Court Opinion

ID: 6869325
Source: CourtListenerOpinion
Date Created: 2022-07-23 20:58:51.691657+00
Date Added: 2024-06-11T16:05:22.651654
License: Public Domain

THOMPSON, Circuit Judge
(dissenting).
This is an appeal from a decree of the District Court for the Western District of Pennsylvania. The appellant is the receiver of the Second National Bank of Erie. Tie brought a bill in equity against the Bondholders’ Protective Committee of the Lawrence Hotel Company praying for the discharge of the bank as trustee. The Lawrence Hotel Company executed a mortgage deed of trust to the bank. In accordance with the provision of the deed of trust, the Lawrence Hotel Company made deposits with the bank to meet interest payments and to retire the bonds. Those deposits were credited by the commercial department of the bank to the trust department in an account designated as “Trust Account, Second National Bank, No. 2.” Payments aggregating $18,427.94 were on deposit with the bank when the bank went into receivership. Under the provisions of the deed of trust, the bank undertook to pay to the Lawrence Hotel Company interest on any cash balances held by the bank. The funds on deposit with the bank were not protected money deposits under section 11 (k) of the Federal Reserve Act, as amended (12 U.S.C.A. § 248 (k), because they were not “awaiting investment” as required by the act. The provision that the bank pay interest on the funds deposited by the Lawrence Hotel Company indicates that those funds were to be used by the bank and not segregated in'a trust account. Under the terms of the deed of trust, the deposit was a general deposit and not a special trust deposit. From a practical business standpoint, the bank’s undertaking to pay interest must have been based on the right or privilege to use the money rather than on the mere holding of the money as trustee. The case of Manhattan Company v. Blake, 148 U. S. 412, 13 S.Ct. 640, 37 L.Ed. 504, is applicable. It follows that the prayer of the bill should have been allowed, the funds should have been declared a general deposit and not a trust fund, the bank should have been discharged as trustee, and that the decree should be reversed.