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    RECTOR v. COMMERCIAL NAT BANK, 200 U.S. 420 (1906)

    U.S. Supreme Court

    RECTOR v. COMMERCIAL NAT BANK, 200 U.S. 420 (1906)

    200 U.S. 420

    FRED C. RECTOR, Trustee of Reinhard & Company, Plff. in Err.,
    No. 138.

    Submitted December 12, 1905.
    Decided February 19, 1906.

    Messrs. David F. Pugh, Fred C. Rector, and Pugh & Pugh, for plaintiff in error.

    Mr. F. F. D. Albery for defendant in error. [200 U.S. 420, 421]  

    Mr. Justice White delivered the opinion of the court:

    This case is governed by the principles which controlled the decision just announced in the case of the same plaintiff in error against the City Deposit Bank Company, No. 137, [ 200 U.S. 405 , 50 L. ed. --, 26 Sup. Ct. Rep. 289.]

    In the trial court judgment was prayed for $970.45, on the ground that on April 10, 1900, that amount of money, the property of Reinhard & Company, had been by that firm transferred to the defendant in error, and that the transaction constituted a voidable preference. The answer was in substance a general denial of the allegations of the petition in the particulars just stated.

    The case was submitted to the court upon the pleadings and the following agreed statement of facts:

    Judgment was entered against the trustee, and that judgment was affirmed by the appellate courts. The supreme court of Ohio entered upon its journal a certificate, made by its chief justice, which is precisely like that set out in the opinion delivered in the City Deposit Bank Case.

    A motion assailing the power of this court to entertain this writ of erro is overruled, for the reasons given in passing upon a similar motion filed in case No. 137. And, applying the principles announced in the case just referred to, it inevitably follows that the payment made on April 10, 1900, by the clearing house association, out of the credits of Reinhard & Company in the hands of the clearing house association, was a transfer of property belonging to Reinhard & Company which the trustee in bankruptcy was entitled to demand and receive from the defendant in error. We need not dwell upon the-contention [200 U.S. 420, 424]   made in argument that because the defendant in error, on the morning of April 10, 1900, gave Reinhard & Company $2,000 in currency in return for Reinhard & Company's draft on New York for a like sum, the transaction, even if fraudulent, invested the defendant in error with the right, upon the suspension of Reinhard & Company, to appropriate any property belonging to Reinhard & Company which they might be able to possess themselves of, and to apply the same in reduction of the advance made upon the seourity of the draft. The doctrine of rescission and following of trust funds can have no application, especially when, as expressly agreed in the statement of facts, the money which the defendant in error gave to Reinhard & Company in exchange for its draft 'was used by Reinhard & Company to pay checks drawn on them, and was paid out over their counter on April 10, 1900, to their customers.'

    The judgment of the Supreme Court of Ohio must be reversed and the case remanded to that court for further proceedings not inconsistent with this opinion.

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