Court Opinion

ID: 6831599
Source: CourtListenerOpinion
Date Created: 2022-07-23 19:54:31.493405+00
Date Added: 2024-06-11T16:04:34.705454
License: Public Domain

HOUGH, Circuit Judge
(after stating the facts as above).
We have held, quite plainly as it seems to us, that if A. in*487trusts to B. moneys for investment in a particular manner, but B. does not carry out Ms undertaking- and becomes bankrupt, A. may recover Ms money out of any fund belonging to B.’s estate into wliich A.’s money can be traced. The reason for this ruling is that B., by undertaking, as stated, assumed a fiduciary relation to A., and by neglecting to invest as agreed was guilty of a breach of trust. In re Bolognesi, 254 F. 770, 166 C. C. A. 216; In re Jarmulowsky, 258 F. 231, 169 C. C. A. 297; In re Shapiro (C. C. A.) 298 F. 1021. But if B. does make the investment or agreed disposition of A.’s money, and even though he appropriates whatever was produced by that money, A.’s light to the original fund is gone, whatever may be his rights to the proceeds of B.’s tortious conversion. In re Brown, 175 F. 769, 99 C. C. A. 345.
This is a matter of general commercial law, in respect of which the decisions of the states in which the United States courts sit are not binding on the latter (Swift v. Tyson, 16 Pet. 1, 10 L. Ed. 865); but the same result in respect of issuance of drafts or the like was reached in Legniti v. Mechanics, etc., Bank, 230 N. Y. 415, 130 N. E. 507, 16 A. L. R. 185, even though a payment by A. to B. in consideration of receiving the latter’s draft or its equivalent, is to be regarded, not as an executed sale and transfer, hut as an executory contract (Gravenlurst v. Zimmerman, 236 N. Y. 22, at page 26, 139 N. E. 766, 27 A. L. R. 1465).
Therefore the question at bar is primarily one of fact; for if Jasper got a draft, cheek, or its equivalent, and in so getting received exactly what he asked for and something ho thought appropriate for his purpose, he cannot he heard to complain that the bankrupt was his trustee and committed a breach of trust. This question of fact must he answered in the light of all the circumstances.
Jasper had a credit in New York, in the shape of an ordinary deposit account with the bankrupts. He could have realized the cash he wanted out of that account and carried the same in his pocket to Germany. This he did not wish; so he arranged the scheme above outlined, by which he would he entitled to collect 9,000 actual dollars of the United States, as soon as the Leipzig bank identified him.
The machinery of payment was the letter, beginning, “We herewith open with you the following credit,” etc., pins the stated means of identification. We think that, in point of fact, this scheme was in effect the issuance of a check or order on Leipzig, payable only to Jasper on demand. If this. view, of the facts be received, then the transaction was the legal equivalent of handing Jasper a draft against his $9,090; there was no breach of trust, and can bo no recovery by way of reclamation or preference.
We point out that all tho requisites of a successful reclamation under tho cases first above cited must bo present, and we discover no proof that the fund proceeded against contains the $9,090 paid by Jasper to bankrupts.
Order affirmed, with costs.