Myers v. Federal Reserve Bank of Atlanta

• Citation: 101 Fla. 407,134 So. 600
• Parties: MYERS v. FEDERAL RESERVE BANK OF ATLANTA.
• Decision Date: 29 April 1931
• Court: United States State Supreme Court of Florida

134 So. 600

101 Fla. 407

MYERS v. FEDERAL RESERVE BANK OF ATLANTA.

Florida Supreme Court, Division B.

April 29, 1931

Proceedings by the Federal Reserve Bank of Atlanta, opposed by Orel J Myers, as receiver of the Palm Beach Bank & Trust Company, to establish a preferred claim against the Palm Beach Bank &amp Trust Company. From a decree allowing preference the receiver appeals.

Affirmed.

BROWN J., dissenting. Appeal from Circuit Court, Palm Beach County; C. E. Chillingworth, judge.

COUNSEL

Blackwell, Donnell & Moore, of West Palm Beach, for appellant.

Metcalf & Hiatt, of West Palm Beach, for appellee.

OPINION

DAVIS J.

Federal Reserve Bank, the appellee, having some items for collection which were drawn on the Palm Beach Bank & Trust Company, sent them with a cash letter to the latter bank for collection and remittance. Palm Beach Bank & Trust Company collected the items merely by charging them to the respective depositors' accounts and attempted to pay the Federal Reserve Bank by drawing two exchange drafts on its correspondent bank, namely, the Atlantic National Bank of Jacksonville. These drafts amounted to $77,586.84 and $22,728.35, respectively.

Before the exchange checks were actually paid by the correspondent bank, the Palm Beach Bank & Trust Company was closed by the comptroller because of insolvency on June 28, 1926.

Prior to the closing of the Palm Beach Bank & Trust Company, the exchange checks, in due course of banking practice, reached the correspondent bank and were there presented for payment. The correspondent bank refused to pay the drafts because of the insolvency of the drawer, the Palm Beach Bank & Trust Company, although it had received the drafts and stamped them as 'Paid' before it received notice that the Palm Beach Bank & Trust Company had closed.

Proceedings were then taken in the circuit court of Palm Beach county by Federal Reserve Bank which filed its petition based on the foregoing state of facts, and asked for a decree adjudging a preference against the statutory receiver of the Palm Beach Bank & Trust Company, which is the appellant here. The lower court allowed the preference upon the authority of Atlantic National Bank of Jacksonville v. Pratt, 95 Fla. 822, 116 So. 635, and like cases.

In addition to allowing the preference, the court below impressed with a trust all the money which had come into the hands of the appellant, as statutory receiver of the closed bank. The court also impressed with a trust the money which the closed Palm Beach Bank & Trust Company had on deposit with the Atlantic National Bank at the time the former bank closed.

The appeal here alleges as erroneous (1) the allowance of any claim for preference at all; (2) the allowance of a lien by way of a trust impressed upon the cash of the Palm Beach Bank & Trust Company at the time it closed; and (3) the holding that under any circumstances the Federal Reserve Bank would be entitled to a lien on the funds on deposit with the correspondent bank, namely, the Atlantic National Bank of Jacksonville. There is also involved here the question whether a claim for preference can be made, after a claim has once been submitted and filed as a common claim only, where the changed character of the claim takes place within the statutory period of one year for presenting claims against closed banks.

It may be said to be well settled in this state that, in order to impress a trust upon the assets of an insolvent bank in the hands of a statutory receiver or liquidator in this state, it must be shown that the assets upon which the trust is to be impressed were increased by the addition to such assets of other assets which belong to the claimant, and that the added assets must be traced into the fund or other assets upon which the trust is to be impressed. Glidden v. Gutelius, 96 Fla. 834, 119 So. 140, 120 So. 1.

