Nyssa-Arcadia Drainage Dist. v. First Nat. Bank

• Decision Date: 12 January 1925
• Citation: 3 F.2d 648
• Parties: NYSSA-ARCADIA DRAINAGE DIST. v. FIRST NAT. BANK OF VALE et al.
• Court: U.S. District Court — District of Oregon

3 F.2d 648 (1925)

NYSSA-ARCADIA DRAINAGE DIST. v. FIRST NAT. BANK OF VALE et al.

District Court, D. Oregon.

January 12, 1925.

Gallagher & Kester, of Ontario, Or., for plaintiff.

C. M. Crandall, of Vale, Or., for defendants.

WOLVERTON, District Judge.

The First National Bank of Vale (which, for convenience, will be called the Vale Bank), becoming insolvent, closed its doors October 24, 1921, and in due course Ray T. Moe was appointed receiver by the Comptroller of Currency.

At and prior to the dates and times hereinafter mentioned, the First National Bank of Idaho had in its possession for collection the following checks and certificates of indebtedness:

Check of date October 17, 1921, drawn by C. C. Mueller, county treasurer, on Farmers' & Stockgrowers' Bank of Vale, Or., payable to the order of Bank of Nyssa, for $2,000.

Two checks of date October 19, 1921, drawn by Robt. D. Lytle, on the Stockgrowers' Bank, payable to order of Allen-Wright Company, one for $20 and one for $30.

Check of date October 17, 1921, drawn by S. Humphrey on the Stockgrowers' Bank, payable to order of Handy & Sebern, for $85.50, of which First National Bank of Hagerman, Idaho, was the owner.

Check of date October, 1921, drawn by O. W. Propst on the Stockgrowers' Bank, for $50.07, of which Pioneer Tent & Awning Company was the owner.

Check of date October 15, 1921, drawn by Vale Drug Store on the Stockgrowers' Bank, for $35.98, of which J. Weil Company was the owner.

Certificate of C. C. Mueller, treasurer of Malheur county, of date October, 1921, for the sum of $761.79, held for school district No. 46.

Certificate of C. C. Mueller, treasurer, of date October, 1921, for the sum of $141.28, held for school district No. 73.

All of which checks and certificates were forwarded by the Idaho bank, on October 19, 1921, to the Vale bank, and, it is alleged, for collection and remission of the proceeds.

The check for $2,000 contains on the reverse side the general indorsement for transmission. So of the checks for $20, $30, $85.50, and $35.98. The certificate for $761.79 contains the bank's indorsement "for collection only." It does not appear how the other check and certificate were indorsed.

By the answer, it is shown that the advice accompanying the transmittal of the checks for $2,000, $85.50, $50.07, and $35.98

was "for collection and | returns;" that | credit

accompanying certificate for $761.79, "for collection," and checks for $30 and $20, "for collection and credit"; and that the item of $141.28 consisted of three certificates, for $24.37, $83.42, and $33.49, respectively, which were "for collection." Each of these items contains, on the reverse side, the indorsement of the Idaho bank "for collection only." As part of the advice "for collection," in each instance, is a direction as follows: "Do not credit or remit until actually paid. * * * Deliver documents only on payment."

All these items were collected by the Vale bank, and the complaint alleges that it turned the entire fund over to the receiver, but that the same is due to plaintiff, less the costs and charges of collection, not exceeding $3.30. A claim was presented to the receiver for the amount, as preferred, but was disallowed.

The defendants admit by their answer that the officers of the Vale bank, at all times prior to October 24, 1921, represented to plaintiff and the public that the bank was solvent and able to meet its financial demands and obligations. On the other hand, plaintiff alleges that the officers and agents of the bank knew of its insolvent condition, but concealed the same from plaintiff and the public, and thus fraudulently induced plaintiff to deal with such bank. This may be conceded for present purposes.

The matters presented for decision arise upon the record, through motion for judgment on the pleadings, namely, the bill and answer.

We may as well attend, first, to the legal effect of the indorsement of the checks and the advice attending their transmission by the Idaho bank to the Vale bank for disposition by the latter bank.

It is plain that a general indorsement for transmission of the paper carries the title, and the transmittee becomes the owner. But an indorsement "for collection," and especially "for collection only" does not have that effect. The paper remains the property of the indorser. A meaning must be ascribed to the words "for collection," and as intended by the indorser. They have the significance of a warning that, contrary to the effect of a general indorsement, it is not the purpose to transfer ownership. Sweeney v. Easter, 1 Wall. 166, 173, 17 L. Ed. 681; Commercial Bank of Penn. v. Armstrong, 148 U. S. 50, 13 S. Ct. 533, 37 L. Ed. 363; 3 Am. & Eng. Enc. of Law, 815.

Nor does indorsement "for account" purport to transfer the title of the paper, or the ownership of the money when received White v. National Bank, 102 U. S. 658, 661, 26 L. Ed. 250.

So, of a draft transmitted for "collection and returns," the relationship of the parties concerned is that of principal and agent, and within itself is not the declaration of a trust respecting the funds involved. Anheuser-Busch Brewing Ass'n v. Clayton, 56 F. 759, 6 C. C. A. 108. On the other hand, it must be conceded an indorsement for collection and credit in indicative of a relationship of debtor and creditor.

Now, analyzing these checks and certificates, with reference to their indorsement and the attendant advice in transmission, the title of the paper passed, without question, in three instances only, namely, the $35.98 check, which was by general indorsement, and the $30 and $20 checks, which were for collection and credit. Title assuredly did not pass as to the two certificates, the indorsements being for "collection" and "collection only." The indorsement of the remaining paper, being checks for $2,000, $85.50, and $50.07, which is

| returns "for collection and is obviously | credit

ambiguous. No one can say, without extraneous evidence, what was intended. In view of the further advice not to remit until actually paid, and a possible usage and custom, existing at the time and previously, between the banks concerned relative to their dealing with one another as to such matters, the ambiguity might be susceptible of satisfactory interpretation. Commercial Bank of Penn. v. Armstrong, supra; Beal v. Nat. Exch. Bank, 55 F. 894, 5 C. C. A. 304; Russo-Chinese Bank v. National Bank of Commerce, 206 F. 646, 124 C. C. A. 434; Charles Hing v. Joe Lee, 37 Cal. App. 313, 174 P. 356.

The doctrine now firmly established is that, where there has been a wrongful appropriation by an insolvent concern of moneys or funds intrusted to it, which have been impounded in due course in the hands of a trustee or receiver for administration and distribution among creditors, and recovery of the fund so wrongfully appropriated is sought, it is no longer necessary for recovery that the selfsame property or funds be identified among the mass of assets impounded, but the test now is: Did the misappropriation, in the manner of treatment in acquiring possession and control, go to swell the general mass of assets? The modification and final settlement of...