Opinion ID: 421001
Heading Depth: 2
Heading Rank: 1

Heading: Who gets the money?

Text: 47 Now that we have disposed of each of SFC's challenges to the FDIC's entitlement to claim the escrow fund in its capacity as receiver for the PSSB, we must settle the question which precipitated the formation of the escrow fund in the first place, as between SFC and the FDIC as receiver, which party is entitled to take final possession of the $326,200 in the escrow account? We do not doubt for a moment the propriety of the district court's determination that the FDIC has the superior equitable claim as between these two parties. 48 As noted by the district court, SFC was, at best, an unknowing participant in a scheme designed to defraud depositors, creditors and shareholders of the PSSB. Under the link financing agreement entered into by SFC, the PSSB and various other parties, SFC neither possessed nor claimed any ownership interest in the funds which eventually constituted the escrow fund, but merely held the money on behalf of the PSSB until such time as the interest payments were due the letter of credit investors. As previously noted, the plan then called for SFC to transfer the funds to the PSSB which, as obligor of the letters of credit, would make the interest payments to investors. SFC's claim on this appeal that the Bank acted merely as a conduit through which SFC made interest payments to the investors is absolutely contrary to the evidence. 49 It is well settled that the rights and liabilities of a bank and the bank's debtors and creditors are fixed at the declaration of the bank's insolvency. First Empire Bank v. FDIC, 572 F.2d 1361, 1367-68 (9th Cir.), cert. denied 439 U.S. 919, 99 S.Ct. 293, 58 L.Ed.2d 265 (1978); FDIC v. Grella, 553 F.2d 258, 262 (2d Cir.1977); Kennedy v. Boston-Continental National Bank, 84 F.2d 592, 597 (1st Cir.1936), cert. denied 300 U.S. 684, 57 S.Ct. 667, 81 L.Ed. 887 (1937). SFC's attempt to rely on events subsequent to the Bank's closing in support of its claim of ownership to the escrow fund must fail since the rights of the parties were frozen on April 13, 1970, when the Bank's doors were shut to business. 50 In effect, the $326,200 held by SFC constituted an interest escrow account in the hands of SFC for the benefit of the PSSB and the letter of credit purchasers. 15 When the Bank ceased operations, the purpose of this escrow account lapsed and the money should have reverted to the depositor of the funds, the PSSB. 16 SFC's hands were further soiled when, shortly after the Bank's closing, SFC declined to return the funds to their rightful owner absent a release from liability. 51 We also concur with the district court in its alternative holding that SFC held the disputed funds as a constructive trustee for PSSB. SFC's contention that a constructive trust may be established only where the party against whom the trust is imposed has acquired the disputed property by fraudulent means is unavailing. In Tuturro v. Schmier, 374 So.2d 71 (Fla.D.C.A.3d 1979), quoting from the Florida Supreme Court's opinion in Quinn v. Phipps, 93 Fla. 805, 113 So. 419, 422 (Fla.1927), the court stated: 52 A constructive trust is one raised by equity in respect of property which has been acquired by fraud, or where, though acquired originally without fraud, it is against equity that it should be retained by him who holds it ... [E]quity will raise a constructive trust and compel restoration, where one through actual fraud, abuse of confidence reposed or accepted, or through other questionable means gains something for himself which in equity and good conscience he should not be permitted to hold. 53 374 So.2d at 73-74 (emphasis added). 17 When a constructive trust is created, the beneficiary (in this case, the PSSB) is entitled to have his original interest restored, and to be reestablished in his title. Johnson v. Johnson, 349 So.2d 698, 699 (Fla.D.C.A. 4th 1977); see also, Allen v. Tatham, 56 So.2d 337, 340-41 (Fla.1952). This remedy follows as a matter of common sense since the purpose of the constructive trust is to prevent the unjust enrichment of the more culpable of the parties. 54 Since it has been determined by this Court that PSSB, as represented by its receiver, the FDIC, has the superior claim of entitlement to the escrow fund, it is therefore clear that the monies contained therein, together with the interest which has accrued since April 18, 1970, the date of the closing of the Bank, should be delivered over to the rightful owner, the FDIC. 18 55 The judgment of the trial court is AFFIRMED.