Bayless v. Eager, 9782.

• Decision Date: 23 February 1934
• Docket Number: No. 9782.,9782.
• Parties: BAYLESS v. EAGER.
• Court: U.S. Court of Appeals — Eighth Circuit

69 F.2d 269 (1934)

BAYLESS v. EAGER.

No. 9782.

Circuit Court of Appeals, Eighth Circuit.

February 23, 1934.

Ira D. Beynon, of Lincoln, Neb. (Edgar Ferneau and John Ferneau, both of Auburn, Neb., on the brief), for appellant.

Petrus Peterson, of Lincoln, Neb. (Peterson & Devoe, of Lincoln, Neb., on the brief), for appellee.

Before GARDNER, WOODROUGH, and BOOTH, Circuit Judges.

BOOTH, Circuit Judge.

This is an action at law brought by the appellant, receiver of the First National Bank of Auburn, Neb., to recover on a promissory note made and delivered by the appellee to the bank in the sum of $5,000.

A jury was waived and the case was tried to the court.

Findings of fact and conclusions of law were made and judgment ordered for the defendant. Proper steps were taken for a review in this court.

Among the facts found by the court are in substance the following: On or about June 1 1931, appellee executed and delivered to the First National Bank of Auburn, Neb'., his promissory note reading as follows:

"$5,000.00 Lincoln, Nebraska, June 1, 1931.

"On or before Dec. 1, 1931, After Date I Promise to Pay to the Order of First National Bank of Auburn, Nebr., Five Thousand Dollars Payable at Auburn, Nebraska, Value Received with Interest at 6 Per Cent Per Annum.

"Frank D. Eager. "No. ____ Due ____ 24596."

The note from the time of its delivery became a part of the assets of the bank and came duly into the possession of the appellant receiver.

At the time of the making of the note, A. J. Storms, under the trade-name of Auburn Seed Company, was engaged in buying, harvesting, storing, and marketing blue grass seed in Nebraska. W. H. Storms, son of A. J. Storms, was associated with him in the business. W. H. Bousfield was, and for many years had been, cashier and managing officer of said bank.

In prior years A. J. Storms and Bousfield had an oral agreement by which Bousfield agreed to finance the dealings of A. J. Storms in blue grass seed, and was to have 26 per cent. of the net profits for so doing. In 1930 appellee Eager had made and delivered his note for $7,500 payable to said bank, and accompanying the note was an agreement delivered to the bank by A. J. Storms and reading as follows:

"Lincoln, Nebr., June 5, 1930.

"A. J. Storms: Herewith I hand you my note for $7,500.00 payable in three months to the First National Bank of Auburn. Please send me per agreement your note for same time and amount signed by Auburn Seed Co., A. J. Storms, W. H. Storms, and W. H. Bousfield and a waiver of the First National Bank of Auburn to any claim to any part of the proceeds from the sale of any of the stripped or harvested seed until this note of mine has been paid in full. Further it is agreed that no chattel mortgages will be given covering any part of the seed stripped or harvested that will create a lien prior to the payment of my note in full.

"Sincerely "Frank D. Eager."

At the time of making the note in suit, a copy of the foregoing 1930 memorandum of agreement was sent by Eager to Storms with the following note attached:

"Burt: You may have papers drawn in accordance with the above copy of our last year's agreement the amount to be changed to $5000.00 instead of $7500.00. Bosford Bousfield will know how to draw the papers to cover all items.

"5/14/31 Frank."

This agreement was delivered by Storms to Bousfield at the time the note in suit was delivered.

Bousfield thereupon prepared a written agreement reading as follows:

"Auburn, Nebraska, May 29, 1931.

"For and in consideration of the sum of $5000.00 advanced to The Auburn Seed Company, by Frank D. Eager, which sum is represented by one promissory note of the said Frank D. Eager, payable to The Auburn Seed Company, it is hereby agreed and understood as follows:

"That the first money received from the sale of blue grass stripped by the Auburn Seed Company shall be paid on the principal sum of the said note; that no chattel mortgage or other lien of any nature shall be placed against the said blue grass seed, by the Auburn Seed Company, until the above described note for $5000.00 shall have been paid in full.

"That the First National Bank of Auburn, Nebraska, hereby waives any and all interest in the said seed, to be stripped, until the said note shall have been paid.

"Auburn Seed Co. "A. J. Storms "W. H. Storms "W. H. Bousfield."

This agreement was signed, as indicated, by the Auburn Seed Company, A. J. Storms, W. H. Storms, and W. H. Bousfield.

The note sued upon would not have been delivered to the bank except an condition that the agreement just recited was signed by Bousfield. The note sued upon was executed and delivered as an accommodation note for the Auburn Seed Company, and was procured at the request of Bousfield, cashier and managing officer of the bank.

After the blue grass seed was harvested, it was stored in a warehouse at Kansas City, Mo., and a warehouse receipt covering the same was procured with the knowledge and at the request of Bousfield. This warehouse receipt was pledged as security for a loan with the Fidelity National Bank of Kansas City. The proceeds of the loan were placed with the Drovers' National Bank of Kansas City, to the credit of the First National Bank of Auburn.

When the proceeds of said loan thus came into the hands of the First National Bank of Auburn, Bousfield and the bank had notice and knowledge that such proceeds were placed there under a special agreement for the special purpose of paying and taking up the $5,000 note made by Eager. They also knew that the proceeds came from the loan on blue grass seed harvested by the Auburn Seed Company.

Before the proceeds came into the control of the First National Bank of Auburn, Bousfield, the cashier, had been notified by A. J. Storms for the Auburn Seed Company that the proceeds should be applied to the payment of appellee's note. Thereafter, on or about August 22, 1931, Bousfield and said First National Bank of Auburn applied said proceeds so received from the loan made upon the warehouse receipt to the payment of certain notes made by the Auburn Seed Company and held by said First National Bank of Auburn. Immediately after said notes had been charged against said account, the account showed overdrawn.

Appellee Eager had no notice or knowledge that a loan had been procured on the warehouse receipt representing said blue grass seed, or that the proceeds of said loan had been taken over and used by the bank until about September 1, 1931.

On or about September 1, 1931, A. J. Storms visited Eager and advised him that the Auburn Seed Company had pledged the warehouse receipt to the Fidelity Bank of Kansas City as security for a loan, and that the proceeds of the loan had been used by said First National Bank of Auburn to take up and pay certain notes given by the Auburn Seed Company to said bank; and thereupon A. J. Storms delivered to Eager a chattel mortgage on said seed stored in the Central Storage Warehouse subject to the lien of the Fidelity National Bank. Eager accepted and retained said chattel mortgage. Eager did not communicate with the First National Bank of Auburn until about November 17, 1931, when he wrote a letter to the receiver of said bank relative to an extension of time for payment of the $5,000, herein sued upon. About October 13, 1931, a notice had been sent by the receiver of said bank to Eager, giving the amount due on the $5,000 note.

The following findings of fact were also made by the trial court:

"26. That the defendant did not intend to waive any of his rights against the First National Bank of Auburn either by his silence or by any act or thing done by him.

"27. That the defendant did not intend to waive any rights...