90 F.2d 525 (10th Cir. 1937), 1423, Queenan v. Mays

Docket Nº:1423, 1424.
Citation:90 F.2d 525
Case Date:May 28, 1937
Court:United States Courts of Appeals, Court of Appeals for the Tenth Circuit

Page 525

90 F.2d 525 (10th Cir. 1937)



MAYS et al.



MAYS et al.

Nos. 1423, 1424.

United States Court of Appeals, Tenth Circuit.

May 28, 1937

Page 526

George B. Schwabe and Frank Settle, both of Tulsa, Okl., for receiver, and First Nat. Bank of Bristow, Okl.

L. O. Lytle, of Sapulpa, Okl. (John R. Miller, of Sapulpa, Okl., on the brief), for I. D. Mays.

W. V. Pryor, of Sapulpa, Okl. (Everett S. Collins and Thomas S. Harris, both of Sapulpa, Okl., on the brief), for the Board of County Com'rs and Ghayn Ray.

Page 527

On October 25, 1924, November 5, 1924, and July 9, 1926, respectively, Joseph Mays deposited with The First National Bank of Bristow for safekeeping, Liberty Bonds of the face value of $39,000.00 and received from the bank written receipts evidencing such deposits.

Without the knowledge or consent of Mays the bank on March 25, 1927, undertook to pledge such bonds to Creek County to secure a deposit of county funds. At the same time the bank pledged to the county to secure such deposit Liberty Bonds belonging to the bank of the face value of $15,500.00.

On April 24, 1928, the Comptroller of the Currency, having become satisfied of the insolvency of the bank took charge thereof and appointed D. V. Penn as receiver of the bank and its assets. Thereafter J. G. Hughes succeeded Penn as such receiver.

Mays did not learn that the bank had undertaken to pledge his bonds to the county until April 24, 1928.

On September 4, 1928, Mays brought a replevin action against the county to recover his bonds. Neither the bank nor its receiver was a party to that action. On July 12, 1933, the Supreme Court of Oklahoma

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finally decreed in that action that Mays could not recover against the county, holding that the county was a bona fide holder for value and that the bank had power to pledge its assets to secure the deposit, 1 relying on Sneeden v. City of Marion (D.C. Ill.) 58 F.2d 341. The Sneeden Case was later reversed by the Circuit Court of Appeals for the Seventh Circuit and its decision affirmed by the Supreme Court of the United States. See Sneeden v. City of Marion, 64 F.2d 721, and City of Marion v. Sneeden, 291 U.S. 262, 54 S.Ct. 421, 78 L.Ed. 787.

After the final decision in the replevin action the county sold $50,000.00 of the bonds pledged with it, with interest coupons attached, for $63,526.75; applied $67.36 in payment of costs of sale and $62,757.00 in discharge of its deposit of $54,000.00 with interest; returned to the receiver $702.39 in cash and $4,500.00 of the bonds of the bank deposited with the county.

The county treasurer prepared a statement showing the disposition of the bonds and the cash received therefor, dated September 12, 1933. It acknowledged receipt by the county of its deposit account in full with interest. It was signed by the county treasurer and approved by the receiver over his signature.

On April 14, 1934, Mays brought this suit against the bank and Hughes as its receiver to establish a preferred claim against the assets of the bank.

Creek County was then made a party defendant on motion of the receiver, the plaintiff consenting. Thereafter the receiver filed his answer to plaintiff's petition and his cross bill against the county. Against Mays, the receiver pleaded laches; failure seasonably to file his claim with the receiver; that the judgment in the replevin action was a final adjudication of the right of Mays against the receiver; that the cashier of the bank, as agent of Mays, sold the bonds to the bank, and the other officers of the bank did not know that Mays had not authorized the sale; that Mays was not entitled to a preference because the assets in the hands of the receiver had not been augmented by the Mays bonds or their proceeds and such proceeds could not be traced into the hands of the receiver.

Against the county, the receiver alleged that the bonds claimed by Mays had been deposited with the county to secure a deposit, and if such pledge should be held illegal, that the county should pay to the receiver such sums as the receiver might be required to pay Mays. By amended cross bill, the receiver asked judgment against the county for the value of the bonds of the bank of the face value of $11,000.00, pledged to secure the county deposit and sold and applied by the county to satisfy its claim against the bank.

