United States Trust Co. v. David

Mr. Justice Robb delivered the opinion of the Court: Among the other questions involved in this appeal is the fundamental one whether the appellant was, under the circumstances of this case, chargeable with knowledge of the relations existing between the Semmes-Kelly Company and the Sanitary Grocery Company when it acquiesced in the demand of the receiver and transferred to his credit the balance of $3,485.3(5 standing to the credit of the Sanitary Grocery Company. We will first consider this question. — 556 — It being conceded that tbe petition of tbe Semmes-Kelly Company, filed June 2d, 1909, and praying the appointment of a receiver for the Sanitary Grocery Company, contained a statement of substantially all the facts which subsequently led-the trust- company to repudiate its act in recognizing the right of the receiver of the grocery company to the deposit standing in the name of that company, the real question is whether the trust company was chargeable with notice of the contents of that petition. “It is a general rule that a paper which expressly refers to another paper within the power of the party gives notice of the contents of that other paper.” Livingston v. Maryland Ins. Co. 7 Cranch, 506-537, 3 L. ed. 421-431. Is there any reason why this case should be excepted from the rule? We perceive none. When the receiver of the grocery company appeared at the bank on the 2d of June, 1909, he served upon the officials of the bank a certified copy of his appointment as such receiver. The caption of this copy contained the number of the equity cause and the names of the parties. The order of appointment purported to have been made “on consideration of the herein bill of complaint and of the answer of the defendants filed herein.” As previously. noted, said receiver was accompanied by the receivers in bankruptcy of the Semmes-Kelly Company, who also served a copy of the order of their appointment upon the bank officials. The receivers of each company made demand for the deposit standing to the credit of that company. Thereupon, the presence of counsel for the bank was procured, and after conference with the bank officials he stated: “That he could not at that moment decide the question for the reason that he wanted to go over all of the facts; that as soon as he could do that he would decide the matter.” Upon the next day, June 3d, 1909, the receiver for the grocery compány was informed by the.bank officials that the question whether the bank would deliver the money standing in the name of said company to 'such receiver was in the hands of counsel “for investigation and advice.” Thereupon, the receiver communicated with counsel for the bank, who said that “after considering the entire matter” he — 557 — had advised the bank to recognize the claim of the receiver. Counsel at the same time stated that the claim of the receivers in bankruptcy would not be recognized as the Semmes-Kelly Company was indebted to the bank. On the next day, June 4th, 1909, two days after the service upon the bank of the order appointing the receiver herein, that receiver went to the bank, and his claim to the fund in controversy was recognized and a transfer of that fund effected. The Sanitary Grocery Company, in form at least, was a separate corporation, and not indebted to the trust company, and yet counsel for the trust company, after a conference with the bank officials, was unwilling, notwithstanding the apparent conditions existing, to pass upon the question submitted to him, that is to say, the question whether the demand of the receiver herein should be recognized, until he (counsel) could “go over all of the facts.” Evidently something had aroused the suspicions of the bank and prompted its counsel to make a further investigation. The Semmes-Kelly Company was indebted to the bank, and the bank had actual knowledge that the appointment of the receiver for the grocery company was upon the petition of the Semmes-Kelly Company, its debtor. It had actual notice that both companies were insolvent, and that their relations would necessarily be involved, to some extent at least, in the equity cause. We think these facts clearly bring the case within the rule that “whatever is notice enough to excite attention and put the party on his guard and call for inquiry in notice of everything to which such inquiry might have led. When a person has sufficient information to lead him to a fact, he shall be deemed conversant of it.” Wood v. Carpenter, 301 U. S. 135, 25 L. ed. 807. The bill in the equity cause was subject to public inspection, and in the circumstances of this case we think the bank was chargeable with constructive notice of its contents when it transferred the amount in controversy to the credit of the receiver of the grocery company. Constructive notice being as effectual as actual notice (Comer v. District of Columbia, 21 App. D. C. 284), the trust company is not entitled to the aid of equity to — 558 — relieve it