State Trust & Savings Bank v. Dunn

• Decision Date: 17 March 1928
• Docket Number: No. 5086.,5086.
• Citation: 24 F.2d 477
• Parties: STATE TRUST & SAVINGS BANK v. DUNN.
• Court: U.S. Court of Appeals — Fifth Circuit

24 F.2d 477 (1928)

STATE TRUST & SAVINGS BANK v. DUNN.

No. 5086.

Circuit Court of Appeals, Fifth Circuit.

March 2, 1928.

Rehearing Denied March 17, 1928.

Webster Atwell, of Dallas, Tex., for appellant.

Rosser J. Coke, of Dallas, Tex., for appellee.

Before WALKER, BRYAN, and FOSTER, Circuit Judges.

FOSTER, Circuit Judge.

Appellee, as trustee, brought suit to recover certain collaterals, alleging title to same to be in him as trustee, and also averring that they had been transferred by the bankrupt within four months prior to the filing of the petition, with intent and purpose on its part to hinder, delay, and defraud its creditors, in violation of the provisions of section 67e of the Bankruptcy Act (11 USCA § 107). In the alternative, the bill prayed for an accounting and for recovery of the value of the collaterals, less any amount found to be due appellant.

The record supports the following conclusions as to the material facts proven:

On December 7, 1923, the Investment Bond & Mortgage Company, the bankrupt, through its president, C. C. Waller, and its secretary-treasurer, W. F. Bland, executed a note payable to the order of the said Waller for $10,000, payable on December 7, 1924, with interest at the rate of 10 per cent. per annum from maturity until paid, and with the usual provision for 10 per cent. attorney's fees. An agreement was also drawn up pledging certain 3 per cent. vendor's lien notes, secured by mortgages on residences in Fort Worth, owned by the bankrupt, as security for the note. These securities were of the face value of over $22,500, were payable pro rata at stated intervals, and were conservatively estimated to be worth about 75 per cent. of their face value. Waller indorsed and negotiated this note with the State Trust & Savings Bank, appellant, and assigned the pledge agreement, through the intervention of G. E. McGregor, who was paid $500 for his services, at a discount of $1,500. A fee of $100 was also paid the bank's attorney for services in the transaction. The net result to the bankrupt was $7,900.

The pledge agreement contained clauses permitting the acceleration of the maturity of the note in the event of insolvency of the maker, authorizing the sale of the securities without notice, and allowing the pledgee to become the purchaser of same. The negotiations for discounting the note extended over some days, as the bank took time to investigate, but were probably concluded on December 10, 1924. However, no money was advanced by the bank until December 12, 1924, when part of the collaterals were delivered and $4,000 was credited. Another credit of $3,000 was given on January 23, 1925, when additional collaterals were delivered, and the last credit of $1,500 was made on March 5, 1924, when delivery of the collaterals was completed. As payments were made on the collateral notes, they were credited to the principal note and indorsed on the back; the total credits from this source amounting to $1,403.79.

The Investment Company was in fact insolvent at the time the note and pledge agreement were made and delivered to the bank, and was adjudicated bankrupt on April 12, 1925. Appellee was first appointed receiver, and later trustee, and qualified as such. He took up with appellant the question of paying off the note and redeeming the collateral, and offered to do so. At that time he had a purchaser able and willing to buy the collaterals for over $12,000. Appellant, however, declined to do anything to facilitate the liquidating of the note.

Appellant did not file a proof of debt in the bankruptcy proceedings, but on April 19, 1925, went through the form of selling the collaterals in the office of its attorneys, Huvelle & Atwell, at Dallas, without appraisal of the securities, without demand for payment of the note, and without notice to the...