It has also been settled by a very recent case decided by this court, but not yet officially reported, that, when a check is presented to a drawee bank for collection, and the drawer had on deposit sufficient funds to meet the check, the drawee bank having in its possession the necessary funds to pay it, the check in contemplation of law, in so far as its relationship to the general assets of the bank or the cash on hand is concerned, is paid when accepted by the drawee bank, even though, under section 6928 C. G. L., section 4842, R. G. S., the check itself is not an assignment in so far as the liability of the bank is involved before the check is presented and accepted by the bank upon which it is drawn. Bryan v. Coconut Grove Bank & Trust Co., Receiver, 101 Fla. 947, 132 So. 481, 487, decided February 24, 1931.

As this court said in the last-mentioned case, speaking through Mr. Chief Justice Strum:

'The receiver contends that no preference should be allowed appellant because the bank's assets coming into his hands were not increased by the transaction between the bank and appellant. That contention cannot be sustained. On June 8, 1926, the Bank of Coconut Grove owed appellant the sum of $14,420 as a general debtor. When on that date appellant drew and delivered the check in question to the drawee bank, and the bank accepted that check as the equivalent of cash under the circumstances state, the effect of the transaction was the same as if appellant had drawn out the money, and received manual custody of it, afterwards returning it to the bank, sacked, sealed, and labeled, for transmission to New York, and not for general deposit. In contemplation of law the amount represented by the check passed out of the hands of the bank into the hands of appellant in payment of its existing indebtedness to appellant, after which the funds were again returned to the bank for a specific purpose and in a different status, and so remained when the receiver took charge of the bank's assets. Thus the money belonging to appellant must be regarded as having passed into the hands of the receiver, increasing by that amount the assets to be administered by him.'

So, on the authority of the foregoing case, we must hold in this case that, when the Federal Reserve Bank sent to the Palm Beach Bank & Trust Company certain items for collection and remittance, and the Palm Beach Bank & Trust Company collected such items by charging them to the respective depositors' accounts, and attempted to pay such Federal Reserve Bank by drawing its exchange on its correspondent bank, the Atlantic National Bank of Jacksonville, and said Palm Beach Bank & Trust Company at the time it did this had moneys on hand, either in its vault or on deposit with its correspondent bank to pay the exchange, in contemplation of law the items sent for collection and charged to the account of the depositors before the bank closed, at a time when there was sufficient moneys on hand or to the credit of the bank to enable it to make remittance, must be regarded as having been actually collected and thereafter to have passed into the hands of the receiver or liquidator of the closed bank as the property of the Federal Reserve Bank, which to that extent increased the amount of assets which passed to him to be administered by such receiver or liquidator for the bank's creditors.

For such transaction, of course, did not increase the actual total amount of assets which passed to the possession of the receiver or liquidator, but it did increase the amount of assets which passed to the receiver or liquidator for the purpose of his administration as such.

Questions of this kind are not to be decided on the basis of whether or not the actual total assets or the total of a particular fund coming into the general control or possession of the receiver or liquidator are increased, but rather on the basis of whether or not the portion of that fund which he has to distribute generally in his capacity as receiver or liquidator is by reason of the transaction larger than it would be had the transaction not occurred.

In this case it appears that the Palm Beach Bank & Trust Company had done everything which on its part was essential to constitute a separation of these collection items from its cash in vaults or its credit balance with other banks. Had the bank remained open a short time longer, the remittance check drawn on the Atlantic National Bank, which had already been forwarded before the bank closed, would have been fully paid, in which event there would be no question that the amount of money in vault and bank balances passing to the receiver or liquidator would have passed to him diminished by exactly that amount.

Although the contingency of the closing of the bank while the remittance check was in the course of passing through banking channels interrupted the realization of payment by the payee, that contingency did not interrupt or dispense with the fact of payment by the payor in contemplation of law. This is true because before the bank closed it had done everything within its legal power to do, in the form in which it was done, to make remittance. The moneys which it had collected were moneys to which it had no title after they were collected.

While theoretical principles controlling matters of this kind must be kept in mind and adhered to, the fact should not be lost sight of that this is practical age, and that the business of banking is largely conducted by means of transfers of exchange and credit balances between the various units of our banking system, both state and national.

Where a transaction between two banks is strictly a cash transaction and so understood and acted on by all the parties, the fact that one of the parties uses one of the banking conveniences of the present day to make its remittance which it otherwise would have made in...