The opinion of the court was delivered by: Platt, Chief Judge.
Plaintiff and defendant have filed motions for summary
judgment. For the reasons which follow, plaintiff's motion is
granted and defendant's motion is denied.
The following facts are not in dispute. On September 19,
1988, Bonnie S. Nachamie ("Nachamie") opened an attorney escrow
account with Guardian Bank, N.A. ("Guardian"), a national
banking association. The account, entitled "Bonnie S. Nachamie,
Esq., Attorney at Law, Trust Account # 2, Account # 25113088-4"
(hereinafter the "Nachamie Account"), was opened as an "IOLA"
account pursuant to a New York State statute permitting
attorneys to open IOLA accounts under certain circumstances.
See N.Y.Jud.Law § 497 (McKinney Supp. 1990).*fn1
On June 21, 1989, the United States Comptroller of the
Currency declared Guardian Bank insolvent and placed it into
receivership, appointing the Federal Deposit Insurance
Corporation ("FDIC") as receiver. As of that date the Nachamie
Account contained $197,211.68, of which $168,700.00 were funds
belonging to the plaintiff, Peoples Westchester Savings Bank
("Peoples Westchester"), a law client of Nachamie. The
remaining funds belonged to other Nachamie clients. By letter
dated July 14, 1989, the FDIC informed Nachamie that the
Nachamie Account contained in excess of the federally-insured
amount of $100,000 and that Nachamie would have to file a claim
for the uninsured excess against the receivership estate.
Pursuant to an agreement dated October 11, 1989, Peoples
Westchester paid Nachamie an adjustment amount of $28,511.68,
representing the difference between the amount of funds in the
Nachamie Account belonging to Peoples Westchester and the total
funds in the account. In return, Nachamie assigned to Peoples
Westchester all of her rights, title and interest in the
Nachamie Account. Peoples Westchester
then brought this action against the FDIC, as receiver of
Guardian, requesting this Court to compel the FDIC to release
the entire balance of the Nachamie Account to Peoples
Westchester or, alternatively, to find Peoples Westchester
entitled to a preference in the liquidation of Guardian
amounting to the Nachamie Account balance.
In its motion, the FDIC argues that plaintiff's sole relief
is through a claim for deposit insurance. It asserts that,
under federal banking law, the records of the financial
institution are conclusive as to the nature of any deposit it
holds, and that in this case the account was a general deposit
creating a debtor-creditor relationship between the depositor
— Nachamie — and Guardian. As a result, each of Nachamie's
clients having a beneficial ownership interest in funds
contained in the Nachamie Account is insured up to $100,000 and
is entitled to a pro rata distribution of any excess over
$100,000 as a general creditor of the receivership estate.
Peoples Westchester argues, in its motion, that the Nachamie
Account was a special deposit because Nachamie never had title
to the funds in the account, and because Guardian was aware
that the funds deposited did not belong to Nachamie, being on
notice that the account was an IOLA account. For this account,
there was no debtor-creditor relationship between Nachamie and
Guardian. Consequently, the issue of federal insurance coverage
is immaterial. Guardian held the funds as a bailee and Peoples
Westchester is entitled to the return of these funds directly
or in preference to other creditors, regardless of what portion
federal insurance may cover.
A motion for summary judgment may only be granted where the
moving party demonstrates that no genuine issue of material
fact exists for trial and that it is entitled to judgment as a
matter of law. Celotex Corp. v. Catrett, 477 U.S. 317, 106
S.Ct. 2548, 91 L.Ed.2d 265 (1986). In this case, there being no
material facts in dispute, the critical issue to be resolved is
whether the Nachamie Account was a special deposit or a general
In Marine Bank v. Fulton Bank, 69 U.S. (2 Wall.) 252, 17
L.Ed. 785, 787 (1865), the Supreme Court explained the
All deposits made with bankers may be divided into
two classes, namely, those in which the bank
becomes a bailee of the depositor, the title of
the thing deposited remaining with the latter, and
that other kind of deposit of money peculiar to
banking business, in which the depositor, for his
own convenience, parts with the title to his
money, and loans it to the banker, and the latter,
in consideration of the loan of the money and the
right to use it for his own profit, agrees to
refund the same amount, or any part thereof, on
See id.; see also Swan v. Children's Home Society, 67 F.2d 84,
86-87 (4th Cir. 1933); Keyes v. Paducah & I.R. Co.,
61 F.2d 611, 612-13 (6th Cir. 1932).
The distinction is important because in the case of a general
deposit the depositor and bank enter into a debtor-creditor
relationship, see Bank of Marin v. England, 385 U.S. 99, 101,
87 S.Ct. 274, 276, 17 L.Ed.2d 197 (1966); New York State Assn.
of Life Ins. Underwriters v. Supt. of Insurance, 37 A.D.2d 304,
325 N.Y.S.2d 172, 175-76 (N.Y. 1971), with the bank acquiring
title to the funds deposited. See Glenn Justice Mtge. Corp. v.
First Nat'l Bank, 592 F.2d 567, 569-70 (10th Cir. 1979); Miller
v. Wells Fargo Bank, 540 F.2d 548, 561 (2d Cir. 1976). In
contrast, the title to money or property that is the subject of
a special deposit remains with the depositor. See Glenn Justice
Mtge., 592 F.2d at 570; Miller, 540 F.2d at 561; Keyes, 61 F.2d
at 613. Therefore, if the Nachamie Account were a general
deposit, it would form part of the receivership estate and
would be distributed to creditors pursuant to federal banking
laws, including deposit insurance regulations. Cf. Federal Home