Drugan v. Crabtree
| Decision Date | 10 May 1924 |
| Docket Number | 2141. |
| Citation | 299 F. 115 |
| Parties | DRUGAN v. CRABTREE. |
| Court | U.S. Court of Appeals — Fourth Circuit |
L. P Summers, of Abingdon, Va. (H. E. Widener, of Abingdon, Va on the brief), for plaintiff in error.
John J Stuart, of Abingdon, Va. (D. M. Cosby, of Abingdon, Va., on the brief), for defendant in error.
Before WOODS, WADDILL, and ROSE, Circuit Judges.
The plaintiff in error, along with the People's National Bank of Abingdon, Va., were sued at law in the United States District Court for the Western District of Virginia, by the trustee in bankruptcy of the estate of the Abingdon Produce Company, to recover the amount of two certain alleged preferences, one of $500, and the other of $1,500, claimed to have been secured by them against the estate of the bankrupt company. A brief recital of the facts in the case will be necessary to a correct understanding of the same.
The Abingdon Produce Company had been engaged buying and selling farm products of all kinds for several years. K. C. Eller was president, B. C. Eller vice president, and B. H. Eller secretary-treasurer and manager. The business was conducted on a large scale, and the company did its banking through the People's National Bank at Abingdon. The company some time in 1921 borrowed from the People's Bank $3,000, giving its note, indorsed by its president and secretary-treasurer which note was also indorsed by the plaintiff in error, J. F. Drugan. It was understood, when the note was made, that it was to be paid at maturity. This was not done, and two curtails of $500 each were made, reducing the note to $2,000, for which amount it was several times renewed; the last renewal becoming due on June 30, 1922.
Early in June the company, finding it necessary to secure ready money to go on with its business successfully, and in order to meet its obligations, called in Mr. McConnell, cashier of the People's Bank, and certain of its stockholders, including the plaintiff in error, to confer with the directors of the company, and for several days full consideration was given to its affairs, with the result that its force was cut down and extra efforts made to realize on its assets. The secretary-treasurer, B. H. Eller, arranged to raise $1,000 on account of his indebtedness to the company, and the president, K. C. Eller, the sum of $2,000, to make good an obligation of the company. At this meeting the plaintiff in error was appointed financial agent, or financial supervisor, of the concern. The business was conducted during the remainder of the month of June, Drugan, who was also engaged in an independent business in Abingdon, looking generally after the finances of the produce company, and only about $100 was cleared for the month. On the 22d of June, the services of the president having been dispensed with for the purpose of economy, it was agreed that he should be relieved from his indorsements on the $2,000 note aforesaid, held by the People's Bank, and accordingly, with that end in view, on the 22d of June, 1922, a new note was prepared with his name omitted, and B. H. Eller and J. H. Drugan indorsed the same. This note was made payable eight days after date, so as to fall due June 30, 1922, the date of the maturity of the old note.
About that time it appears that B. H. Eller, in order to liquidate his indebtedness to the company, borrowed $1,000 from his brother, of which $500 was by check, and $500 evidenced by the note of his brother, with good indorser, payable to his order. He deposited the check to the credit of the company, and endeavored to discount the note for $500, hoping to secure the indorsement of Drugan, which, however, he was unable to do, Drugan stating that he did not desire to further extend his liability. Drugan, however, took the note over to see what arrangement he could make with it at the bank. The bank refused to discount the note, even with Drugan's indorsement, unless the amount should be credited on the $2,000 note held by it. This was finally done, on or about the 29th of June, thereby reducing the produce company's liability on the note to $1,500. Upon the note maturing on the 30th of June, nothing was paid thereon. On the 1st of July, several checks of the company which it had drawn on the bank in anticipation of a deposit to meet them, went to protest. On the morning of Monday, the 3d of July, a deposit of $2,300 was made by the produce company, and on that morning the cashier of the bank called up Mr. Drugan at his place of business, and requested him to come to the bank, which he did, and was positively told by the cashier that the $1,500 note had to be paid. Mr. Drugan inquired how the same could be paid, and he was advised that the company had just deposited $2,300, out of which it could be paid, and requested him to give the bank a check for the amount, which he did, drawing a counter check in the produce company's name by him for the same, and the note was marked 'Paid.'
In answer to a question if any option was given to Drugan as to payment of the $1,500 that day, the cashier replied, 'I told him the note had to be paid,' and in answer to a further question as to whether Drugan ever suggested the payment of the note, the cashier said he had not, and that the payment in no way originated with him, but with the cashier, because he wanted the note paid, having carried the same something over a year, and he had assured his directors that he would not ask them to renew it again.
It is as to the payment of these two sums, of $500 and $1,500, respectively, out of the company's funds, that the controversy in this suit arises; it being claimed by the bankrupt's trustee that each payment constituted an unlawful preference, as well on the part of the bank receiving the same, as of the plaintiff in error, Drugan, the indorser on the notes.
The defendants duly appeared, and upon appropriate pleading issue was joined, and a jury impaneled, and upon proofs adduced and instructions of the court, returned a verdict in favor of the defendant bank, and against Drugan, the plaintiff in error for $2,000. On motion to set the verdict aside, the...
To continue reading
Request your trial
-
CITIZENS'NAT. BANK OF GASTONIA, NC v. Lineberger
...crediting a check drawn against the deposit. Studley v. Boylston Bank, 229 U. S. 523, 529, 33 S. Ct. 806, 57 L. Ed. 1313; Drugan v. Crabtree (C. C. A. 4th) 299 F. 115; Murray v. Corn Exchange Bank (D. C.) 31 F.(2d) 373, affirmed (C. C. A. 2d) 31 F.(2d) 375; Jandrew v. Guaranty State Bank (C......
-
In re Field Heating & Ventilating Co.
...National Bank of Gastonia v. Lineberger, 4 Cir., 45 F.2d 522, 525; Fourth National Bank v. Smith, 8 Cir., 240 F. 19, 26; Drugan v. Crabtree, 4 Cir., 299 F. 115, 120; Jandrew v. Guaranty State Bank of Ovilla, 5 Cir., 294 F. 530, As we view the record, only one material issue is presented and......
-
Mayo v. Pioneer Bank & Trust Company
...N. C. v. Lineberger, 4 Cir., 1930, 45 F.2d 522; Fourth National Bank of Wichita, Kan. v. Smith, 8 Cir., 1916, 240 F. 19; Drugan v. Crabtree, 4 Cir., 1924, 299 F. 115. This Court recently applied this principle in the case of Harper v. First National Bank in Mansfield, D.C., 169 F.Supp. 321.......
-
Joseph F. Hughes & Co. v. Machen, 5659.
...which the endorsers may not enjoy. The right of the endorsers in such a situation was considered by this court in Drugan v. Crabtree, 4 Cir., 299 F. 115, 119, 120, where it was "* * * To hold an indorser on a note which had been extinguished by payment out of the maker's bank deposit liable......