Maryland Casualty Co. v. City Nat. Bank

19 Citing cases

  1. Conqueror Trust Co. v. Fidelity Deposit Co.

    63 F.2d 833 (8th Cir. 1933)   Cited 15 times
    In Conqueror Trust Co. v. Fidelity Deposit Co., 8 Cir., 63 F.2d 833, 838, this court quoted with approval the following excerpt from Havana Cent. R. Co. v. Central Trust Co. of New York, 2 Cir., 204 F. 546, 551, L.R.A. 1915B, 715: "But if the bank have knowledge that the officer [of the drawer of the check] is using the check for his personal benefit, e.g. to pay his debt to the bank or to deposit it to his personal credit, then the bank is put upon inquiry and if it fail to make it, pays at its peril."

    Defendant's theory is that the agency account of the association in the bank was a mingled account, that the bank had no knowledge that Stone had embezzled any money, or that the checks in question were drawn for any wrongful purposes; that there were no circumstances to put the bank on inquiry before it accepted Stone's checks on the agency account for the payment of the notes in question; and that in any event this case presents an exception to the general rule of liability of a bank where a trustee draws trust funds known to the bank to be such to pay an individual obligation of the trustee to the bank, in that here the indebtedness was incurred for the principal and the proceeds of the loans were deposited to the credit of its account, and that there is no liability on the bank unless it has actual notice of the misapplication. Maryland Casualty Co. v. City Nat. Bank (C.C.A. 6) 29 F.2d 662, is possibly an authority for this position. The court there distinguishes the rule announced in Bischoff, Adm'r v. Yorkville Bank, 218 N.Y. 106, 112 N.E. 759, L.R.A. 1916F, 1059, and indicates it thinks that the conclusion in that case is not sound, while this court in Fidelity Deposit Co. of Maryland v. Farmers' Bank (C.C.A. 8) 44 F.2d 11, quotes from that case with approval, so this court is evidently not in harmony with the rule announced in Maryland Casualty Co. v. City Nat. Bank, supra.

  2. Ætna Casualty & Surety Co. v. Catskill Nat. Bank & Trust Co.

    102 F.2d 527 (2d Cir. 1939)   Cited 5 times
    In Aetna Casualty Surety Co. v. Catskill Nat. Bank Trust Co., 2 Cir., 102 F.2d 527, 529, the court said in part, "The bank is obliged by contract and business necessity to honor checks promptly, and has neither the time nor the facilities to act as detective on the conduct of depositors."

    While it has no knowledge that it is receiving trust funds, it does know of the presence of trust funds in the account, and this factor is deemed enough to bar it from deriving a direct advantage through what is shown later to have been a diversion of trust funds. It has no equity equal to that of the real owner. Bischoff v. Yorkville Bank, supra, at page 112, 112 N.E. 759. See also Central National Bank v. Insurance Co., 104 U.S. 54, 26 L.Ed. 693; Maryland Casualty Co. v. City National Bank, 6 Cir., 29 F.2d 662; Austin W. Scott, Participation in a Breach of Trust, 34 Harv.L.Rev. 475. The District Court was therefore right in holding the defendant answerable for diversions of guardianship funds from which it derived direct benefit.

  3. Atlanta St. A.B. Ry. Co. v. Barnes

    95 F.2d 273 (5th Cir. 1938)   Cited 15 times
    Recognizing that a bank may be held liable for misappropriation under Florida law "when the bank knows that an actual misappropriation is intended or is in progress"

    The bank may and should assume the customer's honesty and correct conduct of his business. That a trustee, with the bank's knowledge, deposits trust money in his individual account it not always nor ipso facto a conversion of it. Munnerlyn v. Augusta Bank, 88 Ga. 333, 14 S.E. 554, 30 Am.St.Rep. 159 Note; Maryland Casualty Co. v. City National Bank, 6 Cir., 29 F.2d 662; Farmers' Bank v. U.S. Fid. G. Co., 5 Cir., 28 F.2d 676. The Bank thereafter cannot itself take that trust money for its own uses, or to pay the depositor's individual note, Conqueror Trust Co. v. Fidelity Dep. Co. of Md., 8 Cir., 63 F.2d 833; Central National Bank v. Insurance Co., 104 U.S. 54, 26 L.Ed. 693; Union Stock Yards Nat. Bank v. Gillespie, 137 U.S. 411, 11 S.Ct. 118, 34 L.Ed. 724; but it may ordinarily pay it over to the depositor himself or to his order. This is so because the depositor either before or after making the deposit of the trust money may have become individually entitled to it, or the check by which he orders it paid out may be for the proper uses of the trust.

