Balsa Ecuador Lumber Corp. v. Security Nat. Bank
| Decision Date | 04 June 1956 |
| Docket Number | Civ. No. 511. |
| Court | U.S. District Court — Eastern District of North Carolina |
| Parties | BALSA ECUADOR LUMBER CORPORATION, Plaintiff, v. SECURITY NATIONAL BANK, Defendant. |
Stevens, Burgwin & McGhee, Wilmington, N. C., for plaintiff.
This case was tried without a jury. Jurisdiction is based on diversity of citizenship and an amount in controversy that exceeds $3,000. Balsa Ecuador Lumber Corporation is a New York company. The Security National Bank is a banking corporation chartered by the Federal Government. The Bank's principal office is in Greensboro, North Carolina. Its branch office in Wilmington, North Carolina, became involved in the dispute at hand, which arose under the following circumstances.
The Marine Development Corporation was a business concern with its principal offices in Washington, D. C. in the summer of 1951, the Marine Development Corporation was engaged in a contract to make balsa wood life rafts for the United States Navy. Pursuant to this undertaking the company had opened a branch in Wilmington, North Carolina. W. G. Broadfoot, who then resided in Wilmington, was vice president of the corporation and was in charge of its operations there. He had complete authority to handle all of the company's financial affairs relating to the life raft contract. He could sign checks, notes, or other obligations on the behalf of Marine Development Corporation.
Balsa Ecuador Lumber Corporation supplied Marine with balsa for the rafts. Broadfoot made the purchases for Marine. Sales were made for cash before delivery or on a letter of credit. Julius Marashinsky, a salesman for Ecuador, negotiated the sales for Balsa.
In November 1951, the Pennsylvania Railroad Company made an error that occasioned the difficulties that followed. Ecuador instructed the Railroad to pick up four carloads of balsa lumber on November 23, for shipment to Marine at Wilmington. Balsa sent these instructions to the Railroad on the 15th of November. The Railroad, instead of waiting until the 23rd, as per instructions, shipped the cars four days early on the 19th of November. These arrived in Wilmington before Ecuador received payment for them.
Marashinsky telephoned Broadfoot when the error was discovered. An undetermined portion of the lumber had already been cut and was being processed for making life rafts. Broadfoot confessed Marine's inability to pay for the entire shipment at once. He and Marashinsky discussed the feasibility of placing the remainder to its account in a warehouse operated by Broadfoot in Wilmington, to be checked out to Marine as it was paid for. However, Marashinsky believed that Broadfoot's storage charges were unreasonably high. It was finally agreed that Broadfoot would send a sixty-day trade acceptance.
Broadfoot then sent Ecuador the following letter dated December 4, 1951: "This confirms our telephone conversation this morning with Mr. F. Marashinsky whereby we are to send you a sixty-day Trade Acceptance covering the amount we now owe you.
The letter was signed, "Marine Development Corp., Wm. G. Broadfoot, Vice President."
Balsa replied with the following letter.
Broadfoot had prepared on Marine Development Corporation stationery and sent to Ecuador the following instrument, entitled a Trade Acceptance:
The Trade Acceptance set out above was received by the plaintiff and was signed "Balsa Ecuador Lumber Corp. by Helen Bases, Sec'y." Ecuador discounted the paper to Amsterdam Overseas Corporation. Amsterdam transmitted via the New York Trust Company to the defendant Security National Bank for collection. Balsa, as it was bound to do by the deposit contract with Amsterdam, repaid the credit allowed on the deposit, when the Marine Development Corporation did not pay the Trade Acceptance at maturity.
There is one question that arises from these transactions on which the evidence is in complete conflict. Did Broadfoot agree to personally endorse the trade acceptance? Marashinsky firmly states in a deposition that Broadfoot did so agree in a telephone conversation that I have already mentioned. Broadfoot, in a deposition, is equally firm in his contention that, though he was bombarded with repeated requests both before and after the endorsed paper was received by Ecuador, he steadfastly refused to personally endorse it.
It is clear that Ecuador took the Trade Acceptance without a personal endorsement and sent it for collection via the Amsterdam Overseas Corporation and the New York Trust Company to the defendant Security National Bank in Wilmington. Balsa's letter that accompanied the paper to Amsterdam included the following language: "As mentioned over the phone for our protection, and yours, we believe it would be preferable that you have the enclosed Trade Acceptance forwarded to the Security National Bank of Wilmington, N. C. and request them to have Mr. W. G. Broadfoot personally endorse same."
Amsterdam forwarded the Trade Acceptance to the New York Trust Company with a letter that included the following:
The New York Trust Company's letter of transmittal to Security reads as follows:
This letter and the Trade Acceptance reached the defendant on about the 21st of December. The letter was filed with routine collection letters. Broadfoot's office was located in the same building with the Bank. He was frequently in the Bank two or three times per day between December 21, 1951, and February 7, 1952, the maturity date of the Trade Acceptance. No effort was made to obtain his endorsement before maturity of the instrument. Neither did the defendant inform its correspondent that Broadfoot's endorsement had not been obtained, though it is well to bear in mind that the ignored instructions were to inform the correspondent when the endorsement was obtained.
On December 24, 1951, Balsa received a check for $5,843.93 from Marine. This was payment in advance for more lumber which was shipped on the 27th of December. On January 18, 1952, Balsa had received two more checks, totaling $1,615, advance payment for more lumber shipped on the 18th of January.
Security notified Marine by mail on January 2, 1952, that the Trade Acceptance was in the Bank awaiting payment on February 7th. Payment was refused at maturity. The next day, February 8th, the Trade Acceptance was returned by mail to the New York Trust...
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