Reno Nat. Bank of Reno, Nev. v. Seaborn

• Decision Date: 17 October 1938
• Docket Number: No. 8805.,8805.
• Citation: 99 F.2d 482
• Parties: RENO NAT. BANK OF RENO, NEV., et al., v. SEABORN.
• Court: U.S. Court of Appeals — Ninth Circuit

99 F.2d 482 (1938)

RENO NAT. BANK OF RENO, NEV., et al., v. SEABORN.

No. 8805.

Circuit Court of Appeals, Ninth Circuit.

October 17, 1938.

N. J. Barry, of Reno, Nev. (George P. Barse and John F. Anderson, Attys. for Comptroller of Currency, both of Washington, D. C., of counsel), for appellants.

William M. Kearney, of Reno, Nev., and Merwyn H. Brown, of Winnemucca, Nev., for appellee.

Before GARRECHT, DENMAN, and MATHEWS, Circuit Judges.

DENMAN, Circuit Judge.

This is an appeal from a judgment in favor of appellee, Receiver of the Winnemucca State Bank and Trust Company, for the amount of the latter's credit balance in the appellant Reno National Bank, decided by the district court to be money held in trust for the Winnemucca Bank.

The facts are undisputed. The Winnemucca Bank had on deposit in the Reno National Bank the sum of $2514.82. The Winnemucca Bank failed and one E. J. Seaborn, Bank Examiner of the State of Nevada, became its receiver and succeeded to the legal title to the credit balance in the Reno National Bank. He was required by the law of Nevada, after he had "collected and realized" such credits as were due his bank, to deposit them in a Nevada state bank.

Receiver Seaborn first made a written demand on the Reno Bank for payment to him of the Winnemucca Bank's credit balance. Not receiving it, he demanded its transfer to a Nevada state bank, the United Nevada Bank to his account as receiver. This the Reno Bank promised to make but did not. Thereafter the Reno Bank became insolvent and the United States Controller of Currency appointed W. J. Tobin its receiver. The Reno Bank at all times had sufficient general assets to pay the Winnemucca Bank's credit balance. Nothing appears in the Reno Bank's accounts or records segregating the credit balance, unless Seaborn's written demand for its payment and the failure to pay him constitute such a segregation.

Receiver Seaborn then filed his claim in the Reno Bank receivership for the full amount of the credit balance, basing it on the theory that the refusal of the Reno Bank to pay the credit balance created a trust for its amount, thus segregating that amount from the Reno Bank's general assets. The claim was rejected and Seaborn sued.

The district court, upon the above facts, concluded that the failure to pay the credit balance on demand "had the effect of changing the legal status of the parties in interest from that of debtor and creditor to that of trustee and cestui que trustent, and that said deposit upon such demand, agreement, and failure to comply therewith, immediately became a trust fund held by the Reno National Bank of Reno, Nevada, and that the assets of the Reno National Bank of Reno, Nevada, coming into the possession of the defendant, W. J. Tobin, Receiver thereof, were augmented by the trust fund commingled therewith," and that Receiver Seaborn should have judgment for the amount of the credit balance and costs. The Reno Bank and Receiver Tobin brought this appeal.

Appellants' contentions here are that no trust relationship was created either (a) because of the failure, on the demand of Receiver Seaborn, to pay to him the credit balance of the Winnemucca Bank's deposit, or, (b) because of a failure of the Reno Bank to perform its promise to Seaborn to transfer the amount to the United Nevada Bank, thus preventing Seaborn from collecting or realizing the credit balance, after which he has a statutory obligation to deposit it in a state bank.

The creditor rights of a depositor of a national bank, by virtue of his loan to the bank and the effects of the conduct of the bank as altering such rights, are determined by the law of the state of the deposit, in the absence of a federal statute creating a different relationship. There is no underlying general federal law determining such rights (Erie Ry. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188, 114 A.L.R. 1487), and no federal statute denying to a cestui his right against a bank as its trustee, where, in the course of its business prior to the receivership, such a trust relationship has been created by the conduct of the bank.

No distinction can be made regarding the controlling applicability of the state law to such trust relationship, existing prior to the receivership, and the controlling state law in suits on mortgages and pledges made during the solvency of the bank. The cases holding that state laws cannot determine what preferences should be given in the distribution of an insolvent bank's assets, have no applicability to the question here of the character of the assets prior to and at the time the bank ceases business. No need of federal uniformity exists requiring that federal banks in each state shall conduct their ordinary banking business exactly as in every other state. The stockholders and depositors in a Missouri national bank are not prejudiced because the current banking business in Nevada is controlled by laws differing from Missouri....