COMMERCIAL NAT. BANK IN SHREVEPORT v. Parsons

• Court: U.S. Court of Appeals — Fifth Circuit
• Writing for the Court: HOLMES, McCORD, and WALLER, Circuit
• Citation: COMMERCIAL NAT. BANK IN SHREVEPORT v. Parsons, 145 F.2d 191 (5th Cir. 1944)
• Decision Date: 28 October 1944
• Docket Number: No. 10669.,10669.
• Parties: COMMERCIAL NAT. BANK IN SHREVEPORT v. PARSONS.

145 F.2d 191 (1944)

COMMERCIAL NAT. BANK IN SHREVEPORT v. PARSONS.

No. 10669.

Circuit Court of Appeals, Fifth Circuit.

October 28, 1944.

Sidney L. Herold and Sidney M. Cook, both of Shreveport, La., for appellant.

Monte M. Lemann, of New Orleans, La., Pike Hall, of Shreveport, La., and J. D. Barksdale, of Ruston, La., for appellee.

Robert H. Wimberly, of Arcadia, La., for amicus curiæ.

Otis W. Bullock, of Shreveport, La., for intervener, Randle T. Moore.

Before HOLMES, McCORD, and WALLER, Circuit Judges.

HOLMES, Circuit Judge.

From the language in appellant's brief, the writer seems to regard the reversal of this judgment as a Pyrrhic victory. Reference is made to the distinguished lawyers for appellee, and it is even stated that their knowledge of the local law is indisputable. We are willing to concede this as an abstract proposition, but it is said that even Jove himself nods at times. It may be that appellee was satisfied to let the litigation end if paid the amount of the judgment, but that is immaterial. The fact is, though no cross-appeal was taken, there was a direct appeal that transferred the entire cause to the appellate court for trial de novo on the record made in the district court, except that the trial court's findings of fact could not be set aside unless clearly erroneous and the rights of appellee under the judgment could not be enlarged.

From the argument of counsel, no one would think that appellant sought reversal of the judgment and a retrial on the merits, but that is exactly what it did. The appellant took the appeal and asked that this case "be remanded to the lower court for a trial on the merits and adjudication as to the amount properly allowable to the defendant for administration of Class C assets and for salaries provided for in the amended contract, and for final accounting."

Appellant claims a property right in that part of this judgment from which no appeal has ever been taken, but we find no such part thereof. Not only was the entire judgment appealed from, but a supersedeas was granted by order of court, and execution was stayed pending the appeal. This was an unrestricted appeal from a final judgment. Such an appeal means the entire judgment.

The appellant seems to attribute the alleged errors in the majority opinion to the fact that no Louisiana lawyer sat in the case; but the principles applicable here are not peculiar to the civil law, and there is nothing complicated about this case except the item of profit on taxes and the pledgee's method of keeping its accounts. The asserted intricacy of the Louisiana Civil Code is the last refuge of a Louisiana lawyer with a hard case in the federal court.

Conceding, as appellant now claims, that no money was advanced to the old bank, there are only two issues left in the case: (1) The tax item, and (2) the question of compensation. It clearly appearing that the tax savings were obtained by the trustee by claiming to be the owner of trust realty, both the lower court and this court held that the profit belonged to the cestui que trust. We held that the pledgee had no right to use the pledged real estate for its own benefit, or for the benefit of any one else, without the consent of the pledgor. A contrary rule might create a conflict of interests between pledgors and pledgees or trustees and beneficiaries.

The other issues relate to fees and salaries claimed by the new bank. Under the contract, as amended, appellant was entitled to a reasonable fee for administering Class C assets. The district court denied any such allowance because of the six-per-cent interest charges against Class B assets. This made it necessary for us to look into the amount, nature, fairness, and legality of said interest charges. If it appeared that any charge against appellee was usurious, exorbitant, or without consideration, the amount thereof was relevant and material in stating the account between the parties. It was proper to consider the same in support of the judgment, but for no other purpose.

