Queenan v. Mays

• Decision Date: 28 May 1937
• Docket Number: No. 1423,1424.,1423
• Citation: 90 F.2d 525
• Parties: QUEENAN v. MAYS et al. BOARD OF COUNTY COM'RS OF CREEK COUNTY, OKL. et al. v. MAYS et al.
• Court: U.S. Court of Appeals — Tenth Circuit

90 F.2d 525 (1937)

QUEENAN v. MAYS et al.

BOARD OF COUNTY COM'RS OF CREEK COUNTY, OKL. et al. v. MAYS et al.

Nos. 1423, 1424.

Circuit Court of Appeals, Tenth Circuit.

May 28, 1937.

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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.

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 Taft, declined to dismiss an appeal under similar circumstances. Mercantile Trust Co. v. Kanawha & O. Ry. Co. (C.C.A.) 58 F. 6, 11, 12. So did the Fifth Circuit. Galveston, H. & N. Ry. Co. v. House (C. C.A.) 102 F. 112. The motion to dismiss will be denied.

The receiver asserts that the bank acquired title to the Mays bonds through a purchase thereof from O. D. Groom.

It is clear that the bonds belonged to Mays and that he had not authorized O. D. Groom to make disposition thereof.

The burden was on the bank to establish that it acquired title to the bonds for value without knowledge of any defect in Groom's title or want of authority in him. O.S.1931, § 11358 (48 Okl.St.Ann. § 129); Beesley v. Wm. A. Nicholson Co., 148 Okl. 270, 298 P. 607, 608; First National Bank & T. Co. v. Heilman (C.C.A.10) 62 F.(2d) 157, 158.

It was stipulated that the records of the bank show the bank purchased the Mays bonds from O. D. Groom and paid him therefor. It was not stipulated that such purchase and payment in fact occurred. Nor are the circumstances of the claimed purchase shown. Under the facts as stipulated we are of the opinion the records of the bank were not sufficient to establish the substantive facts of purchase and payment.

But if we assume that O. D. Groom in fact undertook to sell the Mays bonds to the bank, we are of the opinion the bank did not acquire good title as against Mays.

If in making the sale, O. D. Groom dealt with other officers of the bank the circumstances were such as to put them on inquiry. The bonds were not in the possession of O. D. Groom, but were on deposit in the bank for safekeeping and its receipts were outstanding therefor. O. D. Groom was heavily indebted to Mays. The amount of the bonds was substantial. W. W. Groom, president of the bank, knew the bonds had been deposited for safekeeping. Ordinary prudence would have required a release of the bailment from Mays. The fact that Mays had not sold the bonds to O. D. Groom or authorized him to sell the bonds could have been ascertained on slight inquiry.

On the other hand if O. D. Groom acted as the sole representative of the bank in the transaction then the bank cannot retain the fruits of Groom's act, the bonds, without being charged with Groom's knowledge.

It is a well settled general rule that notice to, or knowledge of, an agent while acting within the scope of his authority and in reference to a matter over which his authority extends, is notice to, or knowledge of, his principal. Certain qualifications of the general rule are equally well settled. A principal is not chargeable with or bound by notice to, or knowledge of, an agent as to matters involved in a transaction in which the agent deals with the principal or another agent of the principal as, or on account of, an adverse party. The exception applies when the agent is engaged in prosecuting some fraudulent or illegal enterprise, the success of which would be impaired or defeated by the disclosure to his principal of the notice or knowledge sought to be imputed. A qualification of the exception is recognized where the agent, although engaged in perpetrating an independent fraudulent act on his own account, is the sole representative of the principal and the principal, with knowledge of the facts, retains the fruits of the transaction. In such a case the principal is impaled on the horns of a dilemma. If he disclaims the agent's act as unauthorized, he has no grounds to retain the fruits thereof; on the other hand, if he retains the fruits of the agent's act, after knowledge of the facts, he must in fairness be charged with the agent's knowledge. The reason for the qualification is stated in Mechem on Agency (2d Ed.) p. 1412, as follows:

"The real ground upon which the situation rests is, * * * that where the agent is the sole representative of the corporation, the corporation can not claim anything except through him and that therefore if it claims through him, after notice of the facts, it must accept his agency with its attendant notice."

