Held, that the Fidelity Bank, though it acquired the mere legal title to the draft, never became its equitable owner; that the notice on the draft that it was for collection bound all parties into whose hands it came; that the Evansville Bank could not by its entry of credit to the Fidelity Bank release itself of its obligation to the German-American Bank; and that the mere fact that news of the condition of the Fidelity Bank had not reached the Evansville Bank at the time it made the entry was immaterial. Commercial Bank of Pennsylvania v. Armstrong, 148 U.S. 50, shown not to conflict with this decision. Mr. Alpheus H. Snow, (with whom was Mr. John M. Butler on the brief,) for plaintiff in error.
In Commercial National Bank v. Armstrong , for example, the Supreme Court recognized that "the relation created between the banks as to [a check to be cashed] was that of principal and agent," which created a "trust obligation" over the funds to be transferred and permitted those funds to be "specifically trac[ed]" back to the principal's rightful ownership. 148 U.S. 50, 56, 13 S.Ct. 533, 37 L.Ed. 363 (1893). Because of that agency relationship,
The relation between the two banks is merely that of principal and agent. Commercial Bank of Penn. v. Armstrong, 148 U.S. 50. F. In view of the custom, however, of correspondent banks to credit the forwarding bank with the proceeds of paper collected rather than remitting the specific money received on the collection, in view of which custom depositors are supposed to contract, the correspondent bank does take title to the proceeds in the absence of any agreement to the contrary, and the relation of debtor and creditor as between the correspondent back and the forwarding bank is established.
The Consolidated National Bank had, at the time of its failure, actually collected and received the money as the proceeds of plaintiff's draft. (Reeves v. State Bank, 8 Ohio St. 466, 481, 482; Howard v. Walker, 92 Tenn. 452; Commercial Bank v. Armstrong , 148 U.S. 50.) Even if it were true that the bank had no right to place the proceeds of the draft to plaintiff's account upon its books, and a trust were violated and the funds misapplied, yet, the proceeds of the draft having been mingled with the other moneys of the bank, plaintiff cannot distinguish or identify her money or any fund containing it, and cannot have a judgment for its recovery. (Illinois Trust etc. Bank v. First Nat. Bank , 15 F. 859; Morse on Banks and Banking, secs. 590 (a ), 589 (b ), 629, 630; Illinois Trust etc. Bank v. Smith, 21 Blatchf. 275; Bank of Commerce v. Russell, supra;Vail v. Newark Savings Inst ., 32 N. J. Eq. 629; Terhune v. Bank of Bergen , 34 N. J. Eq., 367; Carlton v. Conroy , 21 Cal. 170; Lathrop v. Bampton , 31 Cal. 17, 24; 89 Am. Dec. 141; Rowland v. Madden , 72 Cal. 17; Roach v. Caraffa , 85 Cal. 436, 444; 2 Story's Equity Jurisprudence, sec. 1259; Ot
The words "for account of" held to be restrictive. White v. Miner's Nat'l Bank, 102 U.S. 658. Followed in Commercial Nat'l Bank v. Armstrong, 148 U.S. 50; Old Nat'l Bank of Evansville v. German American Nat'l Bank of Peoria, 155 U.S. 556; The Nyssa-Arcadia Drainage Dist. v. The First Nat'l Bank, 3 F.2d 648. The legal restrictive effect of the words "for account of" and "for collection" is identical. Old Nat'l Bank of Evansville v. Bank, supra; The Nyssa-Arcadia Drainage Dist. v. Bank, supra; Bank of Metropolis v. First Nat'l Bank of Jersey City, 19 F. 301.
The decision of the question depends in whether or not the collection of the checks by the Federal Reserve Bank of Charlotte and the crediting of the proceeds thereof to the Asheville bank constituted a completion of the collection so as to transform the relationship of principal and agent between the bank and the depositor to that of debtor and creditor; and this question must be decided in contemplation of the agreement between the bank and the depositor above described. In Commercial Bank v. Armstrong, 148 U.S. 50, 13 S.Ct. 533, 37 L.Ed. 363, cited with approval in Jennings v. United States F. G. Co., supra, the Supreme Court considered a situation in which the Fidelity Bank received collection items from a forwarding bank with the understanding that it would collect the items and make remittance on stated days in each month. It became necessary for the Fidelity to send the items to other banks as subagents for collection. At a time when the proceeds of certain collections were in the hands of the subagents, the Fidelity failed and a receiver was appointed, and subsequently the proceeds were paid by the subagents to him. Suit to recover the funds was then brought against the receiver by the forwarding bank. It was held that the mere fact that the subagents of the Fidelity had collected the money due on the items and held it for delivery to the Fidelity did not amount to a receipt of the money by that bank or a mingling of the proceeds with its general funds, unless the collections made by the subagents had been credited
They will get less if the preference is allowed. Each claimant asserted an equity, that the assets taken over by the Comptroller are trust funds in which it is a preferred beneficiary. It is difficult to explain or understand by what equitable right one who has not contributed to the creation of a fund should be given a special and superior interest therein, though some of the state courts seem to so hold. The collecting banks acted as agents, Commercial Bank v. Armstrong, 148 U.S. 50, 13 S. Ct. 533, 37 L. Ed. 363, and had they collected and retained the funds called for by the drafts, as was their duty on account of insolvency, the equities of claimants would be plain; but instead of doing so they merely shifted credits on their books and records. No part of the funds in the banks when they failed was placed there by claimants or by any one for them.
If a deposit is not in one class, it must be in the other. Marine Bank v. Fulton County Bank, 2 Wall. 252, 256, 17 L.Ed. 785; Scammon v. Kimball, Assignee, 92 U.S. 362-370, 23 L.Ed. 483; Commercial Nat. Bank v. Armstrong, 148 U.S. 50-59, 13 S.Ct. 533, 37 L.Ed. 363. Whether a deposit is general or special depends upon the intention and understanding of the parties. Keyes v. Paducah I.R. Co. (C.C.A.) 61 F.(2d) 611.
When negotiable paper is deposited in a bank for collection, the depositor remains the owner as to the collecting bank in absence of special agreement to the contrary, and the bank takes such paper simply as agent of the owner. 2 Michie, B. B. ยง 159; Eufaula Groc. Co. v. Nat. Bank, 118 Ala. 408, 24 So. 389; Morris Co. v. Ala. Car. Co., 139 Ala. 620, 36 So. 764; Jefferson County Sav. Bank v. Hendrix, 147 Ala. 670, 39 So. 295, 1 L.R.A. (N.S.) 246; Id., 153 Ala. 636, 45 So. 136, 14 L.R.A. (N.S.) 686; Commercial Nat. Bank v. Armstrong, 148 U.S. 50, 13 S.Ct. 533, 37 L.Ed. 363; Stones River Nat. Bank v. Lerman Mill Co., 9 Ala. App. 322, 63 So. 776. In view of the agreement that defendant bank should be liable only when actual funds or solvent credit should come into its possession, on failure of payment of draft by the collecting bank, the defendant was not liable to the plaintiff.
The general rule of law is that when one deposits money in a bank the relation of debtor and creditor arises at once, but this applies only when the money is left with the bank for deposit. 3 R.C.L., par. 261, p. 633; 7 C.J., sec. 248; First National Bank of Meridian v. Strauss, 66 Miss. 479; Commercial Bank v. Armstrong, 142 U.S. 50, 37 L.Ed. 363. The title to the funds collected did not pass to the collecting bank.