BANK OF AMERICA NAT. T. & S. ASS'N v. Merchandise Nat. Bk.

• Decision Date: 09 February 1953
• Docket Number: No. 13039.,13039.
• Parties: BANK OF AMERICA NAT. TRUST & SAVINGS ASS'N v. MERCHANDISE NAT. BANK OF CHICAGO et al. O'RILEY v. BANK OF AMERICA NAT. TRUST & SAVINGS ASS'N et al.
• Court: U.S. Court of Appeals — Ninth Circuit

201 F.2d 68 (1952)

BANK OF AMERICA NAT. TRUST & SAVINGS ASS'N v. MERCHANDISE NAT. BANK OF CHICAGO et al.

O'RILEY v. BANK OF AMERICA NAT. TRUST & SAVINGS ASS'N et al.

No. 13039.

United States Court of Appeals Ninth Circuit.

December 24, 1952.

As Amended February 9, 1953.

S. B. Stewart, Jr., G. D. Schilling, Morse Erskine and Erskine, Erskine & Tulley, San Francisco, Cal., for appellant Bank of America.

M. L. Crimmins, Jr., John L. Bradley and Crimmins, Kent, Draper & Bradley, San Francisco, Cal., for appellant Eugene J. O'Riley.

Moses Lasky and Brobeck, Phleger & Harrison, San Francisco, Cal. (Thomas P. Riordan, of Riordan, Linklater & Butler, Chicago, Ill., of counsel), for appellee Merchandise Nat. Bank of Chicago.

Before MATHEWS, STEPHENS and POPE, Circuit Judges.

MATHEWS, Circuit Judge.

At all pertinent times, Merchandise National Bank of Chicago, hereafter called plaintiff, was a national banking association located in Illinois and having its principal office at Chicago, Illinois; Bank of America National Trust & Savings Association, hereafter called defendant, was a national banking association located in California and having its principal office at San Francisco, California, and a branch, called its East Bakersfield branch, at Bakersfield, California; United Produce Company, hereafter called United, was an Illinois corporation; Eugene J. O'Riley and Frank Lofendo were citizens of Illinois; and Cy Mouradick was a citizen of California. In a bankruptcy proceeding commenced on December 1, 1948, United was adjudged a bankrupt on December 16, 1948, and O'Riley was appointed trustee in bankruptcy of United's estate on January 18, 1949. At all pertinent times prior to December 1, 1948, Lofendo was United's agent.

Plaintiff had an account with defendant at defendant's principal office. United had an account with plaintiff at plaintiff's principal office. Lofendo or United, in Lofendo's name, had an account with defendant, hereafter called the Lofendo account, at defendant's East Bakersfield branch.

The Lofendo account was established by Lofendo for United's use and benefit and, as between United and Lofendo, was United's account. However, it purported to be Lofendo's account and was treated by defendant as Lofendo's account. Accordingly, deposits in the Lofendo account were credited to Lofendo by defendant, and when checks drawn on the Lofendo account were paid, the amounts thereof were charged to Lofendo by defendant.

Prior to November 23, 1948, two items — $89,813.10 and $113,216.50 — were charged to plaintiff by defendant and credited to Lofendo by defendant. Thereafter, until June 26, 1950, plaintiff claimed that the $113,216.50 was improperly charged to plaintiff and improperly credited to Lofendo. On and after June 26, 1950, plaintiff claimed that the $89,813.10 and the $113,216.50 were improperly charged to plaintiff and improperly credited to Lofendo. Defendant has at all times claimed that the $89,813.10 and the $113,216.50 were properly charged to plaintiff and properly credited to Lofendo.

On November 23, 1948, plaintiff demanded of defendant payment of the entire amount of the credit balance then existing in plaintiff's account with defendant, which is to say, the entire amount then due and owing to plaintiff by defendant.

If the $89,813.10 and the $113,216.50 were properly charged to plaintiff, there was due and owing to plaintiff by defendant on November 23, 1948, $183,530.01. Defendant paid plaintiff the $183,530.01 — $294.54 on an undisclosed date between November 23, 1948, and February 18, 1949, and $183,235.47 on February 18, 1949 — but never made any other or further payment to plaintiff. Interest on the $183,235.47 at the legal rate of 7% per annum from November 23, 1948, to February 18, 1949, was $3,057.27. Therefore, if the $89,813.10 and the $113,216.50 were properly charged to plaintiff, there was due and owing to plaintiff by defendant at all times after February 18, 1949, $3,057.27, with interest thereon at the rate of 7% per annum from February 18, 1949.

