Ticonic Nat. Bank v. Sprague

• Decision Date: 01 June 1937
• Docket Number: No. 3192.,3192.
• Citation: 90 F.2d 641
• Parties: TICONIC NAT. BANK et al. v. SPRAGUE et al.
• Court: U.S. Court of Appeals — First Circuit

90 F.2d 641 (1937)

TICONIC NAT. BANK et al. v. SPRAGUE et al.

No. 3192.

Circuit Court of Appeals, First Circuit.

June 1, 1937.

F. Harold Dubord, of Waterville, Maine, for appellants.

Harvey D. Eaton, of Waterville, Maine, for appellees.

Before BINGHAM, WILSON, and MORTON, Circuit Judges.

BINGHAM, Circuit Judge.

This is an appeal from a decree of the federal District Court for Maine sustaining the plaintiffs' bill in equity and ordering the defendant Pitcher, the receiver of the Peoples National Bank, to pay to the plaintiffs the sum of $3649.65, with interest from July 30, 1935, the date of the bill of complaint, with costs.

The bill was brought by Lottie F. Sprague and her daughter, Margaret Davis Sprague, against the Ticonic National Bank, the Peoples National Bank, and Arthur D. Pitcher, receiver of both banks, to establish the validity of a trust agreement dated March 28, 1931, entered into between the plaintiff Lottie F. Sprague and the Ticonic National Bank, as trustee, and to assert a lien upon certain kingdom of Denmark bonds aggregating $20,000, held as security for the performance of the trust agreement.

From an early day there had existed in Waterville, Me., two national banks, one known as the Ticonic National Bank, and the other as the Peoples National Bank. In December, 1926, the Federal Reserve Board authorized the Ticonic Bank to act in a fiduciary or trust capacity as provided in title 12, U.S.C. § 248(k), 12 U.S.C.A. § 248 (k), and on that day the directors of the Ticonic Bank established a trust department and adopted by-laws for its management, by which they established adequate provisions for the protection of trust funds, including the provision that trust funds held by the bank and "awaiting investment or distribution" if deposited in the commercial department of the bank to the credit of the trust department, the bank "should first deliver to the trust department, as collateral security, United States bonds or other marketable securities owned by the bank, * * * at least equal in market value to the amount of the funds deposited," and also as required by section 248(k).

On March 28, 1931, the plaintiff Lottie F. Sprague delivered to the trust department of the Ticonic Bank $5,022.18 to establish a trust fund for the benefit of her daughter Margaret under a written agreement setting forth the terms of the trust. By its terms, the trustee was authorized to invest the money in such "bonds or securities" as in its discretion it might determine, and to deposit in its savings department out of said sum at least $1,000. And the trustee agreed to collect the income, interest, and dividends, and on the first banking day of each month, beginning April 1, 1931, pay to the daughter Margaret the sum of $50 from the fund and accumulations until the sum and accumulations were exhausted, etc. The Ticonic Bank accepted the trust and deposited the money in its commercial checking department to the credit of its trust department, with other trust funds awaiting investment or distribution, and secured the total amount of such funds by setting aside in the trust department bonds equal to or exceeding in value the amount of such total deposits, as provided by the by-laws of the bank and the Federal Reserve Act. Included among the bonds thus segregated was a certain lot of $20,000 kingdom of Denmark 6s, 1942.

August 3, 1931, the Ticonic Bank ceased to do business as an active banking concern, sold substantially all of its assets to the Peoples National Bank, and went into voluntary liquidation. In the agreement of sale, the Peoples Bank assumed and agreed to pay the liabilities of the Ticonic Bank to its depositors, but it does not appear that the Peoples Bank succeeded the Ticonic Bank as trustee or expressly undertook the administration of the latter's trusts. The evidence showed that the Ticonic Bank, through its officers, continued to exercise supervision over the trust accounts, including the Sprague account. But that, early in 1931, prior to the acceptance of the Sprague trust by the Ticonic Bank, Mr. Charles W. Vigue, who was president and remained president of the Peoples Bank, had become president and director of the Ticonic Bank and an officer of its trust department; that he assumed active management and control of the latter bank's affairs; that several other gentlemen were and remained directors of both banks; and that both banks were practically controlled by one stock ownership.

After the sale of the assets of the Ticonic Bank to the Peoples Bank, the deposits in the commercial account of the Ticonic Bank, to the credit of its trust department, were carried on the books of the Ticonic Bank in...