See Maryland Casualty Co. v. Queenan, Receiver (C.C.A.10) 89 F.(2d) 155, decided March 24, 1937, and cases there cited.

We conclude first the evidence failed to establish a sale to the bank and second if any such sale was made the bank took the bonds charged with the defect in Groom's title or with his want of authority to act for Mays.

It follows that the bank became liable to Mays for the value of the bonds on March 25, 1927, when it converted them by undertaking to pledge them to the county to secure the county's deposit.

The receiver claims that he is relieved of this clear obligation by the failure of Mays to file his claim within 90 days, and by the equitable doctrine of laches. Neither claim is well-founded.

The practice of requiring claims to be filed within a reasonable time, of which notice is given by publication, is a convenient one calculated to facilitate the speedy administration of insolvent estates. But failure to file a claim within the time specified in the notice is not in itself a bar. Section 193, 12 U.S.C.A., simply directs the Comptroller to notify creditors, by advertising for three months, to present their claims. It does not fix the time within which claims may be presented. Section 194 directs the Comptroller, from time to time, to "make a ratable dividend of the money so paid over to him by such receiver on all such claims as may have been proved to his satisfaction or adjudicated in a court of competent jurisdiction." The statute therefore is not one of limitations. Nor does the notice given so recite; it simply notifies creditors to present their claims to the receiver within 90 days "or they may be disallowed." But both by statute, 12 U.S.C.A. § 194, and by decision, Bank of Bethel v. Pahquioque Bank, 14 Wall. 383, 401, 20 L.Ed. 840, and Schulenberg v. Norton (C.C.A.8) 49 F.(2d) 578, 580, claims may be adjudicated without proof to the receiver. Failure to file the claim within the time fixed by the notice or to establish the claim before the receiver, does not bar the claim. Schulenberg v. Norton, supra. In this case, there are other reasons. When the claim was filed, a few days late, no objection was made on this ground, and the receiver should not now be heard to raise this highly technical objection. The receiver knew the essential facts the day after he was appointed and advised the Comptroller thereof. No prejudice resulted to any one.

The defense of laches is similarly barren of merit. When the formal claim was filed, the receiver suggested postponement of action on the claims until the state court suit was determined. Mays acquiesced. Obviously it was to the advantage of the receiver to postpone consideration until the outcome of that suit. If Mays had recovered his bonds from the county there would have been no claim against the receiver. When that case was decided, Mays acted promptly. The receiver suggested and invited the delay, for his own benefit. This court in Merritt Oil Corporation v. Young, 43 F.(2d) 27, 32, held that where the defendant seeks the delay, he may not interpose it as a bar to recovery. And in Spiller v. St. Louis & S. F. R. Co. (C.C. A.) 14 F.(2d) 284, 288, the Eighth Circuit held that one may not set up laches as a defense if he has been responsible for or contributed to the delay. Nor did the delay result in a prejudicial change in the receiver's position. See O'Brien v. Wheelock, 184 U.S. 450, 493, 22 S.Ct. 354, 46 L. Ed. 636. The argument that Mays has lost his rights because he agreed to the requested delay does not appeal to the conscience of a court of equity, and laches is an equitable doctrine. Nor, despite the argument to the contrary, has any creditor suffered by the delay. The receiver paid out all the funds in his hands, except a pittance reserved for undetermined claims, notwithstanding the pending claim of Mays. The delay will be prejudicial to Mays if there is not enough left to satisfy his claim, but it has not prejudiced other creditors who have received in dividends, practically all the assets of the bank.

The receiver argues that since the county, a bona fide purchaser for value of negotiable paper, defeated Mays in the state court, that judgment bars Mays from recovering from the bank. The argument carries its own refutation. A judgment in favor of an innocent purchaser of negotiable paper from a thief does not bar an action by the owner...