First Nat. Bank of Ortonville, Minn. v. Andresen

• Decision Date: 29 February 1932
• Docket Number: No. 9215.,9215.
• Citation: 57 F.2d 17
• Parties: FIRST NAT. BANK OF ORTONVILLE, MINN., v. ANDRESEN.
• Court: U.S. Court of Appeals — Eighth Circuit

57 F.2d 17 (1932)

FIRST NAT. BANK OF ORTONVILLE, MINN., v. ANDRESEN.

No. 9215.

Circuit Court of Appeals, Eighth Circuit.

February 29, 1932.

L. M. Staples, of Minneapolis, Minn. (F. L. Cliff and E. V. Cliff, both of Ortonville, Minn., and Cobb, Hoke, Benson, Krause & Faegre, of Minneapolis, Minn., on the brief), for appellant.

Charles E. Chrisman, of Ortonville, Minn., for appellee.

Before KENYON, VAN VALKENBURGH, and GARDNER, Circuit Judges.

GARDNER, Circuit Judge.

In this case appellee, as plaintiff below, brought action against the appellant to recover certain notes pledged by appellee as security for a certificate of deposit issued to appellant December 20, 1926, in the amount of $5,520.69. For convenience, the parties will be referred to as they appeared in the lower court.

Plaintiff is the receiver of the Citizens' National Bank of Ortonville, Minn., while defendant is a national banking association, which at all times pertinent to the issues here involved was located at Ortonville, Minn. On the 16th of December, 1926, the Citizens' National Bank of Ortonville, to take care of the clearings between the two banks of that day, issued to the defendant bank its draft on the Merchants' National Bank of St. Paul, Minn., for $5,518.13. On the 18th of December, 1926, this draft was protested for nonpayment, and was thereafter returned to the defendant bank. On the 20th of December, 1926, defendant presented this protested draft to the Citizens' National Bank of Ortonville, in lieu of which that bank executed its certificate of deposit for $5,520.69, being the amount of its protested draft, plus the protest fees. As security for this certificate the Citizens' National Bank then delivered to the defendant bank bills receivable of the bank consisting of various notes aggregating in amount $9,987. On the morning of December 23, 1926, the Citizens' National Bank, by vote of its board of directors, closed its doors, was taken charge of by the Comptroller of the Currency, and plaintiff was appointed its receiver. In due time, plaintiff, as such receiver, made demand on the defendant bank for the return of these notes, and, the defendant having refused to comply with the demand, the present action followed.

Plaintiff bases his right to recover these bills receivable on the ground that, at the time they were transferred to the defendant, the Citizens' National Bank was insolvent, that this transfer was in contemplation of insolvency, not in the usual course of business, and constituted an attempt to give a preference to the defendant bank, and was hence illegal and void.

On stipulation of the parties the action was tried to the court without a jury, and the court found all the issues in favor of the plaintiff and against the defendant. From the judgment entered defendant has appealed, contending that the court's findings are not sustained by the evidence. The action having been tried to the court without a jury, on stipulation of the parties, the findings of the court have the same effect as the verdict of a jury, and, if sustained by substantial evidence, must be affirmed by this court. Lambert Lumber Co. v. Jones Engineering & Construction Co. (C. C. A.) 47 F.(2d) 74.

Section 91, title 12, USCA (Rev. St. § 5242), provides as follows: "All transfers of the notes, bonds, bills of exchange, or other evidences of debt owing to any national banking association, or of deposits to its credit; all assignments of mortgages, sureties on real estate, or of judgments or decrees in its favor; all deposits of money, bullion, or other valuable thing for its use, or for the use of any of its shareholders or creditors; and all payments of money to either, made after the commission of an act of insolvency, or in contemplation thereof, made with a view to prevent the application of its assets in the manner prescribed by this chapter, or with a view to the preference of one creditor to another, except in payment of its circulating notes, shall be utterly null and void," etc.

At the time of the transaction here involved, the Citizens' National Bank had borrowed all the money it was permitted by law to borrow. The lower court so found, and this finding is amply sustained by the evidence. The capital of the bank was seriously impaired. It had been indulging in the practice of "kiting" drafts to a considerable extent, and two previous drafts, one on November 23, 1926, for $4,749.76, and one on December 13, 1926, for $10,821.95, besides the draft issued December 16, 1926, for $5,518.13, had gone to protest.

In support of the...