Smith v. Zemurray

• Decision Date: 01 March 1934
• Docket Number: No. 7153.,7153.
• Citation: 69 F.2d 5
• Parties: SMITH v. ZEMURRAY.
• Court: U.S. Court of Appeals — Fifth Circuit

69 F.2d 5 (1934)

SMITH v. ZEMURRAY.

No. 7153.

Circuit Court of Appeals, Fifth Circuit.

February 12, 1934.

As Amended on Denial of Rehearing March 1, 1934.

H. M. Voorhis, of Orlando, Fla., for appellant.

Hugh Akerman, of Orlando, Fla., for appellee.

Before BRYAN, SIBLEY, and HUTCHESON, Circuit Judges.

HUTCHESON, Circuit Judge.

Another effort to escape the inexorable equality of distribution among creditors of failed banks, by asserting that the claimant is not a creditor but a beneficial owner of a fund held in trust, this case grounds the claim of preference on constructive fraud.

Appellee, holding a dishonored New York draft for $5,000 issued to him before it closed by the failed bank, claiming that the circumstances of its issuance raised a trust in his favor, brought this suit to recover that amount as his funds in the possession of the receiver. The District Judge thought he made his case out. From the decree charging the claim upon the funds in his hands, and ordering it preferentially paid, the receiver appeals.

In support of the decree appellee relies on the evidence of officers and directors of the bank as to its condition of insolvency, and their knowledge of it on August 1, when his transaction with it took place. He relies especially on the court's finding that this evidence establishes that when the New York draft was issued, the bank was, within the knowledge of its officers, hopelessly and irretrievably insolvent. He relies, too, on these facts testified to by Robinson, Zemurray's agent. Having secured from one of Zemurray's debtors a draft in Zemurray's favor on the Orlando Bank & Trust Company, of Orlando, Fla., Robinson took it on August 1 to the collector's window, telling the clerk that he was there to make collection on the draft and remit the proceeds to Zemurray in Alabama. Upon the clerk's suggestion that the remittance be by New York exchange, he took the bank's draft on New York and forwarded it for collection to the Florida National Bank of Jacksonville. Before it reached New York, the Orlando bank had closed and payment was refused.

Appellant urges that the decree was wrong both because the record does not support the finding of hopeless and irretrievable insolvency within the knowledge of the officers on August 1, and because, if it does, this would not justify the further finding on which the decree rests, that the bank, by fraudulent silence, got into its possession money of Zemurray's which has passed to the receiver. It presses upon us as conclusive against the decree, the fact that no money of Zemurray's has ever gone into the bank, and therefore none is there in the receiver's hands to which he can lay claim.

To the appellee's "as if" argument, "`the matter is to be treated as though Robinson had presented the check to the teller and on receiving the money had paid it back over the counter to buy a draft,' American National Bank v. Miller, 229 U. S. 520, 33 S. Ct. 883, 57 L. Ed. 1310," the receiver replies: "Not so. We know from Robinson's own testimony that this did not occur. We know from it that what did occur was an exchange of the paper of a bank, hopelessly insolvent, if plaintiff is right, in the form of an accepted draft on it, for paper of the same bank in the form of its draft on New York. This and nothing more." He argues, too, that when what actually occurred is known, it is idle to speculate on what...