Security State Bank v. Baty

• Decision Date: 22 March 1971
• Docket Number: No. 202-69.,202-69.
• Citation: 439 F.2d 910
• Parties: SECURITY STATE BANK, Pharr, Texas, Plaintiff-Appellee, v. Paul A. BATY, Defendant-Appellant.
• Court: U.S. Court of Appeals — Tenth Circuit

439 F.2d 910 (1971)

SECURITY STATE BANK, Pharr, Texas, Plaintiff-Appellee, v. Paul A. BATY, Defendant-Appellant.

No. 202-69.

United States Court of Appeals, Tenth Circuit.

March 22, 1971.

Burton J. Johnson, Oklahoma City, Okl. (Watts, Looney, Nichols & Johnson and Robert L. Huckaby, Oklahoma City, Okl. on the brief), for plaintiff-appellee.

Howard B. Austin, Oklahoma City, Okl. (Perry H. Winn, Oklahoma City, Okl., on the brief), for defendant-appellant.

Before PICKETT, BREITENSTEIN and SETH, Circuit Judges.

BREITENSTEIN, Circuit Judge.

A frustrated plan to obtain Mexican silver pesos has produced a tangle of legal problems. Payment on two $10,000 checks, given by defendant-appellant Baty for the pesos, was stopped after plaintiff-appellee Security State Bank of Pharr, Texas, had paid out the amount of the checks. The bank brought a diversity action in the Western District of Oklahoma against Baty and secured a jury verdict in its favor. Baty appeals from the judgment entered against him for $20,000 plus interest.

Baty, a Lawton, Oklahoma, business man, collects coins. McClung, a coin dealer, met one Zambrito who represented that he could get Mexican silver pesos more cheaply than any one else. Baty and McClung joined forces in a venture to be financed by Baty. McClung was to seek out, inspect, and receive the pesos. They expected a $4-5,000 profit. Baty who had an inactive account at the First National Bank of Apache, Oklahoma, phoned Tom Manar, the president of that bank, and said: "Tom, I would like to write a couple of checks through your bank and am buying some merchandise and when they reach you, you telephone me and I will bring up the money to cover them." At the request of Zambrito and his associate Floyd Park, Baty signed two checks for $10,000 each, drawn on the Apache Bank and payable to Floyd Park.

On December 7, 1965, McClung delivered the checks to Park and asked that they not be cashed because they would not be honored until he McClung had inspected the coins. Park took the checks to the Security Bank where he had been a customer for several months and where he had a "medium three figure account." He told Norris, the executive vice-president of the Security Bank, that he had a backer in Oklahoma and was going to Mexico on a coin deal. He asked that the checks be cashed and that he be given Mexican pesos. At the same time he gave Norris a slip of paper with the name of Tom Manar on it and suggested that Norris call Manar to see if the checks were good.

After verifying the name, Norris called Manar and asked if the checks in question would pay. Manar replied: "Mr. Baty has made arrangements to cover the checks when they arrive." On the strength of the phone call, Security Bank credited Park's account with the $20,000 and on the same day paid him the equivalent in Mexican pesos. The checks passed through regular banking channels and in due course arrived at the Apache Bank. Manar told Baty of their arrival and Baty said that the merchandise had not been received but was expected and that he would come up and cover the checks. On the next day Manar told Baty that the checks would have to be covered or returned and at Baty's request returned them marked payment stopped.

Subsequent events are interesting but not pertinent to the legal problems. Among other things Baty and McClung met Zambrito and Park in Mexico City in an effort to revive the transaction but negotiations collapsed. Security Bank brought the instant suit. Zambrito, when his deposition was taken in Texas, asserted Fifth Amendment rights in refusing to answer material questions. Park has apparently departed for foreign climes.

Three months after the pre-trial conference and less than one month before trial, Baty moved for the transfer of the cause to the Southern District of Texas for the convenience of parties and witnesses, and waived objection to lack of jurisdiction in the transferee district. The court noted that the suit could not be brought against other nonconsenting defendants in the Texas district and denied the motion. The reason given was proper. See Cessna Aircraft Company v. Brown, 10 Cir., 348 F.2d 689, 691, 692. The court did not abuse its discretion in denying the motion. See Wheeler v. United States, 10 Cir., 382 F.2d 998, 1001-1002.

Baty says that the court erred in not instructing the jury that constructive notice of a claim or defense precludes assertion of the status of a holder in due course. The instruction on notice is essentially taken from 12A Okl.St. Ann. § 3-304. The checks were complete and regular. The claim of constructive notice arises from the statements made by the president of the Apache Bank to the officer of the Security Bank. The latter had no knowledge of the transaction involving Baty, McClung, Zambrito, and Park except for Park's statement that he had an Oklahoma backer. Although the bank officials differed somewhat in their accounts of the telephone conversations, we find nothing therein which would be...