Lynam v. Belfast National Bank

Strout, J. The plaintiff is the trustee in bankruptcy of the Standard Granite Company. The Granite Company had made with the defendant bank deposits in the ordinary manner, and on Septem [457] ber 5, 1902, there was a balance of such deposits standing to the credit of the Granite Company of one dollar and four cents. That balance had been standing since the preceding April. No deposit was made or check drawn after April, till September 5, 1902, when the Granite Company sent to the bank a deposit of eight hundred dollars, accompanied by a letter which stated, “Enclosed find deposit credit S. G. Co. $800.” The amount was received by the bank September 6, and as an ordinary deposit, and added to the balance of one dollar and four cents then- standing to its credit. At that time the Granite Company was indebted to the bank in a sum exceeding three thousand dollars. The Granite Company at that date was insolvent, and this fact was known to the bank. September 6, 1902, a petition in bankruptcy was filed against the Granite Company, upon which it was decreed bankrupt on September 20, 1902, and this plaintiff was appointed its trustee on November 5, 1902. In this suit he claims to recover from the bank the eight hundred dollars deposited on September 6. The bank claims to set off the past-due indebtedness of the Granite Company to it. It is admitted that the Granite Company in making the deposit, did not intend it as a payment on its obligation to the bank, “but did intend that it should be held for its trustée in bankruptcy when appointed. No notice of any intention, however, was given to the bank.” The bank did not apply it in part payment of the indebtedness due. No fraud was intended or practiced, — and none is claimed. The transaction did not constitute a preference under the bankruptcy laws. This is expressly admitted by counsel for plaintiff. It was not a payment or transfer of property within the meaning of section 60 of the bankruptcy act. As between the bank and the Granite Company, notwithstanding the intention of the Granite Company that the fund should be held in trust, if that intention was not communicated to the bank, and if the circumstances immediately preceding and attendant upon the transaction were not such as fairly to apprise the bank of the depos [458] i tor’s intention, and thus to charge it as trustee, the bank could set off its claim against that of the Granite Company, and in the absence of fraud, the trustee in bankruptcy has no greater rights against the bank than the Granite Company had. The trustee takes only the title of the bankrupt to his property, and “property transferred by him in fraud of his creditors.” By section 70 of the bankrupt act, and under subdivision e, he “may avoid any transfer by the bankrupt of his property which any creditors of such bankrupt might have avoided, and may recover the property so transferred.” Except where otherwise provided in the act, the trustee’s rights, in the absence of fraud, are limited to the rights of the bankrupt as they existed before bankruptcy. This principle is thoroughly established by decisions of the Supreme Court of the United States. Yeatman v. New Orleans Savings Institution, 95 U. S. 764; Stewart v. Platt, 101 U. S. 731; Hauselt v. Harrison, 105 U. S. 407; Adams v. Collier, 122 U. S. 390; Goss v. Coffin, 66 Maine, 432, 22 Am. Rep. 585. These decisions were under the bankrupt act of 1867, but in this respect the existing act does not differ from the earlier one. But it is strenuously insisted that the fund was held in bank, in trust for the trustee in bankruptcy. That it was so intended by the Granite Company when the deposit was made, is admitted. Are the circumstances such as to charge the bank with knowledge of this intention? The case shows that on June 10, 1902, the Granite Company, then insolvent, sent to the bank a circular, in which it was stated that the company could not meet its obligations, that it was preparing a statement of its financial condition, and would confer with the creditors as to the best course to be taken, — and that an attachment on its property was then existing, and a keeper in possession. On June 20, a meeting of the creditors was called for June 25, at which time it was held. A copy of the call for this meeting was received by the bank prior to June 25. At that meeting the bank was represented by one of its directors. The Granite Company then presented a statement showing its insolvency, and stated its hope to pay twenty per cent of its indebtedness. At this meeting a committee was chosen and instructed, if possible, to procure a discharge [459] of the attachments, and to arrange for a common law assignment, and, failing in this, to commence bankruptcy proceedings. Since June 10, the Granite Company had ceased to be a going concern, and all its efforts and that of its creditors had been to obtain a distribution of its assets equitably, and to that end the first attempt was to discharge the attachments. Honest dealing on the part of the Granite Company, which is to be presumed, required that all its assets should be husbanded for the benefit of all of its creditors. Pending the effort to obtain an assignment or adjudication of bankruptcy, it had eight hundred dollars in money which it intended to retain, and ought to retain, as part of its general assets. As some time would elapse before it could be thus administered, it was deposited in the bank really for safe keeping. All these facts were well known to the bank when it received the deposit. It knew it was not intended as a payment, and did not treat it as such. The bank could not fail to understand that it was intended that this money should be added to the other assets for the general benefit, as it equitably ought to be. It certainly understood that the Granite Company, under the then existing circumstances, would not voluntarily subject this portion of its assets to a set-off by the bank, to the injury of other creditors. Upon consideration of all the circumstances, and the situation of the parties, we think it a fair inference that the bank understood that the deposit was intended only for safe keeping to be ultimately appropriated for the benefit of all the creditors of the Granite Company, and that in fact it was a deposit in trust for that purpose. And it being charged with such trust, the plaintiff, as trustee in bankruptcy, is entitled to recover. Judgment for plaintiff for eight hundred dollars, and interest from December 22, 1902, the date of demand.