Evening star., 1931-05-22
RIGGS BANK DENIES
CHARGES IN SU|TI
Files Answer to Allegations
in Rheem Case Describing
Full Transaction.

Asserting that the transaction was o
matter Of ordinary business" and de-
nying any knowledge of any misapplica-
ton Of money due Shoreham Building
noteholders, the Riggs National Bank
yesterday filed its answer to suit by
SwartseM, Rheem g. Hensey Co. creditor
for recovery Of $685., zoo.
The suit grew out Of the sale of the
Shoreham Building by Swartzell, Rheem
SE Hensey Co. to the Shoreham Invest
ment Co. At the time there existed
first trust for 81 2,250, 600 on the property.
To effect the release Of this trust. an
account for the benefit Of the note
holders under it was opened in the
bank on July i6, 1890, by Edmund d.
Rheem and Luther A. Swartzel, trus-
tees. The. trustees and SvNTtzell,
Rheem &c HenSey Co. borrowed from
the bank $685. to bring the account
up to the necessary amount.
Trust Release Recorded.
After the account had been estab-
lished, the bill of complaint stated, the
bank notified the District Title Co, and
a release of the trust was recorded.
Then, it was alleged, the funds in the
special account were transferred to the
compsny's general account and a check
thereon for $685., 1858 was drawn by
Swartzsl, Rheem e. HenSey Co. in re-
payment Of the banks loan. These two
transactions formed the basis for the
allegation that the funds we're nnisuSed,
the plaintiff contending the bank had
notice of the purpose Of the special
account.
This bank, in its answer, states that
on July 16, $780, there was opened
with them deposit account by Swart-
zell, Rheem & Hensey Co. and Rheem
and Swartzell, trustees under the trust
on the Shoreham Building, for the ac-
count of noteholders under the trust,
and that four checks aggregating $2,-
34l, ,645.80 were deposited.
The first deposit, on July 16. 1t Is
said. was a check of the Shoreham In
vestment Co. for $3.50, 600 and a check
Of the New York Title g. Mortgage Co.
for $l,556, 6,640.80.
$3SO,000 Loan Made.
On the same day. it Is said, the bank
loaned $3.50, 900 to SWartzell, Rheem IL
Hensey Co. and $255 900 to Rheem and
SwartZen. The bank says it was in
formed the company had made an "ad-
vantageous and profitable sale" of the
900 loan would be needed only for four
or five days. Upon receiving adequate
collateral security, 1t is said, the loans
were made. After the two checks under
this loan had been, deposited in the ac-
count, the bank wrote the following let
ter to the New York Title IL Mortgage
Co.:
This is to advise you there is or de-
posit to the credit Of Swartzell. Rheem
81 Hensey Co. and Luther A. Swartzell
and Edmund D. Rheems, trustees for
account Of holders Of notes described IN
the trust, the sum Of $2,334, ,750."
Disclaimed Responsibility.
The answer then brought out the
fact. however, that Robert v. Fleming,
president Of the bank. telephoned to
the New York Title & Mortgage Co to
say that the letter did not imply that
the bank was responsible for applica-
ticn Of the money. Mr. Fleming fol-
lowed the telephone call by q second
letter, which stated:
Referring to our letter TO you Of
even date. advising that aSwartzell,
Rheem g. Hensey Co. and Luther A.
Swart2o1l and Edmund d. Rheem, trus-
tees, had deposited the sum of $2,334,-
750 TO their credit today, and to my
subsequent conversation over the tele.
phone with your Mr.. Booher, desire
to confirm my statement 10 the effect
that in issuing our letter we did so
without any obligation on our part to
look TO the application Of the money
deposited In the payment Of the first
deed Of trust notes secured under the
afor smentioned deed of trust.
Il am writing you to this effect, as it
appears to me that our previous letter
might be misconstrued, and as you
know the bank could not assume the
responsibility Of looking to the applica-
ton OF these funds"
The second letter was signed by
Robert v. Fleming, president. whereas
the first was written by q vice presi-
dent.
Denied knowledge Of Use.
The title company replied it had re-
ceived the flrst and supplemental letter
and that 1t did not place any such mis-
construction on the former as suggested
by Mr.. Fleming.
The bank says that on the same day
1t sent to the District Title Insurance
Co. copy of the first letter and also
informed IL the bank did not assume
the obligation of seeing to the applica-
ton of the funds.
The bank denies 1t had notice "of
the purpose OF a said special fund
created as alleged in the bill OF COM
plaint," and especially denies that 1t
transferred to the general account Of
Swartzell Rheen & Hensey Co. the
amount named, or any amount what
ever, or that said amount represented
to its knowledge, a special account
created for the benefit Of the note
holders"
transactions Listed.
The answer recites that on July II
there was presented to one OF its re-
ceiving tellers a check on the deposit
account, drawn on the title of the de-
posit account and by the parties who
made the deposits. to the order of
SwartzeI. Rheem & HenSey Co. for
the sum of $2,34l Gas. 80 representing
the total amount then on deposit in the
account This check. the answer says.
was Endorsed by SwartZell. Rheem
g. Hensey Co for deposit to the credit
of that companys account. The check,
it is said. was accompanied by a proper
deposit slip.
The answer says the defendant bank
expressly denies that at the time it
received and honored said check the
defendant had any knowledge that the
drawers Of the check we're committing
any breach of any obligation. fiduciary
or otherwise" The defendant also de-