To this the county answered, setting up the judgment in the replevin action in the state court as a bar under the doctrine of res judicata and the statute of limitations.

No objection, at any stage of the proceeding, has been raised by any party to the propriety, as a matter of procedure, of determining all the matters involved in the controversy in this suit.

The cause was tried on an agreed statement of facts. It set forth the facts above stated, other than those respecting the pleadings, and these additional facts: The county took the Mays bonds reasonably believing them to belong to the bank, and made and maintained its deposit relying on such security. The bank paid Mays interest on his bonds, as it matured, up to and including April 15, 1928. On November 10, 1928, Mays filed with the receiver his verified claim, setting out all the facts in circumstantial detail. He stated he was 83 years old and blind, and therefore unable to read the printed notice requiring claims to be filed by September 20, 1928; that he was not informed of such notice until October 7, 1928; that the deposits of bonds were special deposits; and that it was the duty of the receiver to recover his bonds illegally in the possession of the county and restore them to him.

The receiver submitted this claim to the Comptroller and on December 18, 1928, the receiver advised Mays, through his counsel as follows:

'You will recall that, at the time of your filing the claim with me as Receiver, I stated to you that the claim could not be allowed as a preferred claim, nor would I as Receiver at that time allow the claim as a common claim, but that I would hold same here awaiting the outcome of the suit you had instituted in the District Court at Sapulpa against the County Treasurer, in which you were seeking to replevin the bonds, and that while said suit was pending

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I would submit the matter to the Comptroller's office for their instructions.

'In the Comptroller's letter he instructs that the claim cannot be allowed as a preferred claim and he also advises that I delay any further action in regard to the claim until the determination of your suit in the courts.'

No exception was taken to the claim being filed out of time.

W. W. Groom was president of the bank. From October 24, 1924, to April 24, 1928, O. D. Groom was vice president and cashier of the bank. During that period he was also the financial adviser of Mays. During that period Mays loaned large sums of money to O. D. Groom and W. W. Groom. Such loans were repaid shortly before the bank failed.

The records of the bank show that it purchased the Mays bonds before it undertook to pledge them to the county from O. D. Groom and paid him therefor. Thereafter the bonds were carried as an asset of the bank. The regular monthly statements delivered to Mays did not show any such transaction and Mays had no knowledge thereof.

The day after the bank closed Penn, as receiver, reported to the Comptroller that bonds belonging to Mays in the amount of $39,000.00 had been placed in the assets of the bank and pledged to secure a county deposit.

The receiver has paid 35 per cent in dividends to the creditors; he has cash on hand of $17,534,86; there are pending claims of $11,000.00, in addition to the Mays claim, on which no dividends have been paid.

The trial court decreed that plaintiff recover $48,874.91 from the receiver and that such judgment be a preferred claim; that the receiver recover from the county $62,757.00 less 35 per cent of the county deposit (the amount to which the county was entitled as a dividend of an unsecured deposit of $54,000.00), a net judgment of $43,857.00; that neither judgment bear interest; and that the costs be taxed one-half to the receiver and one-half to the county.

The receiver and the county have appealed.

Wilkinson succeeded Hughes as receiver and by order of the trial court was substituted as a party defendant. Queenan succeeded Wilkinson as such receiver and by order of this court was substituted as a party appellant in Number 1423 and as a party appellee in Number 1424.

After the entry of the decree below and pending the perfection of the appeals, Joseph Mays died and by an order of the trial court the action was revived in the name of I. D. Mays as administrator of Joseph Mays, deceased.

Before LEWIS, PHILLIPS, and BRATTON, Circuit Judges.

PHILLIPS, Circuit Judge (after stating the facts as above).

Appeal of the Receiver-- No. 1423.

The administrator has moved to dismiss this appeal because the decree ran against the bank as well as the receiver, the bank did not join in the petition for appeal and there was no summons and severance. The bank is hopelessly insolvent; the controversy is solely over distribution of assets in the hands of the receiver; the bank is a formal party only; the judgment against it was a meaningless gesture; throughout the proceedings the same counsel have represented both the bank and the receiver. The omission of the bank's name in the petition for appeal is a matter of no moment; to dismiss this appeal on account of such an insubstantial technicality would result in an injustice to the general creditors. The Sixth Circuit, speaking through Judge...

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