Spokane County v. First Nat. Bank

• Decision Date: 24 June 1895
• Docket Number: 209.
• Parties: SPOKANE COUNTY v. FIRST NAT. BANK OF Spokane et al.
• Court: U.S. Court of Appeals — Ninth Circuit

68 F. 979

SPOKANE COUNTY v. FIRST NAT. BANK OF Spokane et al.

No. 209.

United States Court of Appeals, Ninth Circuit.

June 24, 1895

James E. Fenton and D. W. Henley, for appellant.

C. S Voorhees, for appellees.

Before McKENNA and GILBERT, Circuit Judges, and KNOWLES, District judge.

GILBERT Circuit Judge.

The county of Spokane brought a suit against the First National Bank of Spokane and its receiver to recover the balance of public funds deposited with said bank by the treasurer and tax collector of said county between the 9th day of January 1893, and the 26th day of July of the same year, alleging that between said dates there was deposited with said bank by said officer for safe-keeping $81,257.55, all of which had been repaid to the complainant save and except the sum of $11,355.68, 'which said sum the said defendant the First National Bank does now wrongfully retain and hold, and has wrongfully retained and held ever since the 26th day of July 1893. ' It is further alleged in the bill that on or about the 2lth day of July, 1893, the bank became insolvent and suspended payment, and has not since resumed business and that the receiver, since his appointment as such, has received of the assets of the said bank 'sufficient money and funds wherewith to pay and satisfy the said balance deposited and received as aforesaid. ' A demurrer to the bill for want of equity was sustained by the circuit court, and from that ruling this appeal is taken.

It is contended on behalf of the appellant that the money deposited with the bank by the county treasurer was impressed with the character of a trust fund, and that the trust may be enforced against any assets of the bank in the hands of its receiver. It is not alleged in the bill that any of the money of the complainant, or any assets or property thereby procured, has come into the hands of the receiver. It is true it is averred that the bank still retains $11,355.68 of the complainant's money, but it is not said that any portion of that sum was in the possession of the bank when it closed its doors. We interpret the averments of the bill to mean, as in fact it was conceded upon the argument, that the money which the receiver holds is not that which was turned over to him as such when the bank was closed, but that it is the proceeds of collections by him made since that date. If it had been alleged in the bill that at the time of its failure the bank held a sum of money equal to or less than the amount here sued for, the court might lawfully presume that sum to be of the public funds of Spokane county, since it will be presumed that trust funds have not been wrongfully misappropriated or criminally used by the officers of the bank. But while that presumption would prevail as to money on hand, it would not be extended to other assets, for the officers of the bank had as little right to divert the public funds into investment in other property as they had to appropriate them to their own use. But it is said that the complainant has a lien upon the funds in the hands of the receiver upon the theory that the estate of the bank has received the benefit of the complainant's money, and its present assets are thereby increased. There are some decisions of the courts, particularly in cases of suit to recover public funds, that go to the extent of supporting this doctrine, and while the public benefit to be derived from the application of that rule to cases where school and county funds have been misappropriated by banks appeals strongly to the consideration of the court, we are unable to discover that the power to dispense such relief rests upon any of the established principles which govern the action of courts of equity.

There is no recognized ground upon which equity can pursue a fund and impose upon it the character of a trust, except upon the theory that the money is still the property of the plaintiff. If he is permitted to follow it and recover it, it is because it is his own, whether in the form in which he parted with its possession, or in a substituted form. Under the earlier rule, he was required to identify it as the very property which he had confided to another. The newer and more equitable doctrine permits him to recover it from any one not an innocent purchaser, and in any shape into which it may have been transmuted, provided he can establish the fact that it is his property or the proceeds of his property, or that his property has gone into it and remains in a mass from which it cannot be distinguished.

The earlier English doctrine, as declared in the opinion of Lord Ellenborough in Taylor v. Plumer, 3 Maule & S. 575 in which were reviewed the prior decisions of the English courts, was to the effect that the owner of property intrusted to another could follow and retake the same from the possession of the holder, whether he...