In re Lawrence

• Decision Date: 15 December 1908
• Docket Number: 72.
• Citation: 166 F. 239
• Parties: In re LAWRENCE et al.
• Court: U.S. Court of Appeals — Second Circuit

166 F. 239

In re LAWRENCE et al.

No. 72.

United States Court of Appeals, Second Circuit.

December 15, 1908

The following is the report of Thayer, Referee:

This claim is made upon two promissory notes which are in the following form: '$10,000.

Yonkers N.Y., Jan. 14, 1901.

'Seven months after date I promise to pay to the order of myself ten thousand 00/100 dollars, at the Westchester Trust Company, in the city of Yonkers, with interest.

'Value received. No. . . . . Due Aug. 14.

L. R Dickson.'

Indorsed 'L. R. Dickson. Andrew Deyo. E. Russell Coles. N Lawrence. ($2 revenue stamp duly canceled.)' '$14,000.

Dobbs Ferry, N.Y., Jan. 11, 1901.

'Two months after date I promise to pay to the order of myself fourteen thousand 00/100 dollars, at the Westchester Trust Company, Yonkers, N.Y., with interest.

'Value received. Due Aug. 12.

L. R. Dickson.'

Indorsed: 'L. R. Dickson. Nathaniel Lawrence. Andrew Deyo. E. Russell Coles. ($2.80 revenue stamps duly canceled.)' These notes were renewals. The originals were dated July 9, 1900, and were for $10,000 and $25,000, respectively, $1,000 having been paid upon the larger note.

The testimony is that the original notes were indorsed by Dickson and by Andrew Deyo, Nathaniel Lawrence, and E. Russell Coles, in the order named. (Minutes March 4, 1902, pp. 259, 260.)

The claim is contested by the trustee upon three grounds: First, that the original notes were affected by an illegal consideration, namely, the compounding of a felony, and were therefore void; second, that Nathaniel Lawrence, one of the bankrupts, indorsed the notes, relying upon the supposed responsibility of Andrew Deyo, a prior indorser, and that the Westchester Trust Company, the original recipient of the notes, concealed from him the fact that Deyo was heavily indebted to it, and that it had taken from him a mortgage for $50,000, covering all his available property; and, third, that the said trust company held security which was available as collateral to these notes, which has not been accounted for.

The claimant denies all of these allegations, and claims to be a bona fide holder of the notes in due course. He also claims that Nathaniel Lawrence and his trustee in bankruptcy are estopped from questioning the notes by reason of written agreements which were executed by him, in which he declared that the notes were valid and free from defenses.

In order to determine the questions thus presented, it is necessary to examine the origin and history of the notes in question. The Westchester Trust Company was a corporation duly organized under the laws of the state of New York, and carrying on business in the city of Yonkers, Westchester county, for some time prior to June 30, 1890. Leslie R. Dickson, one of its employes, had occupied the position of cashier and performed the duties of receiving and paying teller. (Minutes Nov. 28, 1906, p. 5; Jan. 2, 1907, p. 25.) On the last-mentioned day the executive committee of the company examined its affairs and found no irregularity. (Minutes Jan. 2, 1907, p. 25.) This was on Saturday. On Sunday, July 1st (same minutes, p. 24), Dickson went to John Hoag, the president of the company, and made a statement to him, in consequence of which Mr. Hoag reported to the executive committee that 'there was a shortage in the accounts of the cashier, in which Mr. Deyo, perhaps, was more or less interested. ' (Minutes Nov. 28, 1906, pp. 5, 6; Jan. 2, 1907, p. 34; and Jan. 15, 1907, p. 75.) It appears in the course of the testimony that the amount of the shortage, as far as Dickson was concerned, was about $35,000 (Minutes Feb. 6, 1902, p. 250; Nov. 28, 1906, pp. 4, 18; and Jan. 15, 1907, p. 74), and that the amount for which Deyo was involved was about $46,000. (Minutes Jan. 2, 1907, pp. 3, 5, 28.) On Monday, July 2d, Mr. Daniel S. Remsen, who was a member of the board of directors and of the executive committee (Minutes of Jan. 22, 1907, pp. 101, 102), and also the attorney for the company, was summoned by telegraph from Lake George, and reached Yonkers July 3d (same minutes, p. 103). The Dickson and Deyo matters were referred to him. (Minutes Jan. 15, 1907, p. 71). On the same day Mr. Remsen prepared a mortgage to Frank H. Parsons, his law partner, for $50,000, covering practically all of Deyo's available property. This was executed by Deyo and his wife, and was recorded July 7th. (Minutes Nov. 28, 1906, p. 19; Jan. 2, 1907, pp. 12, 18; Jan. 22, pp. 12, 104, 106, 107.) Deyo had been a customer of the company from the time of its organization. He did business under the name of P. A. Deyo & Son. (Minutes Jan. 22, 1907, p. 88.) The consideration for the mortgage above mentioned was his indebtedness to the company. (Minutes Jan. 2, 1907, pp. 16, 17.) The amount of such indebtedness on the 30th of June, 1900, as far as it appeared on the books of the company, was $6,750. (Minutes Jan. 2, 1907, p. 19; Jan. 22, 1907, pp. 80, 81.) The 4th of July was a holiday. On July 5th a meeting of the executive committee of the company was held at the office of some one who is designated as General Thomas, at which Dickson was present and made a statement of his transactions. (Minutes Nov. 28, 1906, p. 9; Jan. 2, 1907, p. 9; June 22, 1907, p. 106.) Mr. Remsen was present. After the meeting he and Mr. Hoag accompanied Dickson to the office of the American Surety Company, and Dickson made a statement to Mr. Halliday, of that company. The surety company was on Dickson's bond to the Westchester Trust Company, for $10,000.

