Court Opinion

ID: 9336238
Source: CourtListenerOpinion
Date Created: 2022-12-15 21:50:21.756684+00
Date Added: 2024-06-11T17:15:12.110599
License: Public Domain

After stating the facts, the opinion of the court was delivered by
PABDEE, Circuit Judge.
The main contention on this appeal relates to the construction of the correspondence passing between the two banks in 18D5. The appellant, receiver of the American National Bank, contends that under the contract, as shown by the correspondence, whenever an item was remitted by the Louisville Banking Coinpany to the American National Bank, and by that bank received and credited to the. account of the Louisville Banking Company, said item then and there became the property, by purchase, of the American National Bank, and that the resultant relation between that bank and the Louisville Banking Company was solely that of debtor and creditor. On the other hand, the contention is that the correspondence was with, the view to collections of commercial paper, and the arrangements made provided only for the collection of such items as *447should be remitted by the Louisville Banking Company to the American National Bank, and that when the American National Bank became insolvent and closed its doors the mandate ior collection was withdrawal, and the Louisville Banking Company became entitled to the return of all the items which had not been collected by the American National Bank. It is to be noticed that the first letter, written by the American National Bank, was inviting an account, and making an offer of services for the care of any business that the Louisville Banking Company might have in the New Orleans section. It is very far indeed from a proposition to purchase from the Louisville Banking Company all such items of checks and commercial paper as the said banking company might have in that locality. That the Louisville Banking Company had in mind solely the matter of collecting such items as it might have in the New Orleans locality fully appears from its letter of March 11, 1895, which, among other things, contains this passage: “We will ask you to be good enough to instruct the proper department in your bank to carefully advise our collections by our number, that we may have no difficulty in checking them properly.” The arrangement for business provided for in the letters is entirely consistent with the theory that the provisions related wholly to a matter of collection, and it is. inconsistent; with any theory that it was a matter of sale and purchase which was in contemplation of the parties. The course of business between the two banks also shows clearly that the arrangement between the parties was understood to be one for collection solely. Each letter of advice forwarded by the Louisville Banking Company contained this passage: “I inclose for collection and. Please advise collections by number, and return immediately if not honored.” The list of items as forwarded frequently contained instructions with regard to the protest, or waiver of the same, of specific items; and the books of the American National Bank show that, immediately on protest of any item, the item itself and the protest fee were charged back to the Louisville Banking Company; and in some instances items were charged back with the simple note “field,” probably meaning “held for further direction.” Another fact to be noticed in this connection is that for a large portion, if not all, of the items forwarded, the Louisville Banking Company was not the owner of the same for sale, or with power to sell, but was the mere mandatary for collection. Counsel for the appellant bases his entire argument upon the language used by the Louisville Banking Company in its letter of March 7, 1897, as follows:
“We would not wish 1.o maintain a balance in New Orleans upon an interest basis, but, if wo understand your proposition, you agree that you will take from us all items on the states of Louisiana, Mississippi, Georgia, Alabama, and Texas, crediting our account with the total of our letter on receipt at par, and remitting New York at par the year round on our balance in excess of $10,000.”'
—And argues therefrom that the American National Bank was compelled to take at par all the checks, notes, and drafts on persons or corporations in Louisiana, Mississippi, G-eorgia, Alabama, and Texas that the Louisville Banking Company should send, and that the American National Bank was obliged to pay the Louisville Bank*448ing Company for said checks, etc., on receipt of said items, and says that:
“If an agreement on the part of the American National Bank to take the checks, notes, and drafts in controversy from the Louisville Banking Company at par, and to pay the full face value thereof to the New York correspondent of the Louisville Banking Company, on receipt of said items, or within one week thereafter, is not a contract of sale, which passed the title of those items to the American National Bank, we fail to appreciate what constitutes a contract of sale. One of the parties agrees to sell a thing for a fixed price, and the other promises to buy the thing at the price agreed upon, or to pay for it upon delivery, or within a week from that time. All the essential elements of a contract of sale are thus contained in said agreement, while the conditions of a contract of agency are wanting.”
