Jennings v. United States Fidelity & Guaranty Co. - 294 U.S. 216 (1935)
U.S. Supreme Court
Jennings v. United States Fidelity & Guaranty Co., 294 U.S. 216 (1935)
Jennings v. United States Fidelity & Guaranty Co.
Argued January 16, 17, 1935
Decided February 4, 1935
294 U.S. 216
1. National banks are subject to state laws insofar as these are consistent with the policy and provisions, express or implied, of the National Bank Act or other federal statutes. P. 294 U. S. 219.
2. Under § 2 of the Bank Collection Code, as adopted in Indiana, the relation between a bank forwarding a check for collection and the collecting bank is that of principal and agent, until the agent has finished the business of collection. P. 294 U. S. 219.
3. In the absence of tokens of a contrary intention, the better common law doctrine is that the agency of a collecting bank is brought to an end by the collection of the paper, the bank being from then on in the position of a debtor, with liberty, like debtors generally, to use the proceeds as its own. P. 294 U. S. 219.
4. A collecting bank need not collect in cash if another way has the sanction of law or custom to which the parties may be held to have impliedly consented. P. 294 U. S. 220.
5. Under § 9 of the Bank Collection Code of Indiana, a collecting bank, as agent, is not under a duty to collect for cash but may collect by having the collection item set off against checks owed by itself, in a local clearinghouse transaction in the customary way,
and thereafter the liability of the bank to the forwarder or owner is that of a debtor. P. 294 U. S. 221.
6. A national bank in Indiana became insolvent after collecting a check by a local clearing wherein the check was set off against checks of greater amount owed by the bank itself. Held that, in the absence of wrongdoing, there is no ground for impressing the bank's assets with a constructive trust in favor of its principal, and neither is there ground for an implied trust, since the money proceeds of the transaction did not come into the bank as an identifiable fund, but merely went to reduce its liabilities, and to infer that a trust was transferred from the proceeds to an equivalent portion of the bank's cash resources would be without warrant in the intention of the parties. Pp. 294 U. S. 221-224.
7. A debt does not furnish a continuum upon which a trust can be imposed after cancellation or extinguishment has put the debt out of existence. P. 294 U. S. 224.
8. As applied to a national bank, § 13 of the Indiana Bank Collection Code, purporting to make the owners of paper which the bank has collected but for which they have not been satisfied, preferred claimants, in the event of the bank's failure, upon all of its assets, irrespective of whether the funds representing their paper call be traced or identified as part of such assets or as intermingled with or converted into other assets of the bank, is inconsistent with the system of equal distribution established by federal law (R.S., § 5236), and is therefore invalid. P. 294 U. S. 225.
71 F.2d 618 reversed.
Certiorari, 293 U.S. 543, to review the affirmance of a judgment of the District Court, 4 F.Supp. 569, in an action, brought originally in an Indiana court, by the payee of a check, against a national bank and its receiver, to impress a trust upon its assets.