Richardson v. New Orleans Debenture Redemption Co.

• Citation: 102 F. 780
• Decision Date: 29 May 1900
• Docket Number: 930.
• Parties: RICHARDSON v. NEW ORLEANS DEBENTURE REDEMPTION CO., Limited.
• Court: United States Courts of Appeals. United States Court of Appeals (5th Circuit)

102 F. 780

RICHARDSON v. NEW ORLEANS DEBENTURE REDEMPTION CO., Limited.

No. 930.

United States Court of Appeals, Fifth Circuit.

May 29, 1900

W. C Cochran (F. L. Richardson, on the brief), for appellant.

W. H Rogers, for appellee.

Before PARDEE, McCORMICK, and SHELBY, Circuit Judges.

SHELBY Circuit Judge.

The bill in this case was filed by the New Orleans Debenture Redemption Company, Limited, against F. L. Richardson, as receiver of the American National Bank, to collect $1,658.60 which the company had deposited in the bank. The bill also embraced a claim for $1,152, the proceeds of certain collections made by the bank for the plaintiff, but that part of the claim has been settled since the suit was brought. The company bases it right to recover the money on the alleged fact that the bank had received it as a deposit when it was hopelessly insolvent, and under such circumstances as to make the receipt of it a fraud. The facts averred and proved may be briefly stated: The American National Bank, a banking corporation organized under the laws of the United States was on August 5, 1896, and prior to that time, engaged in a general banking business in New Orleans. On that day the bank was hopelessly insolvent, and had been so for a long time. Its condition was well known to its officers and managers. The appellee did not have knowledge of its condition. The appellee was a regular customer and depositor of the bank. When the bank opened on the 5th of August, 1896, it had in cash on hand $15,897.54. Just before 3 o'clock on the same day, the appellee deposited in the bank $83.60 in silver and $1,575 in currency, making a total of $1,658.60. The entire cash deposits received by the bank on that day amounted to $6,934.76. It paid out during that day $13,610.24. Just after 3 o'clock the bank closed its doors, and never reopened for business. The whole amount of cash in the bank after its doors were closed was $9,222 turned over to the bank examiner, who subsequently turned over the same to the receiver. Before receiver receiving these funds the appellant had been duly appointed receiver of the bank by the comptroller of the currency of the United States. It is agreed that the books of the bank do not show how much of the cash which was turned over to the receiver was received by the note and collection clerk, or how much cash was received and not paid out by the receiving and paying teller, or how much of the cash turned over to the receiver was part of the original funds in the bank on the morning of August 5, 1896. There was a special meeting of the directors of the bank at 8:30 p.m., Wednesday, August 5, 1896, at which meeting the president of the bank stated what had taken place during the day, and that the deposits received during the day had been set aside. The directors at this meeting approved of this action, and instructed the president to hold said deposits separate and apart from the banking funds, and to examine carefully into the condition of the bank, and report at the meeting to be held at 8:30 a.m. on the 6th of August. The evidence, however, showed that the deposits in cash received on the 5th of August were not really kept separate. All of the money in the bank which had been received as general deposits, and which had not been paid out, appears to have been handed to the receiver at the same time. Many depositions were offered in evidence in the case, but it is not deemed necessary to state the evidence further. The circuit court (Parlange, District Judge, presiding) granted the relief prayed for in the bill. The decree is to the effect that the appellee have and recover from the receiver the sum of $1,658.60. The decree is given priority over the unsecured creditors of the bank. The receiver has appealed to this unsecured creditors of the bank. The receiver has appealed to this court, and the decree is assigned as error.

Ordinarily when funds are deposited in a bank, the relation of debtor and creditor immediately arises between the banker and the depositor. The money deposited becomes the property of the banker. He has the right to use it, but must pay the debt to the depositor by cashing his checks. When the banker obtains the deposit by committing a fraud, as by receiving it after hopeless insolvency, the relation between the parties is very different. The fraud avoids the implied contract between the parties that would arise in its absence, and, having barred contract, a trust is the equitable result. The fraud itself gives no lien. The fraud prevents the money deposited from becoming the property of the banker, and thereby prevents the relation of debtor and creditor arising between the parties. As the money does not become the property of the banker, it, of course, remains the property of the depositor. In the banker's hands, therefore, it is a trust fund,-- as much so as if it had been a special deposit. The money which the banker has received in due course of honorable business before insolvency has become his property, and he the debtor of those who deposited it. Now, if the banker, having money in his bank, fraudulently receives other money, and mingles it with the moneys on hand, can the defrauded depositor reclaim his money? That is the question presented by this case. The bank received $1,658.60 of the appellee's money just before it closed. It was received under circumstances of fraud, so that it remained the property of the appellee. It passed with the other funds to the hands of the receiver; or, if the identical money did not so pass to the receiver, the sum turned over to the receiver was increased exactly $1,658.60 by the appellee's deposit. This is clear, because if, after receiving the appellee's deposit and placing it with the general funds, payments were made out of the mass of money during the business of the day, it is immaterial whether the identical dollars deposited by the appellee were paid out or...