However, if the $89,813.10 was properly charged to plaintiff, and if the $113,216.50 was improperly charged to plaintiff, there was due and owing to plaintiff by defendant at all times after February 18, 1949, $116,273.77 ($113,216.50 plus $3,057.27), with interest at the rate of 7% per annum on $113,216.50 thereof from November 23, 1948, and on $3,057.27 thereof from February 18, 1949; but if the $89,813.10 and the $113,216.50 were improperly charged to plaintiff, there was due and owing to plaintiff by defendant at all times after February 18, 1949, $206,086.87 ($89,813.10 plus $113,216.50 plus $3,057.27), with interest at the rate of 7% per annum on $203,029.60 ($89,813.10 plus $113,216.50) thereof from November 23, 1948, and on $3,057.27 thereof from February 18, 1949.

Furthermore, if the $89,813.10 and the $113,216.50 were properly credited to Lofendo, there was a credit balance of $30,920.36 in the Lofendo account on and after December 23, 1948; but if the $89,813.10 or the $113,216.50 was improperly credited to Lofendo, there was no credit balance in the Lofendo account on or after December 23, 1948.

On March 22, 1949, plaintiff commenced an action against defendant by filing a complaint, hereafter called the original complaint, in the United States District Court for the Northern District of California to recover the amount which defendant owed plaintiff. The original complaint was based on the theory that the $89,813.10 was properly charged to plaintiff, but that the $113,216.50 was improperly charged to plaintiff. However, instead of the amount which, according to that theory, defendant owed plaintiff — $116,273.77, with interest at the rate of 7% per annum on $113,216.50 thereof from November 23, 1948, and on $3,057.27 thereof from February 18, 1949 — the original complaint prayed judgment for $116,286, with interest at the rate of 7% per annum on $113,216.50 thereof from November 23, 1948, and on $3,069.50 thereof from February 18, 1949. The discrepancies were due to an error of computation on the part of counsel who wrote the original complaint.¹

On June 24, 1949, defendant filed an answer, hereafter called the original answer to the original complaint.² The original answer to the original complaint was based on the theory that the $89,813.10 and the $113,216.50 were properly charged to plaintiff and properly credited to Lofendo. However, instead of admitting that defendant owed plaintiff the amount which, according to that theory, defendant owed plaintiff — $3,057.27, with interest at the rate of 7% per annum from February 18, 1949 — the original answer to the original complaint denied that defendant owed plaintiff anything.³

The original answer to the original complaint contained three counterclaims denominated as such, all of which were based on the theory that the $89,813.10 and the $113,216.50 were properly charged to plaintiff and properly credited to Lofendo. Two were counterclaims seeking to defeat or diminish the recovery sought by plaintiff and claiming other relief.⁴ The third counterclaim, called an interpleader counterclaim,⁵ prayed for an order making the trustee in bankruptcy, Lofendo and Mouradick third party defendants and requiring plaintiff, the trustee, Lofendo and Mouradick to interplead with respect to the credit balance of $30,920.36 which, as stated above, existed in the Lofendo account if the $89,813.10 and the $113,216.50 were properly credited to Lofendo, but did not exist if the $89,813.10 or the $113,216.50 was improperly credited to Lofendo. Such an order was made on June 24, 1949.

Thereafter, prior to June 15, 1950, plaintiff filed a reply to all the counterclaims in the original answer to the original complaint, and the trustee, Lofendo and Mouradick filed pleadings in response to the interpleader counterclaim in the original answer to the original complaint.⁶ Plaintiff's reply was based on the theory that the $89,813.10 was properly charged to plaintiff and properly credited to Lofendo, but that the $113,216.50 was improperly charged to plaintiff and improperly credited to Lofendo, and that therefore there was no credit balance in the Lofendo account. The trustee's pleading and Mouradick's pleading were based on the theory that the $89,813.10 and the $113,216.50 were properly credited to Lofendo, and that therefore there was a credit balance of $30,920.36 in the Lofendo account. The trustee, in and by his pleading, claimed the $30,920.36. Mouradick, in and by his pleading, claimed a lien on the $30,920.36.⁷ Lofendo, in and by his pleading, disclaimed any interest in the $30,920.36.

A trial was had, beginning on June 15, 1950, and ending on June 29, 1950. Plaintiff, defendant and the trustee participated in the trial. Lofendo and Mouradick did not.⁸ On June 23, 1950 — in the course of the trial — plaintiff and the trustee moved for and obtained an order striking Mouradick's pleading from the files on the ground that it had not been served on plaintiff or the trustee.

On June 24, 1950 — in the course of the trial — defendant was permitted to, and did, file an amended answer to the original complaint.⁹ The amended answer to the original complaint differed in some respects from the original answer to the original complaint, but the differences are not material here.¹⁰ Plaintiff did not reply to the counterclaims in the amended answer to the original complaint.¹¹ It was stipulated, however, that plaintiff's reply to the counterclaims in the original answer to the original complaint might be considered its reply to the counterclaims in the amended answer to the original complaint. The trustee, Lofendo and Mouradick did not, nor did any of them, plead to or take any notice of the amended answer to the original complaint or any of the counterclaims therein.

On June 26, 1950 — in the course of the trial — plaintiff was permitted to, and did, file an amended complaint....