157 F. 49 | 6th Cir. | 1907
The object of this bill is to collect from the receiver of the Gabon National Bank the sum of $48,289.17; that sum being public taxes collected by the cashier of the bank while acting as a regularly appointed deputy of the county treasurer, and which sum stood as a general deposit to the credit of the county treasurer on the books of the bank when closed by the Comptroller and placed in the hands of a receiver. The funds of the bank are wholly insufficient to pay creditors in full, and the object of this bill is to have this claim declared a prior lien upon the assets in the receiver’s hands, or, if not a lien and charge upon the entire assets, to follow the fund in so far as it can be traced. The ordinary relation of debtor and creditor did not exist between the bank and the county treasurer, because a county treasurer in Ohio is positively forbidden, except under circumstances which did not exist in this instance, to make a general deposit in any bank of taxes collected. Bates’ Ann. St. Ohio, §§ 6,841 and 1,136 (1) to (9). But the authority of the county treasurer to appoint Blythe, the cashier of the bank, a deputy collector is not doubted. The statute law of Ohio, however, requires the county treasurer to keep his office in rooms provided at the county seat, and that all public money in his possession shall there be kept. It was, therefore, the plain duty of Blythe when he collected taxes to pay the same forthwith to his principal, and of the latter to keep the taxes so collected in his office. Blythe had, therefore, no authority to deposit the funds as a general deposit with the Galion Bank, and the latter was bound to know that it could not receive and mingle this fund with its general moneys. Merchants’ Nat. Bank v. School District No. 8, 94 Fed. 705, 36 C. C. A. 432. Under the settled doctrine, the bank acquired no title to the public fund, and the" public' can recover the same, so far as it'can be identified or traced into property which, has come into the receiver’s possession. That the county treasurer and the county commissioners had knowledge of this deposit, ánd that it was in pursuance of a course of business pursued for several years in succession without objection,
The equitable principles applicable to the facts of this case must operate to deny any general .charge upon either the money or other assets of the bank in possession of the receiver, and deny complainants relief in respect of the moneys in the vaults of the bank when it closed, except in so far as the county has shown, aided by the presumption as to the money used in drawings from the general fund with which the trust fund was blended, that its money has come into the possession of the receiver. Now, the books of the bank show that on February 1, 1904, the moneys in the vaults of the bank had been reduced to $11,652.25. Between that date and February 15, 1904, there was deposited only $45.36 on account of taxes collected. But the moneys deposited by other customers, over and above daily disbursements, increased the cash balance on hand to $20,275.01 — the amount on hand when the bank was closed February 15th. It is, therefore, demonstrated that every dollar of this trust fund had been actually paid out and dissipated by February 1st except this balance of $11,652.25, plus $45.26 of taxes deposited later. Only to the extent of this sum of $11,697.61 has the complainant identified the money which came into the receiver’s hands as part of the trust fund, and only to that extent was there an actual augmentation of the moneys which came to the possession of the receiver. The decree below limited the complainant to the recovery of this identified money so far as this part of the case goes, and to that much of the decree we agree.
But the complainant assigns as error that the court did not extend this rule to the balances to the credit of -the Gabon Bank in banks with which it kept a deposit account. The balances to the credit of the Gabon Bank in these banks which have been received by the receiver aggregate something over $6,000. The balances with these several banks was shifting from day to day during the currency of the tax deposit account. The credits given to the Gabon Bank are shown to have sometimes come from collections, sometimes from proceeds of rediscounts, and sometimes from moneys sent from the vaults of the Gabon Bank to these reserve or corresponding banks. On the other hand, the account was drawn against when exchange was sold and for other purposes. The trust fund is not traced into any of the rediscounts or collections, which in part made up the credits in these banks. That the moneys remitted were not out of the trust fund is to be presumed; for the presumption upon which equity acts in respect' of the character of the funds drawn out of the mingled mass of money in the bank’s vaults is that the bank drew out only its money, leaving in its vaults the money which it was obligated to retain and not use for any private purpose. The court below was right in holding that no part of the money deposited with the corresponding banks and which has come to the receiver’s possession has been identified.
