Wasson v. Hawkins

Decision Date05 January 1894
Docket Number8,922.
Citation59 F. 233
CourtUnited States Circuit Court, District of Indiana

Duncan & Smith, for complainant.

Frank B. Burke and John W. Kern, for defendant.

BAKER District Judge.

The questions of decision in this case arise upon a demurrer to the bill of complaint. The bill shows that for many years prior to the 24th day of July, 1893, complainant had been engaged in business in the city of Indianapolis; that on that day, and for many years prior thereto, he had been a depositor in the Indianapolis National Bank; that Theodore P Haughey then was, and from the organization of the bank had been, its president; that for many years, as such president he had been intrusted by the directors of said bank with its absolute control and management; that its cashier was never consulted, either by the president or the board of directors in any of the matters of management, and his duties, as prescribed by the directors and the president, were simply clerical; that on said 24th day of July, 1893, said bank was utterly and hopelessly insolvent, and unable to continue its business longer for a single day, which was fully known to its said president, who was on said day present in said bank watching its operations; that complainant was ignorant of the fact that said bank was insolvent or in danger of insolvency and, had he known that it was insolvent or in danger of insolvency, he would not have deposited therein any sum of money whatever; that said bank and its president, who had sole and exclusive management of its affairs, well knew that complainant did not know of the insolvency of said bank, and well knew that he believed it was solvent, and able to meet on demand the claims of its depositors in the usual course of business, and further well knew that, if complainant had knowledge of the true condition of said bank, he would not deposit any money therein; that said bank and its president well knew that complainant, relying upon its solvency, was regularly, from day to day, making large deposits of money in said bank; that said bank and its president, well knowing the premises aforesaid, fraudulently concealed from the complainant the insolvency of said bank, and did not in any way warn him of his danger in depositing money therein; that on said 24th day of July, 1893, the complainant, within less than five minutes of the hour at which said bank closed its business for the day, viz. 3 o'clock P. M., deposited in said bank, in money, the sum of $1,642.50, and the further sum of $504.14 in the checks of various persons, drawn upon other banks in the city of Indianapolis; that all of said checks were received as cash, and credited to complainant's account on his pass book and upon the books of the bank as so much cash; that said bank closed its doors and business for the 24th day of July, 1893, at the hour of 3 o'clock P. M., and never thereafter opened them for business, and never thereafter transacted any business whatever; that no part of said moneys were paid out by said bank prior to its suspension, but the same remained in said bank until the appointment of the defendant as receiver thereof; that the checks so deposited were on the morning of July 25, 1893, collected by a clerk then in the employ of said bank, and the proceeds held in the bank until the appointment of the defendant as receiver, when such proceeds were delivered into his hands as such receiver; that said receiver received and retained possession of the moneys so deposited, and of the moneys arising from the collection of the checks so deposited; that, before bringing suit, complainant demanded of the defendant, as receiver, the moneys and the proceeds of the checks so deposited, which demand was by the defendant refused.

The bank was insolvent, and was known by its president, who had sole management of it, to be insolvent. The knowledge of the president was the knowledge of the bank. Martin v. Webb, 110 U.S. 7, 3 S.Ct. 428; Bank v. Walker, 130 U.S. 267, 9 S.Ct. 519. It fraudulently concealed its insolvency from the complainant, who was ignorant of it, and, believing it to be solvent, he deposited, in the bank, bank notes and checks to the amount of $2,146.64 within five minutes of its final collapse. The reception of the money and checks, under such circumstances, was a fraud upon the plaintiff, and entitled him to rescind the transaction, and recover back his deposit from the bank. The keeping of the bank open, and the conducting of its business in the usual manner, constituted a representation to its customers of the solvency of the bank, upon which they had the right to rely; and, if the bank was known to be insolvent by the officers who were charged with its management, the concealment of that fact from a person about to make a deposit would constitute a fraud upon him. The title acquired by the bank to the money and checks deposited under such circumstances would be voidable at the election of the depositor, who could bring suit to recover his deposit without any previous demand. The bank would become a trustee ex maleficio, and would hold the deposit for the use of the depositor, and subject to his right of reclamation. Railway Co. v. Johnston, 133 U.S. 566, 10 S.Ct. 390; Cragie v. Hadley, 99 N.Y. 131, 1 N.E. 537; City of Somerville v. Beal, 49 F. 790; Peck v. Bank, 43 F. 357. In the case of Cragie v. Hadley, supra, it was held that the acceptance of a deposit by a bank hopelessly insolvent constituted such a fraud as entitled the depositor to his drafts or their proceeds.

In Anonymous Case, 67 N.Y. 598, the court say: 'This is not like the case of a trader who has become embarrassed and insolvent, and yet has reasonable hopes that by continuing in business he may retrieve his fortunes. In such a case he may buy goods on credit, making no false representations, without the necessary imputation of dishonesty. Nichols v Pinner, 18 N.Y. 295; Brown v. Montgomery, 20 N.Y. 287; Johnson v. Monell, 41* N. Y. 655; Chaffee v. Fort, 2 Lans. 81. But it is believed that no case can be found in the books holding that a trader who was hopelessly insolvent, knew that he could not pay his debts, and that he must fail in business, and thus disappoint his creditors, could honestly take advantage of a credit induced by his apparent prosperity, and thus obtain property which he had every reason to believe he could never pay for.' And it was decided that 'in the case of...

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27 cases
  • Bellevue State Bank v. Coffin
    • United States
    • Idaho Supreme Court
    • July 2, 1912
    ...depositor, and if it has not been used or mixed with the common funds and can be identified, he can maintain replevin for it." In Wasson v. Hawkins, 59 F. 233, Baker discusses a similar question, and holds that the title acquired by the bank to the money and checks deposited under such circ......
  • Independent District of Pella v. Beard
    • United States
    • U.S. District Court — Southern District of Iowa
    • September 17, 1897
    ...the point now under consideration does not appear to have been discussed); Massey v. Fisher (1894; Butler, J.) 62 F. 958; Wasson v. Hawkins (1894; Baker, J.) 59 F. 233; Oil Co. v. Hawkins (1896) 20 C.C.A. 468, 74 F. reversing decree below. An examination of the cases cited readily shows the......
  • Capital National Bank v. Coldwater National Bank
    • United States
    • Nebraska Supreme Court
    • December 2, 1896
    ... ... money which had come into the hands of the receiver. In ... support of this contention there were cited Wasson v ... Hawkins, 59 F. 233, Boone County Nat. Bank v ... Latimer, 67 F. 27, Lake Erie & W. R. Co. v ... Indianapolis Nat. Bank, 65 F. 690, ... ...
  • City of St. Paul v. Seymour
    • United States
    • Minnesota Supreme Court
    • January 24, 1898
    ... ... City v. Johnson, 5 Dill. 241; First v ... Armstrong, 36 F. 59; Massey v. Fisher, 62 F ... 958; Cleveland v. Hawkins, 79 F. 29; Montagu v ... Pacific, 81 F. 602; Third v. Stillwater, 36 ... Minn. 75. When the bank receiving a check or draft "for ... collection ... Spokane v. Clark, 61 F. 538; Multnomah v ... Oregon, 61 F. 912; Commercial v. Armstrong, 39 ... F. 684; Philadelphia v. Dowd, 38 F. 172; Wasson ... v. Hawkins, 59 F. 233; Illinois v. First, 15 F ... 858; Cecil v. Thurber, 8 C.C.A. 365; Cragie v ... Hadley, 99 N.Y. 131; Cavin v. Gleason, ... ...
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