Cody Finance Co. v. Leggett

• Decision Date: 13 July 1953
• Docket Number: Civ. No. 3383.
• Citation: 116 F. Supp. 700
• Parties: CODY FINANCE CO. et al. v. LEGGETT et al.
• Court: U.S. District Court — District of Wyoming

116 F. Supp. 700

CODY FINANCE CO. et al. v. LEGGETT et al.

Civ. No. 3383.

United States District Court, D. Wyoming.

July 13, 1953.

Alfred M. Pence, Laramie, Wyo., for plaintiff Cody Finance Co.

C. R. Ellery, Cheyenne, Wyo. (Ellery, Gray & Hickey), Cheyenne, Wyo., for defendant Reconstruction Finance Corporation.

KENNEDY, District Judge.

This is one of a number of cases which have come before this Court, both civil and criminal, growing out of the complicated business of A. F. Leggett and the Motor Sales Company carried on at Cody, Wyoming, which finally wound up in the bankruptcy court of this District. While the litigants and issues in the case as originally filed were somewhat numerous and complex, through pre-trial conferences they were eventually all eliminated except the issue between the Cody Finance Company and the Reconstruction Finance Corporation as to which of these parties had the right to possession and to own or collect certain accounts and notes receivable which were the property of the Motor Sales Company and of which that company had made some sort of disposition at different times to each plaintiff and defendant above mentioned. Reference to the pleadings would seem to be unnecessary on account of the admissions and stipulations of the parties through their counsel as to the exact question involved.

After the evidence had been submitted it clearly developed that the amount in controversy considering the type of litigation and that counsel for the defendant corporation had agreed to the charges for collection made by the plaintiff company and further considering the substantial losses which had been sustained by both litigants, that a compromise would be the most efficient and inexpensive way of disposing of the case and each party thereby adding something to its already heavy losses. This Court still believes that it would have been the most advantageous manner of disposition. However, plaintiff's counsel seems to feel that on account of other pending or impending litigation involving Leggett and the Motor Sales Company, combined with the fact that some of the principals in the transactions involved might be placed in a compromising position such an effort for compromise could not be entertained. I still think that in line with the general run of cases where money only is involved there is usually a basis for satisfactory adjustment; that it would have been true in the case at bar as the solution of the problem depends largely upon a matter of law and certainly no compromise upon the ground of expediency and for the purpose of saving time and expense would be admissible in any other litigation nor in the absence of any fraud could it compromise any participant in the transaction in not taking all the steps which may have been imposed upon him or them as a matter of legal conclusion. Nevertheless, the parties having failed to accept the counsel of the Court along the line suggested and having elected to contest the matter to the bitter end, counsel may be assured that the Court is here for the purpose of discharging the duty imposed upon it.

Instead of submitting the matter by oral argument it was agreed by the counsel with the approval of the Court, that the most effective way to present it would be in the form of trial briefs, which have been submitted within the time fixed.

A running sketch of the transactions which were the bases of this portion of the litigation are substantially as follows: The Motor Sales Company was a heavy borrower from the First National Bank of Cody, the Cody Finance Company and other kindred organizations which were interrelated to each other by ownership, as well as other creditor banks at various locations in the country. Under these circumstances the idea arose that a loan might be secured from the Reconstruction Finance Corporation, owned and controlled by the United States, to secure a loan which would put the debtor in a better financial position. The first effort along this line was met with failure but through direct appeals to Washington managers of the R. F. C., a loan of $50,000 was secured which presumably was used to pay off other obligations, some of those obligations of the Cody bank having been switched to the plaintiff company or some of its interrelated associates. Some time later an attempt was again made to secure a larger loan which would be used in part to take up obligations of the Motor Sales Company, including a merger of the former loan, the new loan from the R. F. C. having been agreed upon with the assistance of some pressure at Washington in the amount of $94,000. Papers in evidence of the loan were executed, including what is in evidence in this case as "Blanket Assignment of Accounts and Notes Receivable". This appears to have been executed and delivered on the 24th of March, 1950. Briefly, it purports to assign the accounts and notes receivable of the Motor Sales Company to the Reconstruction Finance Corporation as collateral security for a loan in the amount of $94,000, which loan was evidenced by loan agreement and the note and mortgage made the same date and by reference made a part thereof. It was to be considered by the parties as a blanket assignment of such accounts and notes receivable then held or thereafter acquired while any indebtedness was due and owing from the Motor Sales Company. It was provided that in the event of default in the payment of the loan, or any installment thereof, or the failure of the assignee to fulfill any of the other conditions of said loan as more particularly set forth in the note, mortgages, and supporting documents, then in that event the notes and accounts should immediately become the property of the R. F. C., for the purpose of applying the proceeds of the collection thereof upon the indebtedness. It was provided that the First National Bank of Cody be appointed by the Motor Sales Company as its agent and custodian for the purpose of carrying out the provisions of the instrument for the protection of the R. F. C. The First National Bank of Cody acceded to the arrangement and accepted the duty imposed by which it was required to examine the accounts and notes receivable of the Motor Sales Company at will and without expense to the R. F. C., and to report thereon to the R. F. C., and upon request the bank was to furnish an itemized schedule of names and addresses of each of the debtors covered by this instrument. It further provided that the Motor Sales Company agreed to maintain the accounts and notes receivable in the amount of $30,000 with right of substitution and should the accounts and notes receivable fall below $30,000 at any time, then the Motor Sales Company agreed to deposit with said bank in trust for the use and benefit of the R. F. C., an amount which, together with the notes and accounts receivable, would equal at least $30,000 and that on account of the non-fulfillment of the terms by Motor Sales Company in regard to maintaining said accounts and notes receivable and cash in the sum of $30,000, the same would constitute a default in the terms of the $94,000 loan, by which such default the entire balance due on the indebtedness would be accelerated and that the bank upon notification by the R. F. C. would hold and maintain the cash and such accounts and notes as might be on deposit with said bank, for the use and benefit of the R. F. C. Another section provided that in the default in the payment of the loan the bank was authorized by the Motor Sales Company to obtain immediately the name and address of each of the debtors from the accounts and notes receivable and the amounts due thereon, and that either the bank or the R. F. C., or both, should immediately notify each and all said debtors to make payment direct to the bank, there to be held in trust...