Equitable Trust Co. v. First National Bank - 275 U.S. 359 (1928)
U.S. Supreme Court
Equitable Trust Co. v. First National Bank, 275 U.S. 359 (1928)
Equitable Trust Company of New York v.
First National Bank of Trinidad, Colorado
Argued December 7, 1927
Decided January 3, 1928
275 U.S. 359
1. A New York banking firm, in order to enable small banks in this country to draw upon foreign banks with which it had credit, offered, upon receipt of advice of such a draft accompanied by funds adequate to cover it and the firm's compensation, to forward advice of the draft to the drawee bank and to provide the drawee
with funds sufficient for its payment, by transfer of the firm's credit with the drawee, or otherwise, the drawing lank to act as principal, and draw in its own name and the firm being employed merely as agents of the drawer for the purpose of giving such advice and of providing such funds. In pursuance of this plan, a Colorado bank, claimant herein, drew and sold its draft on an Italian bank, notified the firm, requesting that it protect the draft on presentation, and sent it a check which the firm deposited to its general account in New York. The firm then sent to the Italian bank a list of drafts, including drafts issued by itself and by other banks as well as that of the claimant, with a request to the Italian bank to protect and honor them and charge them to the firm's account. The Italian bank so charged them, and credited them in an account "Drafts Payable." To compensate that bank, the firm's account ceased to draw interest on the amount so charged. International banking practice permitted the firm to cancel such advices if it saw fit, and regain its credit. It did not appear that the claimant or the holder of its draft knew of the mode of bookkeeping described. Thereafter, the firm became bankrupt, the draft for that reason was dishonored, the drawer took it up, and claimed special reimbursement from the trustee in bankruptcy for the amount it paid the firm.
(1) That the sum paid by the claimant to the bankrupt was not paid upon trust to be applied to the draft. P. 275 U. S. 366.
(2) The claimant was not an equitable assignee, pro tanto, of the bankrupts' deposit with the drawee. Id.
2. The words "Pay from balance against this check" do not import an assignment. P. 275 U. S. 368.
13 F.2d 732 reversed.
Certiorari, 273 U.S. 684, to a judgment of the circuit court of appeals which reversed an order of the district court in bankruptcy confirming a special master's report disallowing the reclamation claim of respondent.