  4. Bank of Giles County v. Fidelity Deposit Co.

    84 F.2d 321 (4th Cir. 1936)   Cited 13 times
    In Bank of Giles County v. Fidelity Deposit Co., 84 F.2d 321, it is said: "What it ought to have done is not what it did do, and it cannot escape liability upon the mere conjecture that what did happen to the funds might have also happened had the bank not been derelict in its dealings with those funds."

    v. Windsor Savings Bank, 90 Vt. 487, 98 A. 993; Ward v. City Trust Co., 192 N.Y. 61, 84 N.E. 585; Bischoff v. Yorkville Bank, 218 N.Y. 106, 112 N.E. 759, L.R.A. 1916F, 1059; Fidelity Deposit Co. v. Rankin, 33 Okla. 7, 124 P. 71; Brovan v. Kyle, 166 Wis. 347, 165 N.W. 382; 1 Morse on Banks and Banking (5th Ed.) § 317; First Natl. Bank v. Green (Ky.) 114 S.W. 322; Jones v. U.S.F. G. Co. (Va.) 182 S.E. 560; Fidelity Deposit Co. v. Bank of Smithfield (D.C.) 11 F. Supp. 904; Mass. Bonding Ins. Co. v. Standard Trust Savings Bank, 334 Ill. 494, 166 N.E. 123; Cocke's Adm'r v. Loyall, 150 Va. 336, 143 S.E. 881; Chase Co. v. Norfolk Natl. Bank, 151 Va. 1040, 145 S.E. 725; Trust Co. v. Snyder, 152 Va. 572, 147 S.E. 234; Fidelity Deposit Co. of Md. v. Farmers Bank (C.C.A.) 44 F.2d 11; 4 Bogert Trusts, § 907. For cases in which the question has been complicated by the fact that the trust funds were mingled with the individual funds of the fiduciary in an account in the individual name, see Md. Casualty Co. v. City Natl. Bank (C.C.A.) 29 F.2d 662; Fidelity D. Co. v. Highland Trust Savings Bank (C.C.A.) 44 F.2d 697; Conqueror Trust Co. v. F. D. Co. (C.C.A.) 63 F.2d 833; U.S.F. G. Co. v. Union Bank Trust Co. (C.C.A.) 228 F. 448; Allen v. Puritan Trust Co., 211 Mass. 409, 97 N.E. 916, L.R.A. 1915C, 518. Without gainsaying these general principles, the defendants assert that they are not applicable to the peculiar circumstance common to the five items under consideration because in each instance the money loaned to the individual was actually deposited in the treasurer's account and presumably used for county purposes.

  5. American Surety Co. v. Waggoner Nat. Bank

    83 F.2d 99 (5th Cir. 1936)   Cited 6 times

    he further fact that some of them were cashed over the counter was not unusual in the light of the precarious banking conditions then existing, as disclosed by the evidence. In the absence of revealing circumstances other than these, the bank is entitled to assume that the fiduciary is dealing lawfully with the funds and is properly withdrawing them. Bank of Commerce v. United States Fidelity Guaranty Co. (C.C.A.) 54 F.2d 578; City of San Antonio v. Burke (Tex.Civ.App.) 65 S.W.2d 408; Interstate Bank v. Claxton, 97 Tex. 569, 80 S.W. 604, 65 L.R.A. 820, 104 Am.St.Rep. 885; Moore v. Hanscom, 101 Tex. 293, 106 S.W. 876, 108 S.W. 150; Bank of Commerce v. United States Fidelity Guaranty Co. (C.C.A.) 54 F.2d 578; Lincoln Oil Co. v. Clark Nat. Bank (C.C.A.) 35 F.2d 6; Rodgers v. Bank, 179 Minn. 197, 229 N.W. 90; Bank of Vass v. Arkenburgh (C.C.A.) 55 F.2d 130, 131; Havana Co. v. Central Trust Co. (C.C.A.) 204 F. 546, L.R.A. 1915B, 715; Santa Marina Co. v. Canadian Bank (C.C.A.) 254 F. 391; Maryland Casualty Co. v. City Bank (C.C.A.) 29 F.2d 662; Massachusetts Bonding Co. v. Standard T. S. Bank, 334 Ill. 494, 166 N.E. 123; Empire Trust Co. v. Cahan, 274 U.S. 473, 47 S.Ct. 661, 71 L.Ed. 1158, 57 A.L.R. 921; New Amsterdam Co. v. Nat. Banking Co., 117 N.J. Eq. 264, 175 A. 609; 4 Bogert on Trusts, § 909; Perry on Trusts, p. 177 (122); 3 R.C.L. 549 (177). Compare American Surety Co. v. Lewis Bank (C.C.A.) 58 F.2d 559; United States Fidelity Guaranty Co. v. Union Bank Trust Co. (C.C.A.) 228 F. 448; Williams Co. v. Broward Bank Trust Co. (C.C.A.) 69 F.2d 14.

