Opinion ID: 1503274
Heading Depth: 1
Heading Rank: 2

Heading: The Transmission Item Claim.

Text: The oil company had entered into the following arrangement for the transmission of funds to Columbia, S. C.: Its various filling station operators in the territory in which the failed bank conducted branches would from time to time deliver to these various branch banks cash or cash items representing sales, and receive from them their checks or drafts on the branch at Columbia, paying therefor a charge, which in most instances was one-tenth of 1 per cent. These drafts were then sent to the oil company's office in Columbia and were by it collected from the Columbia branch of the failed bank; the proceeds of the collections being deposited in another bank. Ordinarily, the drafts were in transit to Columbia for only one or two days, but in the period preceding the closing of the failed bank there was some delay due to the congestion of the holiday season, so that seventy-eight of these items, aggregating $9,595.83, were outstanding. Seventy of these were issued on December 30th or 31st, seven on December 28th or 29th, and one on December 24th. The oil company contends that a trust should be declared in its favor for the amount of these items on the cash assets of the bank on the grounds: (1) That no title to the funds deposited for transmission passed to the bank; and (2) that the bank at the time of receiving them was hopelessly and irretrievably insolvent to the knowledge of its officers. It is perfectly clear that the title to the funds deposited for transmission passed to the bank. It was not the intention of any one that the particular cash and cash items delivered to the various branch banks should be segregated and transmitted by them. On the contrary, these were used for purchasing drafts on the Columbia branch, and a mere debtor and creditor relationship was established to the amount of the drafts. The case in this respect is controlled by our recent decisions in Santee Timber Corporation v. Elliott (C.C.A.4th) 70 F.(2d) 179, 93 A.L.R. 874, and Lindsay v. Elliott (C.C.A.4th) 77 F.(2d) 95. It is on all fours with the case of Great Atlantic & Pacific Tea Co. v. Citizens' National Bank (C.C.A.3d) 66 F.(2d) 883, and we need add nothing to the opinion in that case, which thoroughly embodies our views as to the principles of law involved. On the question of declaring a trust because of the receipt by the bank of the funds when it was hopelessly and irretrievably insolvent to the knowledge of its officers, the case is governed by our recent decision in Poole v. Elliott (C.C.A.4th) 76 F.(2d) 772, 775, which related to the same bank, and in which counsel for appellant here were permitted to file brief as amici curiæ. In that case we said: Where the bank has been hopelessly and irretrievably insolvent over a long period, and the depositor must rely on the rule laid down in such cases as Brennan v. Tillinghast (C.C.A.6th) 201 F. 609, 612; Empire Surety Co. v. Carroll County (C.C.A.8th) 194 F. 593, 605, and Schumacher v. Harriett (C.C.A.4th) 52 F.(2d) 817, 82 A.L.R. 1, to trace the trust funds, i. e., on the presumption that the bank respected the trust and preserved the trust fund, making payments in the meantime from other moneys (obviously a pure fiction in the case of a constructive trust), it is clear that other depositors as to deposits made during this period are entitled in equity to the same relief as petitioner, and in granting relief the court should see that their rights are protected. In such cases, therefore, the establishment of a trust in favor of depositors on the ground of hopeless and irretrievable insolvency would affect a large part of the obligations to depositors and probably all of the cash assets passing into the hands of the receivers; and the court should not entertain a petition asking such relief unless petitioner has acted promptly on learning of the bank's insolvency and before matters have progressed to the point that relief cannot be afforded without injustice to other persons interested in the administration of the estate. Such a case is peculiarly one for the application of the maxim, `Vigilantibus non dormientibus æquitas subvenit.' In this case, it appears that no question was raised by the oil company as to the hopeless and irretrievable insolvency of the bank until it filed its answer on August 4th, more than seven months after the closing of the bank. No explanation of this delay is given; and, while it is not possible to prescribe a period for action which can be applied to the different circumstances of all cases, we do not hesitate to say that an unexplained delay of seven months is too great and should bar a depositor seeking a form of relief which, if so delayed, will necessarily result in disrupting in large measure the administration of the insolvent estate. If the bank here was in fact hopelessly and irretrievably insolvent to the knowledge of its officers and directors, this condition must have extended back to early in November; and, in that case, all persons who deposited funds in the bank and its branches during the period of nearly sixty days have as great an equity in the cash assets which came into the hands of the receivers as has the oil company. If a constructive trust is declared in favor of the oil company on the cash assets passing into the hands of the receivers, there is no reason why these other depositors whose claims have been filed with the court should not be allowed to participate, as they are in like case with it; and, if the oil company desired to raise a contention which, if sustained, would have resulted in a different form of administration for a large part of the assets of the estate, it should have done so promptly and vigorously and not have allowed the administration to proceed without protest along different lines. Here the oil company not only waited for more than seven months before making such claim, but then asserted it merely by way of counterclaim in a suit filed by the receivers, did not ask relief for others similarly situated, and did not bring the counterclaim on for hearing even to the extent of obtaining an order of reference until more than seven months later. Eighteen months additional was allowed to elapse before a report was obtained from the special master; and not until nearly three years after the failure of the bank was the matter brought on for hearing before the District Judge. In the meantime the liquidation of the bank's affairs had gone forward, claims had been proven and allowed, debts had been paid off, and dividends had been paid to general creditors. We think that, under these circumstances, the oil company is in no better position to ask that a trust be declared on the cash assets in favor of depositors, because of the alleged hopeless and irretrievable insolvency of the bank, than was the claimant in the Poole Case.