Central Bank and Trust Co. v. General Finance Corp.

Citation297 F.2d 126
Decision Date29 December 1961
Docket NumberNo. 18662.,18662.
PartiesCENTRAL BANK AND TRUST COMPANY, Appellant, v. GENERAL FINANCE CORPORATION et al., Appellees.
CourtUnited States Courts of Appeals. United States Court of Appeals (5th Circuit)

Richard J. Horwich, Pallot, Marks, Lundeen, Poppell & Horwich, Miami, Fla., for appellant, Central Bank & Trust Co.

Edward McCarthy, Jacksonville, Fla., Jerry B. Crockett, Miami, Fla., Ellott Adams, Anderson M. Foote, Jr., McCarthy, Adams & Foote, Jacksonville, Fla., for appellee, General Finance Corp. of Florida.

Before TUTTLE, Chief Judge, and JONES and WISDOM, Circuit Judges.

JONES, Circuit Judge.

The disposition of an earlier appeal of this case is shown by the opinion in General Finance Corporation of Fla. v. Central Bank and Trust Company, 5 Cir., 264 F.2d 869. A brief recital of the facts which were before the Court on the former appeal is necessary. Anthony Clausi, trading as Auto Wholesaler, was in the automobile business at Miami, Florida. He borrowed money in substantial amounts from General Finance Corporation and undertook to secure the loans with trust receipts on motor vehicles. Clausi carried a bank account with the appellant, Central Bank and Trust Company. General Finance Corporation, the appellee, here called GFC, carried a bank account with The First National Bank of Miami. On July 15, 1957, Clausi drew a check to GFC on Central. GFC deposited the check to its credit in First National on July 17. The credit was conditioned upon collection by First National. The check was presented and delivered by First National to Central on July 18, a Thursday. On July 22, Monday, Central returned the check to First National with a slip attached bearing the notation "Drawn against Uncollected Funds." Over the objection of GFC the amount of the check, $28,300, was charged back to it by First National. GFC brought suit against the two banks asserting that since the check was not returned by Central to First National before the close of business on July 19, 1957, it did not thereafter have the right to do so. The suit was brought in the United States District Court for the Southern District of Florida. Diversity of citizenship was the basis for federal jurisdiction. The district court, on motions to dismiss and for summary judgment, entered a summary judgment for the defendants. On appeal this court held that, under Florida Statutes § 676.55 F.S.A.,1 the retention of the check longer than the permitted period constituted payment and that the complaint stated a cause of action against both Central and First National. The judgment was reversed, and the cause was remanded.

Upon the remand of the cause to the district court, Central filed its answer, counterclaimed against GFC and cross-claimed against First National. The cross-claims against First National are not involved on this appeal. We are concerned with the defenses asserted by Central's answer and counterclaims. By these pleadings Central asserted that the payment of the checks, given by Clausi to GFC and drawn on Central, resulted from the retention of the check in the amount of $28,300 beyond the statutory period and constituted Central a holder in due course of the checks. Central contended, and contends, that GFC had information superior to that of Central as to the affairs of Clausi and because of this GFC is estopped to retain the payment of the checks. Central urges that GFC would be unjustly enriched if permitted to retain the proceeds of the check in the amount of $28,300.

When Central opened for business on July 19, 1957, the credit balance of Clausi was $24,733.61. A deposit of $23,943 was thereafter made by Clausi, in which were two checks of GFC drawn on First National for $20,700 and $2,068. This deposit was marked by an officer of Central "No Hold" which meant that Clausi was permitted to draw against uncollected items. On Saturday afternoon, July 20, an officer of Central learned that Clausi was in financial trouble, Central asserts that GFC had this information on the preceding afternoon. On Monday, July 22, Central presented to First National the two GFC checks and learned that payment was stopped. Central attempted to return the $28,300 check. Representatives of Central and GFC had a discussion with respect to Clausi on Monday afternoon. A representative of GFC was in possession of $46,800 of Clausi's checks on Central. These were placed in an account in Central with the understanding that such of them as were good would be paid. On July 23, Tuesday, Central paid GFC two checks, one for $3,000 and another for $8,300, and charged them to the Clausi account. The balance in the Clausi account, as shown on Central's books which permitted the payment of these two checks to be made, resulted from the acceptance by First National of the return of the $28,300 check with a corresponding credit by First National to Central. Central assumed that it had made a valid refusal of payment and a valid return of the $28,300 check. Central took the position before the district court and takes the position here that GFC is estopped from retaining the proceeds of the two checks aggregating $11,300 because of its superior information, and that it should be required to repay the $11,300 to Central under the doctrine of unjust enrichment.

The district court, following the decision of this Court on the former appeal, held that Central, by failing to return the $28,300 within the time permitted by the statute had made payment of the check. The district court held that because of the crediting to Clausi of the checks in the aggregate amount of $22,768, Central did not become a holder in due course upon the return of these checks with payment stopped. The district court rejected the claims put forward by Central of estoppel and unjust enrichment. Judgment was entered for GFC against Central for $28,300 with interest. Relief on the counterclaims was denied. On appeal the district court's findings and conclusions are challenged and the district court's failure to make additional findings is asserted to be error.

The check of $28,300, which Central paid by its retention of it beyond the period permitted by the statute, was drawn upon Central by Clausi. The case was not one where a bank had permitted its depositor to draw against uncollected items drawn upon another bank. In the definitions of Section 191 of the Negotiable Instruments Law it is provided that "`Holder' means the payee or indorsee of a bill or note, who is in possession of it, or the bearer thereof." Fla. Stat.Ann. § 674.01, F.S.A. Section 52 states that:

"A holder in due course is a holder who has taken the instrument under the following conditions:
"(1) That it is complete and regular upon its face;
"(2) That he became the holder of it before it was overdue, and without notice that it had been previously dishonored, if such was the fact;
"(3) That he took it in good faith and for value;
"(4) That at the time it was negotiated to him he had no notice of any infirmity in the instrument or defect in the title of the person negotiating it." Fla.Stat.Ann. § 674.54, F.S.A.

The drawee of a check payable to another is neither payee nor indorsee. It is not a holder and hence not a holder in due course. State Planters Bank & Trust Co. of Richmond, Va. v. Fifty-Third Union Trust Co., 56 Ohio App. 309, 10 N.E.2d 935; Kansas Bankers Surety Co. v. Ford County State Bank, 184 Kan. 529, 338 P.2d 309, 75 A.L.R.2d 600; Shammas v. Boyett, 114 Cal.App.2d 139, 249 P.2d 880; Kuhns v. Live Stock National Bank, 137 Neb. 459, 289 N.W. 893; Woodward v. Savings & Trust Co., 178 N.C. 184, 100 S.E. 304, 5 A.L.R. 1561; Farmers & Merchants Bank v. Bank of Rutherford, 115 Tenn. 64, 71, 88 S.W. 939, 112 Am.St.Rep. 817; American Hominy Co. v. Millikin National Bank, D.C., 273 F. 550; 10 C.J.S. Bills and Notes § 303, p. 785; 8 Am.Jur. 112, Bills and Notes § 375. To support its contention that it is a holder in...

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