Standard Oil Co. of Ky. v. Hawkins

• Decision Date: 02 June 1896
• Docket Number: 240.
• Parties: STANDARD OIL CO. OF KY. v. HAWKINS.
• Court: U.S. Court of Appeals — Seventh Circuit

74 F. 395

STANDARD OIL CO. OF KY. v. HAWKINS.

No. 240.

United States Court of Appeals, Seventh Circuit.

June 2, 1896

The appellant filed its bill in the court below in substance charging that on the 24th day of July, 1893, the Indianapolis National Bank was utterly and hopelessly insolvent, and unable to continue its business longer for a single day which was well known to the president, who had the absolute control and management of the bank, and who was present at the bank on that day, watching its operation. On that day and within less than five minutes of the hour at which the bank closed its doors for the day, the appellant, in ignorance of the insolvent condition of the bank, and believing it to be solvent, deposited in the bank the sum of $1,746.71, of which amount the sum of $16.58 was in money the sum of $229.86 was in a check upon the Indianapolis National Bank, and the remainder of the deposit consisted of various checks and drafts upon other banks in the city of Indianapolis or elsewhere, post-office money orders, postal notes, and express money orders. The total amount of the deposit was credited to the appellant's account in its bank book, and upon the books of the bank. The bank closed its doors at 3 o'clock in the afternoon of that day, and never thereafter opened them for business, but, after the closing of the bank and on that day, paid out large sums of money to various depositors who had knowledge of its insolvent condition, thus wrongfully, it is alleged, giving preference to such depositors, so that the appellant is unable to trace the cash it deposited into the hands of the receiver thereafter appointed. But the drafts and checks drawn upon other banks in the city of Indianapolis, and the money orders, postal notes, etc., deposited by the appellant were on the next day, by a clerk formerly serving the bank, collected, and the proceeds held in possession of the bank until possession was taken by an examiner of national banks, who, acting under the authority of the comptroller of the currency, took possession. The checks and drafts upon outside banks were on the 24th of July, 1893, after the close business hours, transmitted by the bank to other banks for collection and remittance, and in due course of business the proceeds were collected and received, either by the bank examiner at the time in charge of the Indianapolis Bank, or by the receiver thereof subsequently appointed. In August, 1893, the appellee was by the comptroller of the currency appointed receiver of the bank, and received from the bank examiner in possession of the bank the proceeds of the collections made upon the checks and drafts deposited by the appellant on the 24th of July, 1893, On the 12th of October, 1893, the appellant filed its verified petition or claim with the receivers for $2,782.45, which amount included the total amount of the deposit of the 24th of July. The bill states that a copy of this petition and claim is annexed to the bill as an exhibit. The printed record, however, does not contain it. It would seem to have been the usual claim of a creditor asserting an unpreferred claim. As such, the receiver accepted the claim as true, and allowed it, and so entered it upon his record, and thereupon issued to the complainant the certificate of the proof of such claim, upon the form and in the manner prescribed by the comptroller of the currency, and reported his doings in the matter to the comptroller of the currency, who also approved of the claim, and entered it upon his books and records, and allowed the same as an unpreferred claim. On the 31st of December, 1893, the receiver prepared a schedule of all unpreferred claims theretofore proven, being 1,715 in number, and amounting in the aggregate to $981,755.82, and forwarded a copy thereof to the comptroller of the currency. Prior to that date the receiver had also forwarded to the assistant treasurer of the United States more than the sum of $245,000 realized by him out of the assets of the bank, retaining only the sum of $500. The comptroller of the currency declared a dividend of 25 per cent. to the holders of the claims so approved, which action was based upon the facts and statements herein stated and referred to; and the receiver thereupon prepared checks for the several holders of the claims so approved, for the dividend declared, including a check to the complainant for $695.51, being the dividend of 25 per cent. upon this claim so proven. Such checks were forwarded by him to the comptroller of the currency, who signed the same, and entered each check upon his books, and furnished a copy of the list to the treasurer of the United States, which was entered upon his books, and upon the books of the assistant treasurer of the United States, after which the comptroller returned such checks to the receiver for delivery to the payees. Under the system of accounts kept by the treasurer of the United States and the comptroller of the currency, the receiver's books must and do show the several claims proven, the owners thereof, and the amount of the dividend claimed; and the books of the assistant treasurer must and do show the name of each claim, the amount of each claim approved, and all such books exhibit the appellant's claim as stated. The receiver tendered to the appellant the check for $695.51, which was declined. The complainant charges that when it filed its claim with the receiver 'it has no knowledge that it had the right, under the law, to demand the proceed of said check, drafts, money orders, and notes thus having come into the hands of the receiver, but supposed and understood that its only right, under the law, was to prove its entire claim against the receiver, and to share pro rata in the distribution of the funds which might come into the hands of the receiver to be distributed to the general creditors of said Indianapolis National Bank'; that the proof of claim was prepared by the receiver upon the forms furnished by the comptroller of the currency, and the appellant executed proof of the claim at the request of the receiver that it should do so, and 'relying upon its belief that said receiver then held all of such fund simply as trustee for all persons according to their rights, and would discharge them accordingly.' The bill further charges that the appellant was ignorant and did not suppose it had the right to claim the entire proceeds of the drafts and checks, money orders, and postal notes until after the decision of the circuit court of the United States for the district of Indiana in the case of Wasson v. Hawkins (rendered Jan. 5, 1894) 59 F. 233, when it at once stated the facts to its counsel, by whom it was advised that, if it had taken the necessary steps at the proper time, it could have claimed the entire proceeds of the draft; that counsel declined to give an opinion forthwith whether its conduct in proving its claim would preclude its then making a claim for the full amount of said proceeds. It then directed its counsel to examine and advise with respect to the law in that regard. Immediately thereafter its counsel communicated the fact of their employment, and of their engagement in examining the question, to the receiver, stating that, if they concluded that such course were open to the appellant, they would file a bill to accomplish the purpose; that having concluded such examination a few days before the filing of this bill, on the 19th day of March, 1894, the appellant filed its bill in the court below, having tendered back to the receiver the certificate of the proof of its claim, and having requested the receiver to permit it to withdraw the claim filed, and to file an amended claim, excluding therefrom the proceeds of the draft, checks, money orders, and postal notes which had come to the hand of the receiver. The bill further charges that the receiver has assets in his hands, belonging to the bank, out of which he will realize moneys largely in excess of the amount required to pay the proceeds of the various instruments deposited; that the labor imposed upon the various officials by the presentation of the claim, and by its withdrawal and the substitution of an amended claim, had been and would be insignificant. A demurrer to the bill was sustained, and the bill was dismissed for want of equity. This appeal is brought to review the ruling of the court below.

