First State Bank & Trust Co. of Guthrie, Oklahoma v. Sand Springs State Bank of Sand Springs, Oklahoma

• Citation: 528 F.2d 350
• Decision Date: 16 January 1976
• Docket Number: No. 75--1187,75--1187
• Parties: The FIRST STATE BANK AND TRUST COMPANY OF GUTHRIE, OKLAHOMA, Appellant, v. SAND SPRINGS STATE BANK OF SAND SPRINGS, OKLAHOMA, et al., Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (10th Circuit)

Page 350

528 F.2d 350

The FIRST STATE BANK AND TRUST COMPANY OF GUTHRIE, OKLAHOMA, Appellant, v. SAND SPRINGS STATE BANK OF SAND SPRINGS, OKLAHOMA, et al., Appellees.

No. 75--1187.

United States Court of Appeals Tenth Circuit.

Argued Nov. 10, 1975.

Decided Jan. 16, 1976.

Thomas R. Williams, Williams & Hirzel, Guthrie, Okl., for appellant.

Frederic Dorwart, Tulsa, Okl., for First National Bank, Tahlequah, Okl., appellee.

Charles W. Mooney, Jr., Oklahoma City, Okl., for Oklahoma State Bank and Trust Co. of Vinita, Okl., appellee.

Irvine Ungerman, Tulsa, Okl., for Sand Springs State Bank of Sand Springs, Okl., and Boulder Bank and Trust Co. of Tulsa, Okl., appellees.

Before BREITENSTEIN, HILL and BARRETT, Circuit Judges.

BARRETT, Circuit Judge.

First State Bank and Trust Company of Guthrie, Oklahoma, (Guthrie), appeals a judgment decreeing that it was not entitled to collect funds represented by certain certificates of deposit. A statement of the facts will serve to place the controversy in perspective. Gulfco Investment Corporation, (Gulfco), together with several wholly owned subsidiaries, ¹ was in corporate reorganization proceedings under Chapter X of the Bankruptcy Act, 11 U.S.C.A. § 501 et seq., when Guthrie, a creditor of Gulfco, filed an application with the District Court, sitting as a Court of Bankruptcy pursuant to 11 U.S.C.A. § 1, for a determination of the trustee's interest in certain certificates of deposit, which Guthrie claimed to own. The application was opposed by several banks, also creditors of Gulfco, who had issued the certificates of deposit. These banks, Sand Springs State Bank of Sand Springs, Oklahoma, Boulder Bank and Trust Company of Tulsa, Oklahoma, Oklahoma State Bank and Trust Company of Vinita, Oklahoma, The First National Bank of Tahlequah, Oklahoma, and First State Bank and Trust Company of Oklahoma City, Oklahoma, shall hereinafter be referred to as the issuing banks. The trustee responded to the application. He initially claimed the certificates of deposit and the funds represented thereby as an asset of Gulfco's estate. At a subsequent proceeding, however, the trustee conceded that the conflicting claims of the banks to the certificates of deposit would not affect the reorganization because it would be an offset to the debtor's estate. The trustee did ask that Guthrie and the issuing banks make a statement of their respective claims to the certificates of deposit because these claims could affect the other claims filed in the debtor's estate. None of the transactions could be set aside as preferential transfers due to the fact that they all occurred more than four months prior to the filing of the Chapter X proceedings.

The controversy presented is essentially one between banks asserting conflicting claims to the funds represented by the certificates of deposit. ² Gulfco borrowed money from the issuing banks and was required, pursuant to the respective loan agreements, to place 15% of the amount borrowed in non-interest bearing certificates of deposit. This amount was designated a 'compensating balance.' It increased the lender's yield by virtue of the fact that Gulfco paid interest on the full amount of the loan even though it had actual use of only 85% of the amount borrowed. In addition, then, to the interest being paid by Gulfco on the loans, the issuing banks had the amount withheld as compensating balances on deposit. The issuing banks could, insofar as we can ascertain, use these funds to produce additional revenue for the issuing banks.

Gulfco held the certificates of deposit but drew no interest on them. In an attempt to make use of the funds represented by the certificates of deposit, Gulfco entered into an arrangement with Guthrie whereby Gulfco would assign the certificates of deposit to Guthrie and Guthrie would, in turn, pay to Gulfco the full amount of the certificate. The gain to be made by Guthrie from this arrangement would be realized when Gulfco would pre-pay interest to Guthrie on the amount of the certificate at 1% above the prime rate. All of the certificates matured at either three month or six month intervals. They were automatically renewable. Prior to the maturity date Guthrie would notify Gulfco that the certificates of deposit were due, whereupon Gulfco would pre-pay interest to Guthrie for another period in order to prevent the certificates from being collected. Obviously, if the certificates had been sent by Guthrie to the issuing bank for collection, the Gulfco loan would have been called because the requisite 15% compensating balance was not on deposit. Thus, the success of the scheme rested on Gulfco's ability to meet the pre-paid interest obligation to Guthrie prior to the maturity date of the certificates.

When financial difficulties befell Gulfco, it was no longer able to meet the interest payments to Guthrie. Guthrie then proceeded to submit the certificates of deposit to the issuing banks for collection. Each of the issuing banks refused Guthrie's demand for payment of the funds represented by the certificates. The issuing banks, with the exception of First State Bank and Trust Company of Oklahoma City, maintained that they were not obligated to pay Guthrie for the following reasons: proper notice of the assignment from Gulfco to Guthrie had not been given; the certificates were non-negotiable and therefore any interest acquired by Guthrie was subject to the prior claims and defenses of the issuing banks; and that certain certificates were not due.

When payment was refused, Guthrie initiated the proceedings below by filing the application for a determination of the trustee's interest in the certificates of deposit. Sand Springs State Bank and Boulder Bank and Trust Company made special appearances challenging the Court's jurisdiction. They also moved to quash service of Guthrie's interrogatories. Jurisdiction was also challenged by First National Bank of Tahlequah, who specially appeared and by Oklahoma State Bank and Trust Company of Vinita by motion to dismiss. First State Bank and Trust Company of Oklahoma City did not contest jurisdiction, and did not challenge Guthrie's claim to the certificate of deposit.

Motions for summary judgment were filed by Guthrie, First National Bank of Tahlequah and Oklahoma State Bank and Trust Company of Vinita. All interested parties agreed to submit the case to the Court for final disposition. On the apparent request of the Court, briefs were filed by the parties in support of or in opposition to the respective motions for summary judgment. The Court in entering the subject judgment obviously intended thereby to grant the motion of the issuing banks.

The Court made findings of fact and conclusions of law, holding that Guthrie could not collect the funds represented by the certificates of deposit issued by Sand Springs State Bank, Boulder Bank and Trust Company, First National Bank of Tahlequah and Oklahoma State Bank and Trust Company of Vinita. No decision was rendered regarding the certificate of deposit issued by First State Bank and Trust Company of Oklahoma City.

Guthrie's appeal presents the following issues: (1) Is Guthrie entitled to the funds represented by the certificates of deposit in preference to the issuing banks, and the trustee in the Chapter X proceedings? (2) Did the issuing banks meet the burden of proof required of them in establishing their claimed rights to the funds represented by the certificates of deposit? (3) If Guthrie is not entitled to the funds represented by the certificates, are the issuing banks entitled to these funds in preference to the trustee in the Chapter X proceeding?

I.

We consider the question of...