In re Kessler

• Decision Date: 13 March 1911
• Docket Number: 160.
• Citation: 186 F. 127
• Parties: In re KESSLER et al.
• Court: U.S. Court of Appeals — Second Circuit

186 F. 127

In re KESSLER et al.

No. 160.

United States Court of Appeals, Second Circuit.

March 13, 1911

On petition to review and appeal from an order of the District Court of the United States for the Southern District of New York, dated August 12, 1910, modifying and confirming a report made by a special master and providing that Lawrence E. Sexton, trustee of Kessler & Co., bankrupts, is entitled as holder of $39,000 of notes indorsed by Kessler & Co. to the National City Bank, to share in certain funds held by him as security for notes of Robert B. MacLea Company, and to have the same applied to the payment of the said $39,000 pro rata with the Merchants' National Bank, the Banque de Bale and Kessler & Company, Limited, of Manchester, England.

George Zabriskie and Albert B. Kerr, for appellants.

Wallace MacFarland and S. J. Rosensohn, for trustee and appellee.

Before LACOMBE, COXE, and WARD, Circuit Judges.

COXE Circuit Judge.

Prior to October 30, 1907, Kessler & Co. were bankers doing business in New York; they were adjudicated bankrupts November 22, 1907, and Lawrence E. Sexton became their trustee on December 31, thereafter. The R. B. MacLea Company was engaged in business in New York as importers and dealers in dry goods. On July 13, 1904, this company made an agreement with Kessler & Co. whereby the bankers agreed to extend to the merchants a credit of $50,000 to be advanced as needed on the promissory notes of the merchants bearing interest at the rate of 6 per centum per annum. The merchants agreed to hold their stock as security for any indebtedness due to the bankers and undertook to deliver to the bankers such reasonable transfers or assignments as were necessary to protect and secure the bankers. All orders for the sale of goods were to be submitted to the bankers and approved by them, they agreeing to guarantee the payment of such accounts for a commission of 2 1/2 per centum on the amount of such accounts. All accounts for goods sold were to be transferred to the bankers and stamped as follows:

'This account has been assigned and is only payable to Kessler &amp Co., bankers, 54 Wall street, New York.'

The assignment was not only for the purpose of protecting the bankers in their guaranty, but as additional security for any indebtedness which at any time might be due them from the merchants. When paid to the bankers the proceeds of such accounts less commissions were to be placed to the credit of the merchants and applied on the indebtedness due from the merchants to the bankers. In the event of failure of the merchants to carry out any of their agreements or in the event that their statements proved to be untrue, the bankers were at liberty to declare due and payable all unpaid advances made by them.

At the time of the failure of Kessler & Co. on October 30, 1907, notes of the MacLea Company to the order of Kessler & Co. to the amount of $96,000 had been received by the latter company. Kessler & Co., before their failure, had transferred all but one of these notes as follows:

To the Merchants' Bank of New York ..	$30,000
To the Banque de Bale ................	15,000
To the City Bank of New York .........	39,000
To Kessler & Co., of Manchester .......	5,000
	-------
	$89,000

The amount due the City Bank was reduced to $12,000 by a deposit of $27,000 standing in the name of Kessler & Co. which was set off by the bank against the liability of Kessler & Co. Subsequently the trustee in bankruptcy paid off or satisfied the aforesaid balance and received the $39,000 of MacLea notes, indorsed by Kessler & Co., together with the collaterals. Mr. Sexton, as trustee, collected from the collaterals a...