Chas. W. Smith, for appellant.

John W. Kern, for appellee.

Before WOODS, JENKINS, and SHOWALTER, Circuit Judges.

JENKINS Circuit Judge (after stating the facts).

At the argument the question was urged to our attention whether, and under what circumstances, a court of equity would relieve from mistake of law, or from pure ignorance of the law. This vexed question has frequently been considered by the various courts, and it cannot be said that they are by any means at agreement upon the subject. The matter has been somewhat considered by the supreme court in Elliott v Sackett, 108 U.S. 132, 142, 2 Sup.Ct. 375; Thompson v. Insurance Co., 136 U.S. 287, 296, 10 Sup.Ct. 1019; Griswold v. Hazard, 141 U.S. 260, 264, 11 Sup.Ct. 972, 999. These causes, perhaps, cannot properly be said to have turned upon mere mistake or ignorance of the law, pure and simple. We do not deem a solution of the question essential to the decision of the case in hand. The proceeds of the paper, deposited under circumstances rendering its receipt by the bank a fraud, came to the possession of the receiver of the bank, and went to swell the fund in his hands. The appellant had an election of remedies. It might pursue the moneys in the hand of the receiver realized from the securities so fraudulently obtained by the bank (Railway Co. v. Johnston, 133 U.S. 566, 10 Sup.Ct. 390), or it might treat the bank...