238 F. 285 (5th Cir. 1916), 2977, Brent v. Simpson

Docket Nº:2977.
Citation:238 F. 285
Party Name:BRENT et al. v. SIMPSON.
Case Date:December 19, 1916
Court:United States Courts of Appeals, Court of Appeals for the Fifth Circuit
 
FREE EXCERPT

Page 285

238 F. 285 (5th Cir. 1916)

BRENT et al.

v.

SIMPSON.

No. 2977.

United States Court of Appeals, Fifth Circuit.

December 19, 1916

Page 286

This is an appeal from a final decree of the District Court of the United States for the Northern District of Florida in a case in which the trustee in bankruptcy of the estate of Knowles Bros., a corporation, was plaintiff, and the executors of F. C. Brent, deceased, were defendants. The purpose of the bill was to compel the delivery by the defendants of certain securities, alleged to be the property of the bankrupt corporation, and which were in the possession of the executors. The bill charges that they were transferred by W. H. Knowles, who was the president of the bankrupt corporation, for it, in fraud of its creditors; it being insolvent at the time of the alleged transfer in April 1913, and the transfer having been made without consideration moving to the bankrupt. The purpose of the transfer is alleged to have been to indemnify the intestate, F. C. Brent, upon an accommodation indorsement, made by him at the instance of W. H. Knowles, to secure his personal obligation, the amount of which the executors of the said F. C. Brent, the indorser, have been compelled to pay, and for the reimbursement of which they are holding the securities. The obligation was a negotiable note of the Pensacola Investment Company, payable to W. H. Knowles, which he discounted at the Importers' & Traders' National Bank of New York City and which he and the intestate indorsed. The securities in question consisted of negotiable notes of third parties, secured by realty mortgages.

The answer of the defendant executors denies that the intestate acquired possession of the securities involved in the suit in April, 1913, as alleged in the

Page 287

bill, but, on the contrary, asserts that the intestate came into possession of them first in October, 1910, when they were delivered to him by W. H. Knowles to indemnify him against loss on an accommodation indorsement, then made by him at the request of W. H. Knowles, individually, and discounted at the Sullivan Banking & Trust Company of Montgomery, Ala. The amount of the loan, evidenced by the note, was $50,000. The original face value of the pledged securities was $100,000, reduced by the surrender by intestate to Knowles of a note for $30,000, secured by hotel stock, which left the face value of the remaining securities, which are here in question, $70,000. The answer asserted the validity of the transfer made in October, 1910, alleging that the securities were then pledged with intestate for value, i.e., for his indorsement on the $50,000 note, discounted by the Sullivan Banking & Trust Company; that they were transferred before maturity to intestate; that, at the time of the transfer, the corporation of Knowles Bros. was solvent and had enough assets to fully pay its debts, not including the pledged securities; that the intestate Brent had no knowledge or notice, at the time he accepted the securities for his indemnity, that W. H. Knowles had not given to Knowles Bros. value for them, or that Knowles Bros. was insolvent, if it was then insolvent. The answer also relied upon the Florida statute of limitations of three years, as a defense to the right of the trustee to recover the securities; and denied the jurisdiction of the District Court. The answer alleged, and the evidence showed, that after the original pledge of the securities by Knowles to intestate Brent in October, 1910, upon the occasion of the renewal of the note held by the Sullivan Banking & Trust Company, the bank asked for collateral, as well as personal, security, and, in pursuance of the bank's request, Brent, or Knowles for him, transmitted the securities, which had been pledged with Brent, to the Sullivan Banking & Trust Company. Upon a subsequent maturity of the note at the Montgomery bank, a misunderstanding arose as to its renewal by that bank, and W. H. Knowles thereupon arranged to get the money, with which to take it up, from the Importers' & Traders' National Bank of New York upon...

To continue reading

FREE SIGN UP