  6. W. Horace Williams Co. v. Broward Bank Tr. Co.

    69 F.2d 14 (5th Cir. 1934)   Cited 3 times

    This contention is based on the further untenable one that if the bank had put this money to the credit of "Dye, Merrill Brennan Inc., agents of the Detroit, Fidelity Surety Company," the bank would have thereby obligated itself to appellant to see to the proper application of the funds. In short, appellant makes the unreasonable claim that by depositing to the account of Brennan, Inc., whom appellant not only represented to be, but vouched for as agents of the surety company, the bank obligated itself to appellant as insurer, that the money would not be drawn from the account except by authority of the named principal, and that it is responsible for permitting such deposit though the money went where appellant intended it to go. Maryland Casualty Co. v. City National Bank (C.C.A.) 29 F.2d 662; Harris Co. v. Chipman (C.C.A.) 156 F. 929. A bank is under no such obligation as this, even to the principal. Alexander v. Security Bank Trust Co. (D.C.) 273 F. 258, at page 262. Its responsibility to the principal arises only when it knows or ought to know that the principal's funds are being diverted to the agent's personal use. Farmers' Bank v. U.S.F. G. Co. (C.C.A.) 28 F.2d 676; Empire Trust Co. v. Cahan, 274 U.S. 473, 47 S. Ct. 661, 71 L. Ed. 1158, 57 A.L.R. 921.

  7. Bank of Vass v. Arkenburgh

    55 F.2d 130 (4th Cir. 1932)   Cited 9 times

    But it is a simple case of where a bank, without knowledge of any misconduct on the part of the fiduciary, has credited a check drawn to and indorsed by the fiduciary to the individual account of the fiduciary and another, and has honored checks drawn against the account, without knowledge that in drawing same the fiduciary was converting the trust fund to her own use. In such case, the law is well settled that the bank is not liable to the beneficial owners of the trust fund. 26 R.C.L. 1316; Empire Trust Co. v. Cahan, 274 U.S. 473, 47 S. Ct. 661, 71 L. Ed. 1158, 57 A.L.R. 921, and note at page 930; Maryland Casualty Co. v. City Nat. Bk. (C.C.A. 6th) 29 F.2d 662; Commercial Sav. Bank Trust Co. v. Nat. Surety Co. (C.C.A. 6th) 294 F. 261; Santa Marina Co. v. Canadian Bank of Commerce (C.C.A. 9th) 254 F. 391; New Amsterdam Casualty Co. v. Robertson, 129 Or. 663, 278 P. 963, 64 A.L.R. 1396, and note; Cocke's Adm'r v. Loyall, 150 Va. 336, 143 S.E. 881; Whiting v. Hudson Trust Co., 234 N.Y. 394, 138 N.E. 33, 25 A.L.R. 1470; Bischoff v. Yorkville Bank, 218 N.Y. 106, 112 N.E. 759, L.R.A. 1916F, 1059; Manufacturers' Trust Co. v. United States Mortgage Trust Co., 122 Misc. Rep. 726, 204 N.Y.S. 105, affirmed 213 App. Div. 345, 210 N.Y.S. 613, affirmed 244 N.Y. 550, 155 N.E. 893; Allen v. Puritan Trust Co., 211 Mass. 409, 97 N.E. 916, L.R.A. 1915C, 518 and note; U.S.F. G. Co. v. Home Bank, 77 W. Va. 665, 88 S.E. 109; Hood v. Kensington Nat. Bk., 230 Pa. 508, 79 A. 714. When the check was credited to the account of Mr. and Mrs. Dunlop, the bank had no notice that it represented a trust fund and did not in fact belong to them, as represented by Mr. D

