Illinois Trust & Savings Bank v. First Nat. Bank

• Decision Date: 16 March 1883
• Citation: 15 F. 858
• Parties: ILLINOIS TRUST & SAVINGS BANK OF CHICAGO, ILL., v. FIRST NAT. BANK OF BUFFALO and another, Receiver, etc.
• Court: U.S. District Court — Northern District of New York

15 F. 858

ILLINOIS TRUST & SAVINGS BANK OF CHICAGO, ILL., v. FIRST NAT. BANK OF BUFFALO and another, Receiver, etc.

United States Circuit Court, N.D. New York.

March 16, 1883

Monroe & Ball, for complainants.

Crowley Movius & Wilcox, for defendant.

WALLACE J.

The theory of this bill is that the receiver holds the proceeds of a certain draft for $6,527.75, sent to the First National Bank of Buffalo by complainant for collection in April, 1882 charged with a trust to pay over the same to the complainant.

It may be assumed that the First National Bank of Buffalo was insolvent when it received the draft for collection; that its officers knew of the insolvency; and that the bank would be obliged to suspend within a day or two; and it may be further assumed that the bank received the draft merely as an agent to collect it of the drawers and remit the collected proceeds, when converted into a draft on New York, to the Bank of New York, to the credit of the complainant. Instead of remitting the proceeds to the Bank of New York the First National Bank of Buffalo kept them and mingled them with the general funds of the bank, the draft having been paid in money, and the money having been put by the bank with its other moneys indiscriminately.

All this took place before the bank closed its doors or any proceedings were instituted to compel it to go into liquidation. When the title of the receiver accrued assets came into his hands more than sufficient for the payment of the drafts. Whether any of the moneys collected upon the draft came to the receiver's hands could not, from the nature of the case, be ascertained.

It was undoubtedly a fraudulent act on the part of the defendant bank, in its condition of hopeless insolvency, to convert the proceeds of the draft by mingling them with its own funds so that their identity was destroyed. Assuming that there was a trust relation between the complainant and the defendant bank, and not merely the relation of creditor and debtor, it is incumbent upon the complainant to trace the fund misappropriated by the defendant bank into the hands of the receiver before it can charge him with the duty of recognizing the complainant's equitable title.

There is an insuperable difficulty in doing this which must defeat the complainant's right to relief. All the moneys and assets of the defendant bank, when they were received by the receiver, came to him as a trust fund for all the creditors of the bank, without preference, subject to the prior lien of the...