We do not think that any such effect can be given to the clause referred to, and the promise and agreement to take all such items, crediting the account and forwarding at par, cannot be understood as contracting that the taking was by purchase; but the whole tone and purport of the letter are rather to the effect that the word “take,” in that connection, meant to handle, collect, look after. “Checks deposited and credited as icash do not become the property of the bank, so that it takes the risk upon itself, even though the depositor has been allowed to check against the deposit before the paper is collected; and the depositor can recover the check or other paper, if it is still in the possession of the depositary.” Morse, Banks (3d Ed.) § 586; Beal v. City of Somerville, 1 C. C. A. 598, 50 Fed. 647. See Newm. Bank Dep. p. 211, § 209. See, also, Balbach v. Frelinghuysen, 15 Fed. 675. As we construe the contract between the parties to be one relating to the collection, and not the purchase, of the items forwarded, the case is controlled'by Bank v. Armstrong, 148 U. S. 50, 58, 13 Sup. Ct. 533. See, also, Evansville Bank v. German-American Nat. Bank, 155 U. S. 564, 15 Sup. Ct. 221. And the complainant below was entitled to a decree for all items not collected by the American National Bank before suspension, and afterwards collected by subagents, and traced to the possession of the receiver.
The appellant also contends that many of the items allowed for in the decree appealed from have not been sufficiently traced to identify the amounts as coming to the hands of the receiver. In regard to this we have made as full an examination as the importance of the case warranted, and find that the objections to none of the items allowed are well founded, except in regard to certain checks which were collected by Attorney Denegre on the 6th of August, aggregating $931.63, which were put in a separate envelope, and were turned over by Denegre to Examiner Johnson, and by Johnson handed intact to the receiver. In the testimony of Johnson, one item on the Louisiana National Bank of $135 was collected for account of complainant, while the evidence does not show that any such item was ever forwarded by the Louisville Banking Company, and it is not mentioned in any list of items forwarded by the Louisville Banking Company to the American National Bank. We think that this item is not sufficiently traced, and it should not have been included in .the decree of the court belotv.
*449The decree of the court below allows interest against the receiver from judicial demand. We are of opinion that this was erroneous. The funds collected, coming into the hands of the receiver, turned over to the comptroller, could not earn interest, and any interest to be paid thereon would be necessarily taken from some other trust fund. The involved circumstances surrounding the case made it improper, if not impossible, for the receiver to pay over the amount for which he is charged as trustee without an investigation and an accounting; and we think he was in no fault, but rather in the fulfillment of his official duties, in refusing to recognize complainant’s demands until they were judicially determined. As a general rule in equity, trustees are not required to pay interest unless they are in fault in the management of the trust fund, or have so used the trust fund as to earn interest.
An objection is made to the form of the decree rendered in the court below, in that it commands the receiver to pay over to the complainant a certain large sum of money within 10 days, when, as a matter of fact, and in accordance with law, the receiver is not in personal custody of the funds in question, but the same are in the hands of the comptroller of the currency. The effect of the decree, as rendered, might be that the receive]' would be in contempt for not paying over moneys which are not within his control. See Merrill v. Rank, 41 U. S. App. 529, 21 C. C. A. 282, and 75 Fed. 148.
Admitiing these last-meniioned objections, the decree of the court below should he reversed, and the cause remanded, with instructions to enter a decree as follows: It is ordered, adjudged, and decreed that the complainant, the Louisville Banking Company, do have and recover from the defendant, Frank L. Richardson, receiver of the American National Bank, the sum of §11,193.51), which said receiver is ordered to pay, out of the funds which have come to his hands as receiver, within 30 days from the signing of this decree, and by priority over all unsecured creditors of the American National Bank, or that he do within said delay certify the same to the comptroller. of (he currency, with a copy of this decree; and it is further ordered and decreed that for the balance of complainant’s claim, to wit, the sum of §27.102.86, ihe said banking company he, and is hereby, recognized as a general creditor, entitled to participate pro rara with the depositors and other general creditors of said American National Bank of Slew Orleans in the distribution of its assets; and it is ordered and decreed that the said defendant receiver pay to said Louisville Banking Company such pro rata thereon as has been or may he paid to other unsecured creditors of said American National Bank, or do certify the same to the comptroller to govern his action in the premises. And it is so ordered.