Colorado Nat. Bank of Denver v. Newton

• Decision Date: 13 January 1936
• Docket Number: No. 1295.,1295.
• Citation: 80 F.2d 696
• Parties: COLORADO NAT. BANK OF DENVER v. NEWTON.
• Court: U.S. Court of Appeals — Tenth Circuit

80 F.2d 696 (1935)

COLORADO NAT. BANK OF DENVER v. NEWTON.^*

No. 1295.

Circuit Court of Appeals, Tenth Circuit.

December 23, 1935.

Rehearing Denied January 13, 1936.

Walter W. Blood, of Denver, Colo. (G. C. Bartels, Frank N. Bancroft, and Arthur H. Laws, all of Denver, Colo., on the brief), for appellant.

Henry E. Lutz, of Denver, Colo., for appellee.

Before LEWIS, PHILLIPS, and BRATTON, Circuit Judges.

LEWIS, Circuit Judge.

On November 9, 1934, M. E. Traylor and Company, a Colorado corporation, filed and presented to the court below its petition, and thereon it was adjudicated bankrupt on that day. Later appellant presented to the referee in bankruptcy its claim consisting of a promissory note given by the bankrupt for $9055, averring that certain certificates for shares of stock in various corporations, bonds issued by various corporations and promissory notes secured by mortgage had been delivered and pledged to appellant to secure the payment of said note. The referee allowed that claim as secured by said collateral.

Appellant presented two additional claims, one for $254.20 and the other for $1986.71, as claims secured by the same collateral that was pledged with the note. The agreement in that respect, which was appended to the note and signed by the bankrupt, is this:

"To secure the payment of this note and of any other liability or liabilities or obligations of the undersigned to the holder hereof, due or to become due, or whether now existing or hereafter contracted, the undersigned has transferred, pledged and delivered to said The Colorado National Bank of Denver, the following property, to-wit: (General character of the securities pledged is here described); and the undersigned agrees that, upon breach of any of the promises herein contained, or upon failure to pay any of said other liabilities or obligations, when due, the holder hereof may" sell the pledged property and apply the proceeds in payment of said indebtedness.

The referee found:

"On November 9th, 1934, at 10:15 A. M., when the petition in bankruptcy was filed, Easton owed the claimant-bank $254.20; and on that date Investment Managers, Inc., owed the claimant-bank $1986.71."

Those amounts asserted by appellant as secured claims against the bankrupt arose in this way: As to Easton, who had a checking account with the bank, — he owned certain securities in the custody of appellant bank which he had agreed to sell to the bankrupt for $310.24, and on November 8, 1934, he authorized the bank to deliver those securities to the bankrupt, take the bankrupt's check for the purchase price, and credit the same to his checking account, which it did on that day. On the morning of the next day the Denver Clearing House met at 9:00 o'clock, and this check was presented for clearance. The Denver National Bank on which it was drawn refused to accept it for payment, but appellant bank was not notified that it had been dishonored until about 2:00 P. M. on November 9th. The procedure in handling this check for payment was the usual one in handling such items by the Denver banks. When appellant bank received notice that payment of the check by the Denver National Bank had been refused, it charged the amount of the dishonored check to Easton's account. Easton had given checks on appellant bank on the 8th and 9th of November in such amounts that his account was then overdrawn to the amount of this claim. $254.20.

Investment Managers, Inc. had a checking account in appellant bank. On November 7, 1934, the bankrupt gave its check to Investment Managers, Inc. drawn on the Denver National Bank for $3090.79. On November 8, 1934, the bankrupt gave it two other checks on the Denver National, one for $1116.70 and one for $14.94. In the afternoon of November 8, 1934, these three checks were deposited in appellant bank, each of which had this endorsement, "Deposit Acct. Investment Managers, Inc." Each check was credited to Investment Managers, Inc. checking account. These checks given to Investment Managers, Inc. followed the same course as the check that was credited to Easton's account, with the same result. Payment on all of them was refused by the Denver National, and when appellant received notice of their dishonor on the afternoon of November 9th and charged them back, the checking account of Investment Managers, Inc. had been overdrawn to the amount of the claim, $1986.71, large amounts having been checked out by Investment Managers, Inc. by checks payable to the bankrupt and deposited by bankrupt to its credit in the Denver National. The referee, and District Judge on certification, each held that no liability of the bankrupt to appellant bank resulted from any of these transactions; that the bank took the checks for collection only. But the referee further found that the bank "permitted Investment Managers, Inc. and Easton to draw against said checks prior to their collection." The District Judge also found that the bank permitted both parties to draw against the checks.

It is argued here that the bank was only the agent of Easton and of Investment Managers, Inc. for collection, never acquired title to or interest in any of said checks, and the only liability to it as the result of the transactions was that of Easton and Investment Managers, Inc. for their respective overdrafts. There were deposit slips used with the deposit of the checks. Printed thereon was this:

"All deposits are accepted for collection only and credited subject to final cash payment and are handled at risk of depositor. Credit is given conditionally, this bank reserving right to charge back to depositor all unpaid items or returns therefor which are unpaid." * * *

The adjudications...