Van Zandt v. Hanover Nat. Bank

• Decision Date: 11 October 1906
• Docket Number: 247.
• Citation: 149 F. 127
• Parties: VAN ZANDT v. HANOVER NAT. BANK.
• Court: U.S. Court of Appeals — Second Circuit

149 F. 127

VAN ZANDT v. HANOVER NAT. BANK.

No. 247.

United States Court of Appeals, Second Circuit.

October 11, 1906

E. B Whitney, for plaintiff in error.

P. S Dudley, for defendant in error.

Before WALLACE, TOWNSEND, and COXE, Circuit Judges.

WALLACE Circuit Judge.

The question whether the plaintiff (as receiver of the American National Bank of Abilene), or the defendant, was entitled to the possession of the four promissory notes which came to the hands of the defendant in January, 1905, depends upon the following facts: The defendant had been for some time the New York correspondent of the Abilene bank, and the Abilene bank had kept with the defendant a deposit account, making deposits and withdrawing them by checks, bills of exchange etc. From time to time it forwarded notes or commercial paper made by various persons and owned by itself, indorsing said paper, and offering it to the defendant for sale with a request that in case the defendant purchased the paper the proceeds thereof should be deposited in the deposit account. November 27, 1903, the Abilene bank signed a written contract of hypothecation by which it agreed with the defendant--

'That all bills of exchange, notes, * * * money, and property of every kind owned by the undersigned * * * deposited with the said bank, or which may be in any wise in said bank, or under its control, as collateral security for loans or advances already made, or hereafter to be made, to or for account of the undersigned, by said bank, or otherwise, may be held collected, and retained by said bank until all liabilities present or future of the undersigned * * * of every kind of said bank, now or hereafter contracted, shall be paid and fully satisfied.'

In January, 1905, the four notes in controversy, made by third persons and indorsed by the Abilene bank, payable, three of them, respectively, in 90, 60, and 30 days, and one of them in 6 months, were forwarded by it from Abilene, Tex., to the defendant, by mail, with instructions: 'We hand you for discount and credit. ' The defendant received two of them January 14th, and two of them January 16th, and immediately notified the Abilene bank, by telegrams and letters, that the paper was not satisfactory. After the first two notes had been mailed to the defendant, but before it had received notice of the defendant's refusal to discount them, the Abilene bank drew a check upon the defendant for $3,825.45. This check was paid by the defendant January 17th, resulting in an overdraft of the account of the Abilene bank of about $3,500. Thereupon the defendant, without consulting the Abilene bank, credited the account of that bank with $3,500, and notified the latter by mail that it had made a 'temporary loan' of that amount 'against collateral in our hands.' Before this letter reached Abilene by the ordinary course of mail the Abilene bank had failed, and the plaintiff had been appointed its receiver by the Comptroller of the Currency.

Upon these facts it is plain that the plaintiff was entitled to recover unless the terms of the contract of November 27th authorized the defendant to treat the notes as a security in its hands for an overdraft or indebtedness by the Abilene bank. In the absence of a contract of that purport, it would have been the duty of the defendant, upon receiving the notes and concluding not to discount them, to return them to the Abilene bank or hold them awaiting further instructions and subject to the disposition of that bank. The Abilene bank had not asked for a temporary loan, and was entitled to have its notes used as it had directed, so as to realize their full proceeds; and if not so used, it was entitled to make such disposition of the notes as it saw fit. As the notes had been sent to the defendant for a specific use, they did not become subject to a general banker's lien. Such a lien does not attach upon securities which are deposited with the banker for a special...