There was evidence in the record tending to support an inference that the new bank was not entitled to any compensation because of its exorbitant charges, its management of the estate so as to bring about the appointment of a receiver, and its effort to buy the trust estate at a price that would have caused great loss to the stockholders of the old bank. We did not hold, as stated in the brief of petitioner, that the appointment of the receiver was unnecessary. We did not question the necessity or validity of the appointment. We held that, under the contract, the transfer to appellant of all assets of the old bank should have rendered unnecessary the appointment of a receiver for the old bank. It is presumed that the receiver's appointment was necessary; but the question is who was to blame for the necessity of his appointment.

Whether the appellant willfully or negligently caused the appointment of this receiver was a question that emerged from the record before us, particularly from a letter to the Comptroller written by the president of the new bank less than three weeks after the receiver was appointed, in which he tried to buy the remaining assets of the old bank and recommended an assessment against its shareholders of one hundred per cent of the capital stock.¹ This was an issue that bore directly upon the allowance of compensation to the appellant; but we left the issue open for determination by the district court after hearing such additional evidence as might be offered. This ruling was not a denial but was the very essence of due process of law, painstakingly afforded the appellant without even an adverse comment upon the impropriety of a trustee looking with covetous eyes upon the res in its custody.

We spent much time studying the record in an effort to ascertain what loans had been made by the new bank to the old. Over a million dollars in interest had been charged, and we naturally thought that large loans had been made; we have no doubt that large loans were contemplated. We found an additional charge of over three hundred thousand dollars for interest on a million-dollar note. Our dissenting member thought there were two such notes and that money had been advanced on only one of them, but we later found that both entries were symbolic.

In the brief for a rehearing, we are told for the first time that no loans were made to the pledgor; that it was not necessary to use a dollar of appellant's money to satisfy the obligations of the old bank, because the pledged assets were sufficient to pay all debts. This is equivalent to an admission that no interest is due by the old bank, and that all interest charges were for costs of administering Class B assets. If so, then only in paragraph V of the contract is the word interest to have the unusual meaning claimed by appellant. The contract in other places uses the words, fees, interest, and expenses, and when they are used elsewhere in the contract each is given its usual and ordinary meaning, interest meaning compensation for the use or detention of money. Interest is the lifeblood of a bank, and we are unable to think that these bankers did not know the usual and ordinary meaning of the word interest when used in the contractual phrase of interest computed on daily balances at the rate of six per cent per annum. To hold that they said interest when they meant fee or commission would not only be an unwarranted assumption, but would necessitate the presumption of an intention to mislead the stockholders of the old bank.

Our interpretation of interest, as meaning compensation for the use of money, is consistent with the balance of the contract; the appellant's is not. If interest was intended to mean what we have held, then the provision in the same paragraph, that the cost of administering Class B assets should fall entirely upon the appellant, is plain; but if it was intended to mean fees for administering Class B assets, it conflicts with the provision in the same paragraph that the cost of administering Class B assets shall fall entirely upon the new bank. The word costs is broad enough to include both fees and expenses of administration, but is not broad enough to include interest on money borrowed.

The modern meaning of the word usury implies that some interest was due for the use of money and that an excessive amount was charged or collected. If interest was charged by appellant for the use of money when no money was advanced or owing, then there was a total failure of consideration, and such amount should be disallowed. No interest can accrue if no principal is owing. Therefore, we would not say that the interest charged on the million-dollar note was usurious, because that would imply that some interest was due, when the fact is that there was only a potential liability on this note and not one cent of principal or interest was ever actually due or owing thereon.

This inexplicable note was not signed by the shareholders of the old bank. It was signed by the corporation that pledged its entire assets and agreed to quit business. As a man cannot lift himself by his own boot straps, the old bank could not increase its assets by executing a promissory note.² If the note had been executed by the shareholders, or cash had been deposited by them, in consideration of their statutory liability, the old bank's assets would have been increased; but these shareholders did not execute a note or deposit any cash, although to the extent of one million dollars they were the statutory guarantors of the liabilities assumed. This note was good only to the extent that its maker was insolvent; in that event, it was merely cumulative evidence of an otherwise valid obligation. The cross-entries on appellant's books with reference to...