99 F. 900 | 7th Cir. | 1900
These appeals are from a decree by which the West Chicago Park Commissioners, a quasi municipal corporation, was adjudged entitled to recover of the National Bank of Illinois, at Chicago, the sum of $310,013.40, and the receiver of the bank was directed to pay the complainant as a creditor for that amount ratably with other creditors of the bank. The receiver, who is the principal appellant, challenges the liability of the bank. The contention on the cross appeal is that the sum due the park commissioners should have been declared a preferred claim. The theory of the bill, in brief, is that Edward S. Dreyer, who was the senior member of the banking firm of E. S. Dreyer & Co., and from March 13, 1894, until December 21,1896, was the treasurer of the West Chicago Park Commissioners, misapplied the moneys of that body to the discharge of the liabilities of E. S. Dreyer & Co. to the National Bank of Illinois, at Chicago; the officers of the bank participating in the wrong.
The facts and circumstances in evidence are set out in great detail in the report of the special master, but only a summary statement here is deemed necessary. E. S. Dreyer & Co. was a partnership, composed of Edward S. Dreyer and Kobert Berger, a son-in-law of George Schneider, who from August, 1871, to the end, in December, 1896, was the president of the National Bank of Illinois. The business of the partnership, commencing about 1879, was at first confined to dealings in real estate and mortgage loans, but later was extended to private banking. This was done at the instance of Schneider, the president, and W. A. Hammond, the second vice president, of the National Bank of Illinois, who promised that the bank would see the firm “through.” The subsequent transactions of the bank which have been brought into question in this suit seem to have been efforts to make good that promise. The firm was not a member of the Chicago Clearing House, but “cleared” through the National Bank of Illinois. It is substantially true, as stated in the brief for the appellant, that, from the inception of the business until the failure of the bank, the firm kept a deposit account in the bank, “to the credit of which were placed all cheeks deposited with E. S. Dreyer & Co., and all moneys received by them and paid out over, their counter, and to which account all checks upon E. S. Dreyer & Co. coming through the clearing house were charged, and also all cash paid by said bank to the firm of E. S. Dreyer & Co. This method'
But while, as an outline of the method of business pursued, this statement is not especially objectionable, its full significance will be more evident when it is added that at the time of Dreyer’s appointment as treasurer of the West Chicago Park Commissioners, E. S. Dreyer '& Co., though possessed of large interests in real estate, were practically insolvent, and without the aid of the National Bank of Illinois would have been forced to suspend. The bank held their obligations for large amounts, and, besides, their deposit account almost constantly was heavily overdrawn. In this situation Schneider, the president of the bank, became surety upon Dreyer’s first official bond, and upon each successive bond required upon his reappointment at the end of each year. Dreyer’s first deposit was $249,024.75, made on April 18, 1894, to the credit of E. S. Dreyer & Co.’s account, which was then overdrawn to the amount of $49,054.06. On the next day E. S. Dreyer & Co. drew against their account so replenished a check in favor of E. S. Dreyer, treasurer, for $199,024, which was deposited in the bank to the credit of Dreyer as treasurer, and was the beginning of the account kept as before stated. This was done upon an understanding with the officers of the bank that the account should be so opened, and that, of the money coming into Dreyer’s hands as treasurer, E. S. Dreyer & Co.' should be allowed to use in their business $50,000 (extinguishing the existing overdraft), and that all other park money should be deposited in Dreyer’s account as treasurer, and should be drawn out only on checks approved by Carl Moll, the cashier of the bank; and so the business was done while that account was kept open, and large sums were checked therefrom and transferred to the credit of E. S. Dreyer & Co. for the purpose of paying further overdrafts in their account. But this method of operation was so palpably awkward — each transaction carrying on its face the proof of a misappropriation of public money to private use — that it was necessarily abandoned. The change, however, was one of bookkeeping, more than of essential fact. It was so arranged that all park funds went directly to the credit of E. S. Dreyer & Co. in the bank, constantly augmenting their deposit, or diminishing their overdraft, instead of being transferred from time to time for the purpose
We do not dissent from the proposition of counsel for the appellant, in their original brief, that:
“In order to render the National Bank of Illinois liable to the park commissioners, it must appear either that the bank received some beneflt from the misappropriation of the park funds by Dreyer, or else that the bank was guilty of such participation in the misappropriation of said funds as to render it liable, even although it received no beneflt therefrom.”
This concedes the misappropriation. The fact was undeniable; and it is apparent, on the facts already stated, both that the bank received benefit from, and actually and knowingly participated in, the misappropriation. The charge that the officers of the bank induced the deposit of the park funds in the bank to the credit of E. S. Dreyer & Co. for the purpose of thereby reducing the indebtedness of that firm to the bank, it is urged, cannot he true, because that indebtedness greatly increased during the period of Dreyer’s treasnrership. The fallacy of this is plain. Each misappropriation, when made, operated to reduce the amount of the existing indebtedness. So Dreyer and the officers of the hank well understood and presumably intended. Each deposit made lighter the constantly growing burden of keeping the promise to see Dreyer & Berger through their embarrassments.
The contention that the amount of the recovery is too large by rea-, son of interest with which Dreyer & Co. charged themselves from, month to month, under the statute, does not arise upon the assignment of errors. The second, third, and fifth specifications of error, are to the effect that the court erred in finding the bank indebted tó the complainant in the sum of $316,013.40, or any other sum, but there is in no specification a suggestion of the particular error now insisted upon. See Stewart v. Morris, 37 C. C. A. 562, 96 Fed. 703; Columbus Construction Co. v. Crane Co. (C. C. A.; Jan. Sess. 1900) 98 Fed. 946. :
The cross appeal is without merit. A deposit upon which interest’ must be paid cannot be special or in trust, and, in case of the failure of the bank, must, for the purpose of payment, be on the same footing, with other deposits or unsecured demands.
The decree below is affirmed.