Ball v. German Bank of Carroll County, Iowa

• Decision Date: 01 May 1911
• Docket Number: 3,452.
• Citation: 187 F. 750
• Parties: BALL v. GERMAN BANK OF CARROLL COUNTY, IOWA, et al.
• Court: U.S. Court of Appeals — Eighth Circuit

187 F. 750

BALL v. GERMAN BANK OF CARROLL COUNTY, IOWA, et al.

No. 3,452.

United States Court of Appeals, Eighth Circuit.

May 1, 1911

F. F Oldham (W. R. Lee and E. A. Robb, on the brief), for plaintiff in error.

Benjamin I. Salinger and L. H. Salinger, for defendants in error.

Before HOOK and ADAMS, Circuit Judges, and RINER, District Judge.

ADAMS Circuit Judge.

This was an action at law, brought by the receiver of a national bank to recover the value of property alleged to have been transferred by it, before the receivership, to the defendant the German Bank of Carroll County, Iowa, in violation of section 5242, R.S. 1878 (U.S. Comp. St. 1901, p. 3517). At the close of the case each party requested the court to instruct a verdict in its favor. The court refused the request of the plaintiff, and gave that of the defendant directing a verdict in its favor. Due exceptions were saved by plaintiff to both these rulings, and they are now assigned for error.

There was no substantial conflict in the evidence. This the parties necessarily assumed in making their requests for peremptory instructions. The only question, therefore, for our consideration is one of law: Whether on that evidence the judgment rendered in favor of the defendant was right. Section 5242, supra, provides in substance that any transfer of property by a national bank, made after the commission of an act of insolvency or in contemplation thereof, with a view to prevent the distribution of its assets as provided by law or with a view to preferring one creditor over another, shall be null and void. If, therefore, the transfer was made (1) to a creditor, (2) with intent to prefer that creditor, and (3) either after the commission of an act of insolvency by the bank making the transfer, or in contemplation of the commission of such an act, the transfer was null and void.

The two banks were doing business in the same town, Carroll, Iowa, and it had been for years a common practice for each to pay checks drawn on the other, and at the close of each business day to take an account of their payments for each other, and for the bank against which a balance was found to give to the other its duebill for that balance, to be liquidated in cash or by draft on the following day. These duebills were regarded merely as temporary evidence of the result of the day's clearance. Upon such liquidation, whether in cash or by draft, the checks paid by either bank were surrendered to the bank upon which they were drawn for debit against the account of the depositor who drew them.

A clearance made on October 13, 1908, pursuant to this general practice, disclosed that the German Bank had overpaid for account of the First National Bank $3,511.56, and a duebill for that amount was executed and delivered to the former by the latter. A clearance of October 15th disclosed that the German Bank had overpaid for account of the First National Bank $2,968.16, and a duebill for that sum was given. On October 14th the First National Bank drew a draft on a correspondent bank at Cedar Rapids, Iowa, for $3,000, payable to the German Bank, and delivered it (probably with a balance in cash) to the German Bank, whereupon the first mentioned duebill was taken up and marked 'Paid.' On October 15th a like draft was drawn for $2,500, and with it (and probably some additional cash) the second mentioned duebill was taken up and marked 'Paid.' Later, on October 17th, after the business of the day had been closed, the president of the German Bank, having been advised of the dishonor of both these drafts by the Cedar Rapids bank, requested the cashier of the First National Bank to give his bank collateral. At that time the president and vice president of the First National Bank were in Chicago, where they had been once before during that week, for the purpose of raising money with which to meet pressing needs of their bank.

The cashier, who remained in charge of the bank, and to whom the request for collateral was preferred, made it clear by his uncontradicted testimony that the bank could not open its doors after that day, and would have to suspend business, if the officers failed to raise the needed money in Chicago. He also testified in effect that he knew, prior to the time of making the transfer to the German Bank, that they had so failed. He then conformed to the request of the president of the German Bank, and indorsed and delivered to him, for his bank, the two bills receivable, the value of which is sued for in this action, and took the following receipt:

'Carroll, Iowa, October 17, 1908.

'Received from the First National Bank, Carroll, as collateral security, the following notes, to wit: Ed. Hageman, $4,000.00; Mr. Krensky, $1,500.00. Said notes deposited to protect the German Bank against any loss that may arise by reason of drafts issued by said First National Bank to said German Bank which have been reported dishonored, amounting to $3,000.00 and one for $2,500.00.

(Signed) J. P. Hess, Pres.'

At the time of this transfer the First National Bank was undoubtedly insolvent. It kept its doors open, and, though its cash resources were low, honored all checks, whether few or many we do not know, presented at its counter on and prior to Saturday, the 17th day of October. It did not open for business...