Flower v. Commercial Trust Co.

• Citation: 223 F. 318
• Decision Date: 27 April 1915
• Docket Number: 4206.
• Parties: FLOWER v. COMMERCIAL TRUST CO. [1] In re JONES DRY GOODS CO.
• Court: United States Courts of Appeals. United States Court of Appeals (8th Circuit)

223 F. 318

FLOWER v. COMMERCIAL TRUST CO. ^[1]

In re JONES DRY GOODS CO.

No. 4206.

United States Court of Appeals, Eighth Circuit.

April 27, 1915

Justin D. Bowersock, of Kansas City, Mo. (Lester W. Hall, Inghram D Hook, and Robert B. Fizzell, all of Kansas City, Mo., on the brief), for appellant.

W. H H. Piatt, of Kansas City, Mo. (Thomas R. Marks and Brown Harris, both of Kansas City, Mo., on the brief), for appellee.

Before ADAMS and CARLAND, Circuit Judges, and AMIDON, District Judge.

ADAMS Circuit Judge.

The Commercial Trust Company filed with the referee in charge of the estate of Jones Dry Goods Company in bankruptcy a proof of claim against that estate for $15,000, stating as its consideration that it was for money loaned to the bankrupt and received and used by it for its own use and benefit. Objections having been made to its allowance, the referee heard proof and made an order disallowing it. Upon a petition for review the district court reversed that order of the referee, and made an order allowing the claim for the amount loaned, with accrued interest, aggregating $15,132.50. From that order the trustee appealed to this court. He assigned for error that the district court erred in allowing the claim because the evidence did not show that the claimant loaned the money to the bankrupt company and because the court permitted the use of parol evidence to vary the terms of a written contract which he claims fixed the rights of the parties, and elsewise as hereinafter stated.

The dry goods company was a corporation engaged in a general merchandise business in Kansas City, Mo. Two brothers, L.M and J. L. Jones owned most of its capital stock, one being its president and treasurer and the other its vice president and secretary. L. M. Jones, the president, went to St. Louis where the claimant trust company was engaged in business, and there negotiated for the loan in question, and after returning to Kansas City, the transaction was closed by correspondence. L.M. and J. L. Jones signed their individual names to a note for $15,000, and forwarded it to the claimant inclosed in a letter written on a letterhead of the Jones Dry Goods Company and signed by L. M. Jones in his official capacity as president, as follows:

'May 11, 1909. Commercial Trust Co., St. Louis, Mo.-- Dear Sirs: Mr. Walter S. Dickey called the writer on the telephone this morning and informed me you desired $15,000.00 of the paper of my brother and myself, something along the lines suggested in our correspondence and conversation some time ago. We therefore inclose herewith note for $15,000.00 dated May 11th, maturing September 10th, 1909, signed by L. M. Jones and J. L. Jones with collateral of 180 shares of 6% preferred stock of Jones Dry Goods Company. This paper is to be discounted at the rate of 6%.

'You may please place $6,000.00 of the proceeds of this paper to the credit of Jones Bros. Banking Company of this city. We inclose herewith signature cards of those entitled to check against the account of Jones Bros. Banking Company. The remainder of the proceeds you may please remit to us in St. Louis, New York or Kansas City Exchange.

'We have executed this paper in the way we understood from Mr. Dickey, would be satisfactory to your company. If there is any error anywhere, kindly let us know and we will correct it.

'Assuring you of our pleasure in doing this business with you, and believing our relations will be mutually pleasant and profitable, I am,

'Very truly yours,

(Signed) L. M. Jones, Prest.'

The Jones Bros. Banking Company referred to in the letter was a private bank owned by the dry goods company and operated for its convenience inside the store. The dry goods company also carried an account on its books known as the 'L.M. and J.L. special account,' not involving any of the personal debits and credits of the two brothers, but employed by the dry goods company whenever money was borrowed for the uses of the company which the company, for reasons satisfactory to itself, did not wish to appear on its books, in the notes payable account. Upon receiving that note the claimant, trust company, placed $6,000 to the credit of the Jones Bros. Banking Company, which amount by appropriate bookkeeping entry was forthwith turned over to the dry goods company, and mailed a cashier's check, payable to the order of Jones Dry Goods Company for the sum of $8,695, the remainder of the proceeds of the note after deducting the interest to accrue, to the Jones Dry Goods Company, Kansas City, Mo. Both these sums were subsequently used by the dry goods company in the prosecution of its regular business.

In addition to this letter and the facts just stated oral testimony of several witnesses was introduced concerning the negotiation for the loan as it actually occurred between the president of the dry goods company and the president of the claimant, trust company, at the time it was first negotiated between them in St. Louis. On the whole evidence Judge Van Valkenburgh, the learned District Judge who heard the case made the allowance, stating in a...