from the result of its own negligence. Roberts v. Hughes, 81 Ill. 131, 25 Am. Rep. 270; Sheldon v. South School Dist. 24 Conn. 88. “If the mistake is the result of the party’s carelessness or inattention, the court will not interfere in his behalf, its policy being to administer relief to the vigilant.” Wood v. Patterson, 4 Md. Ch. 339. The affidavit of counsel for the trust company, to which reference has been made, does not constitute a justification for the failure of the bank or of its counsel to examine the pleadings in said equity cause. It sets forth no statement of the receiver of either of the two companies, nor does it allege that the receiver of either company was interviewed. It merely states that upon indefinite occasions Charles W. Semmes, who was president of the Semmes-Kelly Company, had informed counsel that he individually owned and controlled a majority of the stock of the grocery company. We do not think that such past statements of Mr. Semmes, in the circumstances existing when the receivers were appointed for the two companies, constituted a sufficient justification for the bank’s lack of diligence. In its petition herein appellant asked the court to decree that the grocery company is not a separate and independent croporation; that the property and assets alleged to belong to it are in effect the property and assets of the Semmes-Kelly Company, and the receiver herein be directed to transfer such assets to the receivers in bankruptcy of said Semmes-Kelly Company. Appellant here complains of the refusal of the court to grant this prayer. As previously stated, the Sanitary Grocery Company was ostensibly a distinct legal entity, and transacting business as such. The extent and nature of this indebtedness at the time this receiver was appointed does not clearly appear. The petition herein was filed July 14th, 1909, rule to show cause issued, and the receiver answered on July 29th, 1909. A hearing was had, and the petition dismissed on November 8th, 1909. Meanwhile the Semmes-Kelly Company had been adjudged bankrupt and a trustee in bankruptcy appointed. The Cudahy Packing Company and other creditors of the Semmes-Kelly — 559 — Company had filed a petition in the bankruptcy court asking that the sale of the assets of the grocery company by the receiver of that company, on July 26th, 1909, be declared null and void; that the trustee in bankruptcy or receivers of the Semmes-Kelly Company take possession of the property of the grocery company. A hearing was had upon that petition, the rule to show cause, the returns thereunder, the proceedings of record in said equity cause, and upon oral testimony (not in this record). On August 17th, 1909, the bankruptcy court filed its findings of facts and conclusions of law. The court found that the Semmes-Kelly Company and the Sanitary Company were ostensibly separate and independent corporations; that the sale made by the receiver herein of the assets of the grocery company was made “pursuant to the order, duly granted, of the equity court in the said equity cause, in all respects fairly and in good faith. * * * That no advantage of any kind to the creditors of the Semmes-Kelly Company, or to any other party in interest, would result from an order vacating the same in the said equity cause. That the interests of creditors and of all parties concerned will be best protected and advanced by permitting the said sale to stand, and its proceeds, less the necessary and proper costs and expenses thereof, and without prejudice to the claims, if any, of the creditors of the Sanitary Grocery Company to priority thereon, to be accounted for to the receivers of the Semmes-Kelly Company, or to its trutsee in bankruptcy, when appointedThe court ruled that at the time of the appointment of the receiver herein, and at the time of the passage of the order directing the sale by him of the assets of the grocery company, the equity court had jurisdiction of the subject-matter and of the parties; that neither the filing of the intervening petition nor the order adjudging the Semmes-Kelly Company bankrupt, nor any other proceeding in the case, terminated the jurisdiction of the equity court in said equity cause. The court thereupon denied the petition. From this order no appeal was taken. On October 5th, 1909, an order was passed in the equity court referring the cause therein to the auditor, to state the — 560 — account of tbe receiver of tbe grocery company. It thus appears tbat nothing now remains to be done save tbe settlement of tbe receiver’s account. It is therefore unnecessary to pass upon the question presented by this assignment of error, as a moot question only is presented. Of course, any balance remaining in tbe bands of tbe receiver after tbe settlement of bis account will be turned over to tbe trustee in bankruptcy for distribution as suggested by tbe bankruptcy court in its findings above quoted. This disposes of the case, and tbe decree is therefore affirmed, with costs. Affirmed.