Court Opinion

ID: 3390306
Source: CourtListenerOpinion
Date Created: 2016-07-05 18:50:20.166641+00
Date Added: 2024-06-11T12:58:30.279119
License: Public Domain

I am unable to agree to the conclusion reached by MR. JUSTICE TERRELL. The circumstances under which the deposit was received by the bank from Mr. Garrett come fully within the rule that acceptance of general deposits by a bank which is "hopelessly *Page 402 
insolvent" to the knowledge of its officers constitutes such a fraud as will entitle the unsuspecting depositor to rescind and recover the money, or give him a preferential claim, or create a trust ex maleficio, provided other conditions sometimes held essential to a recovery, such as augmentation of assets, identification, etc., can be satisfied. See Steele v. Allen, Com. of Banks, 240 Mass. 394, 134 N.E. Rep. 401, 20 A.L.R. 1203, and the long list of authorities cited in the annotation beginning on page 1206 of the last cited volume.
The phrase used in the rule above quoted as to the Bank's condition when it receives a deposit which renders its reception of the deposit a fraudulent act in law is "hopeless insolvency." The word "irretrievable" applies to that which cannot be recovered. "Hopeless" is not so strong a word. The conditions in which Bank officials may find the Bank's financial affairs may be hopeless so far as recovery by means of a judicious or prudent use of the Bank's asset may redeem it from bankruptcy, but by no means beyond possibility of recovery by means of extraneous aid.
The facts in the case of Federal Reserve Bank v. Idaho Grim Alfalfa Seed Growers Assn., 8 F.2d 922, upon which the court held the Standford Bank insolvent and title to the drafts involved did not pass to it, were not more conclusive of insolvency and knowledge of that fact by the officers than were the facts in this case, if indeed they possessed as high a degree of probative value as to the fact of insolvency and knowledge of it by the officers.
In that case Judge Rudkin said that the receipt of a deposit by an insolvent bank is a fraud on the depositor and title to the deposit does not pass. When such insolvency, hopeless insolvency, is known to the officers of the Bank and they are presumed to know the condition *Page 403 
of the Bank's affairs, the receipt of a deposit from an innocent and unsuspecting depositor is such a fraud upon him that title to his money or checks constituting his deposit does not pass to the bank.
I think that a careful study of the facts set out in the opinion leads to the inescapable conclusion that the Bank was insolvent, that it was hopelessly so when Mr. Garrett made the deposit, and that the condition of the Bank's affairs were fully known to the officers.
So, I think the judgment should be reversed.