Coakley v. Equitable Bank & Trust Co.

• Decision Date: 11 February 1931
• Docket Number: No. 2518.,2518.
• Citation: 46 F.2d 967
• Parties: COAKLEY v. EQUITABLE BANK & TRUST CO.
• Court: U.S. Court of Appeals — First Circuit

46 F.2d 967 (1931)

COAKLEY v. EQUITABLE BANK & TRUST CO.

No. 2518.

Circuit Court of Appeals, First Circuit.

February 11, 1931.

Thomas H. Mahony, of Boston, Mass., for appellant.

Robert G. Dodge, of Boston, Mass., for appellee.

Before BINGHAM, ANDERSON, and WILSON, Circuit Judges.

WILSON, Circuit Judge.

This is an action to recover on three promissory notes given to the Tamiami Banking Company of Miami, Fla., and assigned to the appellee after maturity. The appellant was the maker of one note and an indorser on the other two.

The defendant, and appellant here, pleaded the general issue and in an amended answer set up the following as an equitable defense:

"And now comes the defendant and further answering avers that the notes referred to in the plaintiff's declaration were obtained by the fraud of the plaintiff's assignor the Tamiami Banking Company as hereinafter set forth and taken by the plaintiff subject to all equities.

"And the defendant says that one Anderson, the president of the said Tamiami Banking Company, and one Reese, the vice-president of the said Tamiami Banking Company, acting for and in behalf of the bank, induced the defendant and a group of men associated with him to purchase the bank of the said Tamiami Banking Company, on the representation that it was in a sound and solvent condition; that it had loans aggregating $770,000, each one of which was 100 percent good, and that the price made for the purchase, to wit, $125,000, was very much lower than a fair valuation for the bank; that the circumstances were such that an investigation and audit of the bank before purchase was impossible, but that if the defendant and his group would buy the bank on terms agreed on, and if any representation made should prove not to be true, that a cancellation of the purchase and a return of the money to the defendant and his group would be made on demand. In pursuance of said representations made by said Anderson and the said Reese in control of and acting on behalf of the said Tamiami Banking Company, an agreement was made by which the defendant and his group, in consideration of the sale of said bank, paid in cash $55,000; and, at the suggestion of Anderson and Reese, the defendant borrowed $20,000 additional from one Jacobs, through his attorney, Schwarzenberg, upon the promise of said Anderson, Reese and Tamiami Banking Company that said $20,000 so borrowed would be returned to the lender, by the bank, within a week from the date of borrowing, and the defendant says that when the date for said repayment came, the bank procured the signatures of the defendant and of Gael Coakley and William M. Hurd for the purpose of making payment of said Jacobs' loan through the proceeds of the notes; that said signatures were obtained purely as an accommodation and on the express stipulation that no payment would ever be demanded, but that the notes would be returned after sale of stock which was retained had been made by the bank to persons who were not then available; that the moneys obtained from the discount of the notes in furtherance of the promise referred to were paid upon the same day by the defendant to Schwarzenberg and others who had helped in the procuring of the loan and that no benefit of any kind inured to the defendant, Gael Coakley or William M. Hurd or of any other persons in the group of purchasers; that the defendant was a mere conduit to repay the loan arranged for by the defendant in behalf of the plaintiff bank's assignor; that there was no consideration for the notes in question or for the defendant's making or indorsing thereof."

Whether or not the answer set up an equitable defense, the issues therein were tried out with the consent of the defendant before the District Judge sitting in equity, who made the following findings of fact:

"1. The Ta-Miami Banking Company did not own and had no interest in any of the shares purchased by the defendant and his associates. The shares were on the contrary the property of the individuals in whose names they stood.

"2. Payment for the shares in question was made, and was intended to be made, to the individuals in whose names the shares stood and not to the Ta-Miami Banking Company.

"3. The defendant signed the note for $5,000 (Ex. 1) and endorsed two notes for $10,000 each (Exs. 2 and 3). The proceeds were deposited to his credit with the Ta-Miami Banking Company, and were thereafter applied by him to his own purposes,...