  8. Bank of Commerce v. United States F. G. Co.

    54 F.2d 578 (10th Cir. 1931)   Cited 2 times

    The principle is well settled that a bank is liable for the restoration of trust funds, if it knowingly aids a depositor in withdrawing and converting them to his personal use, or profits from the transaction. Empire Trust Co. v. Cahan, 274 U.S. 473, 47 S. Ct. 661, 71 L. Ed. 1158, 57 A.L.R. 921; Whiting v. Hudson Trust Co., 234 N.Y. 394, 138 N.E. 33, 25 A.L.R. 1470; Maryland Casualty Co. v. City National Bank (C.C.A.) 29 F.2d 662; Bischoff v. Yorkville Bank, 218 N.Y. 106, 112 N.E. 759, L.R.A. 1916F, 1059; Parker-Gordon Cigar Co. v. Liberty National Bank, 134 Okla. 286, 273 P. 269; Cocke v. Loyall, 150 Va. 336, 143 S.E. 881; Oklahoma State Bank v. Galion Iron Works (C.C.A.) 4 F.2d 337; Duckett v. National Mechanics' Bank, 86 Md. 400, 38 A. 983, 39 L.R.A. 84, 63 Am. St. Rep. 513; Allen v. Puritan Trust Co., 211 Mass. 409, 97 N.E. 916, L.R.A. 1915C, 518; Farmers' Bank of Alamo, Ga., v. U.S.F. G. Co. (C.C.A.) 28 F.2d 676; L.R.A. 1915C, 519, note.

  9. Fidelity & Deposit Co. of Maryland v. Highland Trust & Savings Bank

    44 F.2d 697 (6th Cir. 1930)   Cited 2 times

    Certainly no lien, as giving rights to or affecting legal title, was involved in or intended to be declared in either of these cases; and the present case must rest upon the ordinary doctrines of courts of equity as to trust funds. Nor, under the facts of the case, can we find any general liability against the bank, on the general ground that it had paid, out of this account, checks to others which were in fact for Whitice's personal use. Maryland Co. v. City National Bank (C.C.A. 6) 29 F.2d 662, 663; Empire Co. v. Cahan, 274 U.S. 473, 47 S. Ct. 661, 71 L. Ed. 1158, 57 A.L.R. 921. We do not overlook the fact that the Highland, early in the period, knew that Whitice used official funds in another bank, the Hamilton, to pay his personal debt to the Highland.

  10. Lincoln Oil Producing Co. v. Clark Nat. Bank

    35 F.2d 6 (6th Cir. 1929)   Cited 2 times

    U.S.F. G. Co. v. Union B. T. Co., 228 F. 448, 451 (C.C.A. 6). As applicable to notes A and E the defendant bank was simply the agent of McCombs, their holder, for collection. Ward v. Smith, 74 U.S. (7 Wall.) 447, 453, 19 L. Ed. 207, 210; Smith et al. v. Bank, 12 F.2d 535, 536 (C.C.A. 4). When McCombs directed defendant to draw upon the corporation for payment of note A which bore his signature as one of the makers and afterwards countersigned the check for such payment, this standing alone might seem to cast a shadow upon the transaction; the effect of it was to pay this note out of corporation funds, and, nothing else appearing, there are cases holding that the defendant would be bound by any information which it could have obtained had it pursued inquiry as to whether such withdrawal was or was not a corporate transaction [but see Maryland Co. v. City Bank (C.C.A. 6) 29 F.2d 662, 663]. It appearing, however, that Cannon, the treasurer, directed defendant to send the draft to Louisville for collection, that he also signed the check in payment thereof as treasurer, and that the corporation's bank at Louisville paid the check and remitted the proceeds, we conceive that defendant was therefore justified in accepting the fund and placing it to the credit of McCombs. It certainly was not required to go to the extent of inquiring whether either the note or check had been authorized by the board of directors or whether there lurked within the transaction the possibility of some future complaint by minority stockholders. The requirement of such extraordinary precaution is overburdensome.