J., and HAINES, HINMAN, BANKS, and AVERY, JJ.

BANKS Justice.

This is an action brought by the plaintiff as receiver of the Broadway Bank & Trust Company, a state bank located in New Haven, to recover a payment made to a depositor which is claimed to be void under the provisions of section 3933 of the General Statutes, which reads as follows: " All payments or conveyances made by any such bank or trust company in contemplation of insolvency, to or for the use of any or all its creditors, with the fraudulent intent to prevent the distribution and appropriation of its effects in the manner prescribed by section 3935, shall be void." Section 3935 provides that the avails of the property of an insolvent bank or trust company in the hands of a receiver shall be appropriated ratably to the payment of various claims in the order specified therein.

From the finding, which is not subject to any material correction, the following facts appear: The defendant Treat was treasurer of the Broadway Bank & Trust Company, and the defendant Manning, who is his mother-in-law, had an account of $500 in the savings department of the bank which was carried under the heading " Carrie Manning, R. V. Treat, agent," the passbook being in the possession of Treat, who had authority to sign withdrawal orders and manage the account. The bank became insolvent in December, 1931, and on Thursday, December 17th, a serious " run" started on the bank which continued on Friday, Saturday, Monday, and Tuesday. On Tuesday, December 22d, at ten minutes of three, no funds remained in the bank, payment was suspended, and by order of the bank commissioner the bank did not open on the following day, and the plaintiff was subsequently appointed receiver.

On Sunday, December 20th, Treat visited Mrs. Manning, who told him she had read about the " run" on the bank, requested him to look out for her money which she did not wish " tied up" in the event the bank failed, and told him to withdraw it. Treat did not withdraw the money on Monday, but on Tuesday afternoon, after he had learned that the bank was about to close, he directed a teller to bring $500 and a withdrawal order to his private office, and not to say anything about it, and thereupon withdrew the $500 and closed the account. At this time there was a good deal of excitement in the bank, and a large number of depositors were in line waiting to make withdrawals at the regular windows, many of whom were unable to procure their funds before the bank suspended payment. Treat knew that the bank was insolvent and was about to close when he made the withdrawal, which he made as agent and treasurer of the bank and as agent of Mrs. Manning.

The trial court held that the withdrawal was not made in the ordinary course of business, that it was a payment made in contemplation of insolvency and with intent to prefer Mrs. Manning over other creditors, and was void under the terms of the statute.

Preferential payments by an insolvent bank or trust company to creditors are not void or voidable at common law, in the absence of a secret trust for the benefit of the debtor, Cosmopolitan Trust Co. v. S. L. Agoos Tanning Co., 245 Mass. 69, 139 N.E. 806, and in an early case in this state it was held that an insolvent bank might legally prefer one depositor over others, Catlin v. Eagle Bank, 6 Conn. 233. Subsequent to the decision in that case, the statute under which the present action was brought was enacted, and has continued in force, in substantially its present form, since 1837. Somewhat similar statutes have been enacted in other jurisdictions, and a federal statute renders void any payment by a national bank made in contemplation of insolvency and with a view to the preference of one creditor to another. Cases brought under these statutes, both federal and state, may be found in an annotation in 74 A.L.R. 937. The two elements of proof essential to a recovery under them are that the payment or transfer attacked must have been made (1) in contemplation of insolvency, and (2) with intent to effect a preference. That the bank is actually insolvent, and the payment therefore necessarily preferential, is not sufficient. A payment made by an insolvent bank to a depositor in the...