Jefferson Standard Life Ins. Co. v. Wisdom

• Decision Date: 19 April 1932
• Docket Number: No. 6488.,6488.
• Citation: 58 F.2d 565
• Parties: JEFFERSON STANDARD LIFE INS. CO. v. WISDOM.
• Court: U.S. Court of Appeals — Fifth Circuit

58 F.2d 565 (1932)

JEFFERSON STANDARD LIFE INS. CO. v. WISDOM.

No. 6488.

Circuit Court of Appeals, Fifth Circuit.

April 19, 1932.

Wm. H. Watkins, of Jackson, Miss., for appellant.

Hugh V. Wall, of Brookhaven, Miss., and Fulton Thompson, of Jackson, Miss., for appellee.

Before BRYAN, FOSTER, and SIBLEY, Circuit Judges.

SIBLEY, Circuit Judge.

Jefferson Standard Life Insurance Company sought relief in equity against the receiver of First National Bank of Brookhaven, Miss., on account of a collection made by the bank which had not been paid over at its failure, lost its case, and appeals. The facts are not disputed, and are these: The insurance company at Greensboro, N. C., having no previous relations with the bank, sent it a draft with these instructions: "Kindly collect the draft and remit this office in New York funds for the full amount, any necessary exchange being borne by the drawee." The collection was made January 3, 1931, but, instead of procuring New York funds, the bank on January 5th sent its cashier's check, drawn upon itself. This the insurance company at once deposited for collection at Greensboro, but before it was presented in Brookhaven the First National Bank on January 12th had ceased to do business. The collection had been made by the bank in part by receiving a check for $5,000 on another bank in Brookhaven, which had paid it through a clearance transaction by giving a check for $9,829.95, for which the First National Bank on January 7th got credit at the Federal Reserve Bank in New Orleans. Its credit balance there remained above $5,000 until January 12th, the day of failure, when the balance was about $16,000. The Reserve Bank on that date applied this balance to the redemption of First National Bank's indorsements on five notes aggregating $16,000 which had been rediscounted in the Federal Reserve Bank, and sent the notes to the receiver of the First National Bank, who still has them or their proceeds. On these facts the $5,000 collected for the insurance company is clearly traced into the $16,000 in the hands of the Federal Reserve Bank. No cash was handled, but a tracing of credits suffices. Washington Loan & Banking Co. v. Fourth National Bank (C. C. A.) 38 F.(2d) 772. The insurance company, as owner of the $5,000 collected, was entitled in equity to a lien on the fund in which it was thus commingled. Peters v. Bain, 133 U. S. 670, 693, 10 S. Ct. 354, 33 L. Ed. 696.

Had the Federal Reserve Bank absorbed the fund by an offset that resulted in no gain to the receiver, the tracing would have fallen short of reaching the assets in his hands, but the fund was in effect invested in the $16,000 of notes which by its application were released and returned to the receiver. Upon these notes and their proceeds, the insurance company has the same lien as it had on the money which purchased them for the...