The third and last question arises upon an error assigned by the ap
Peters v. Bain, 133 U. S. 671, 678, 693, 10 Sup. Ct. 354, 33 L. Ed. 696, is a very close authority upon the facts of this case. There the moneys of a national bank had been obtained and used in breach of trust by a firm of private bankers. Both failed; the firm after a general assignment. The receiver of the national bank sought to impress with a trust the entire property of the firm in the hands of its assignee. It was shown that the hank’s money had been used exclusively in the purchase of certain property. It was sought, also, to impress a lien upon other property which had been “paid for by the firm, out of the general mass of moneys in their possession, and which may or may not have been made up in part of what had been wrongfully taken from the bank.” Waite, C. J., heard the case on circuit, and, as to this class of property, said:
“There the purchases were made with moneys that cannot be identified as belonging to the bank. The payments were all, so far as now appears, from tile general fund then in the possession and under the control of the firm. Some of the money of the bank may have gone into this fund, but it was not distinguishable from the rest. The mixture of the money of the bank with the money of the firm did not make the bank the owner of the whole. All the bank could, in any event, claim would be the right to draw out of the general mass of money, so long as it remained money, an amount equal to that which had been wrongfully taken from its own. possession and put there. Purchases made and1 paid for out of the general mass cannot be claimed by the bank, unless it is shown that its own moneys then in the fund were appropriated for that purpose. Nothing of the kind has been attempted here, and it has not even been shown that, when the property in this class was purchased. the firm had in its possession any of the moneys of the bank which could bo reclaimed in specie. To give a cestui que trust the benefit of purchases by his trustees, it must be satisfactorily shown that they were actually made with the trust funds.”
The opinion of the Supreme Court was by Fuller, Chief Justice, who affirmed the Circuit Court, and overruled the claim of a general charge, saying that “purchases made and paid for out of the general mass cannot be claimed by the bank, unless it is shown that its own moneys then in the fund were appropriated for that purpose.” The contention that the cases of Smith v. Mottley and Smith v. Au Gres, decided by this court, sustain the decree below in giving a general lien upon all the bills and notes acquired by the bank during its custody of the tax deposit, is a misapprehension. Smith v. Mottley was this: Miss Smith owed a sum of money to Miss Wintersmith. When the note fell due she paid into Mottley’s bank the amount of the note, the bank claiming authority to collect the same, and that it would obtain the note and deliver it to her. Within 10 days the bank failed. The money so paid into the bank was placed upon the books of the bank to the credit of the payee. When Miss Wintersmith learned of the transaction, she repudiated the authority of the bank .to collect her debt from Miss Smith. The latter filed her petition in the bankrupt court, and asked that her claim against Mottley’s bank he paid in preference. From the time the bank wrongfully received Miss Smith’s money until the time its doors were closed its general cash balance was never below the amount of Miss Smith’s claim, and a
“It may not be necessary to show earmarks upon the proceeds of the thing parted with to justify such a remedy; but it must at least appear that the funds in the hands of the receiver were increased or benefited by the proceeds, and the recovery is limited to the extent of this increase or benefit. In every case relied upon by counsel for appellant, recovery, if decreed, was based on the fact that the property in the hands of the assignee or receiver of the person or bank against whom the claim of fraud, right to rescind, and priority of distribution was made, included in its mass either the very thing parted with or its proceeds. Railroad Company v. Johnston, 133 U. S. 573, 10 Sup. Ct. 390, 33 L. Ed. 683; Armstrong v. Bank, 148 U. S. 50, 13 Sup. Ct. 533, 37 L. Ed. 363; Cragie v. Hadley, 99 N. Y. 131, 1 N. E. 537, 52 Am. Rep. 9. The exact question is discussed with satisfactory fullness in Bank v. Latimer, (C. C.) 67 Fed. 27; and the necessity for the presence of the proceeds of the very thing obtained by fraud in the mass of assets to be distributed is clearly pointed out.”
The opinion in Re Dial was announced by the same member of the court who wrote the opinion in Smith v. Mottley, as well as the opinion in the Au Gres Case, to which we shall refer later. That was a case where certain rubber, to which the bankrupt had no title, had been wrongfully used and made up into tires. Bankruptcy ensued. The owner of the rubber, by petition, asserted his right to the rubber and to follow it into the tires into which it had gone. It appeared that this rubber had been worked into tires, and that rubber of the bankrupt had been worked into other tires, and the tires made from both had been so intermingled that those made from the petitioner’s rubber could not be distinguished from those made from the bankrupt’s rubber. In this condition some of these tires came into the possession of the bankrupt’s trustee. We held that, under such circumstances, the petitioner was entitled to enforce a charge against the tires which had passed to the trustee, to the extent that the assets had been augmented by the rubber of the petitioner, and ordered an account. Upon the necessity of tracing the trust fund into the trustee’s possession, we said:
“We recognize that the rule only permits the following of the converted property into assets which can be traced as proceeds, and that the lien does not attach to assets in which neither the thing nor its value can be found.”
Complainants have not shown that any single piece of that mass of bills and notes was acquired with the blended moneys of the bank and of the tax fund, still less are they able to show that the assets in the receiver’s hands have been actually augmented by a dollar collected from paper so paid for by the mingled fund.
The decree must be modified as to this, and affirmed as to all other matters. Costs of this court will be divided.