When Mr. Remsen left the office of the surety company, Dickson was still there. (Minutes Jan. 22, 1907, p. 109.) On Sunday afternoon, July 8th, Andrew Deyo called on Nathaniel Lawrence in reference to obtaining his indorsement on certain notes for Dickson. Mr Lawrence refused to give the indorsement. Dickson, accompanied by another gentleman, had previously four or five days before called on Lawrence at his store in Dobbs Ferry and made a similar request, which Lawrence had at that time refused. (Minutes of Jan. 2, 1907, pp. 31, 32.) On this Sunday, July 8th, Deyo asked Lawrence to go to Mr Remsen's house with him 'to talk over Dickson's defalcation of the trust company's money,' saying, that if Dickson didn't get those notes signed by Monday morning, he would have to go to jail. (Same minutes, p. 34.) Lawrence went with Deyo to Mr. Remsen, whom he knew to be the counsel for the trust company, and talked the matter over. Mr. Lawrence says that Mr. Remsen told him that the notes must be signed by the next morning or Dickson would have to go to jail. (Same minutes, p. 35.) On cross-examination, he modifies that statement thus: 'Mr. Deyo and Mr. Remsen were talking; it was said there that, if he did not have the notes signed the next morning, Dickson would have to go to jail. ' (Same minutes, p. 41.) Mr. Remsen denies using this language, and states that what he did say was that, if they wanted him to present those notes to the trust company, they had better have them there the next morning, as there was to be a meeting of the board or executive committee the next day, at which he would present them. (Minutes of Jan. 22, 1907, pp. 95, 96.) The following morning, July 9th, Deyo called on Lawrence with the notes signed by Dickson and indorsed by Deyo. Lawrence then indorsed them. (Minutes Jan. 2, 1907, p. 35.) They were delivered the same day by Deyo to Mr. Remsen. (Minutes Jan. 22, 1907, p. 97.) No one informed Lawrence that Deyo was involved in Dickson's defalcation, or that Deyo had mortgaged his property to the trust company, and he had no knowledge of these things at the time. (Minutes Nov. 28, 1906, pp. 8, 9; Jan. 2, 1907, pp. 22, 36, 37, 112; Jan. 22, 1907, pp. 111 114.) He knew Deyo in a general way, both being in somewhat similar lines of business. Mr. Lawrence's indorsement was purely for accommodation. (Minutes Jan. 2, 1907, pp. 31, 32.) On the next day, July 10th, Lawrence called on Mr. Remsen at his office in New York, and stated that he wanted his name taken off of those notes. Mr. Remsen told him that Mr. Sheehan 'had that in charge.' He went with Mr. Remsen to Mr. Sheehan's office, and, as he testifies, 'Mr. Hoag and Mr. Sheehan were there, and I demanded that my name be taken off; and he said, 'What are you going to do with the boy-- let him go to jail?' ' (Same minutes, p. 38.) Mr. Hoag denies that the language quoted was used in his presence. He cannot, however, remember clearly anything that was said at the meeting in question. (Minutes Jan. 22, 1907, p. 91.) Mr. Remsen is quite positive that no such thing was said (Same Minutes, p. 93), but he corroborates Mr. Lawrence's testimony that he requested to have his name taken off the notes. (Same Minutes, p. 113.) Mr. Lawrence also testified that Mr. Sheehan said, at the same interview, 'that they had gone over Mr. Deyo's affairs and thought him good. ' (Minutes Jan. 2, pp. 39, 43.) Mr. Hoag and Mr. Remsen both say that no such statement was made that they can remember. (Minutes Jan. 22, pp. 86, 87, 94.) Mr. Hoag says that he was not present during the whole of the interview between Sheehan and Lawrence, and cannot remember clearly what conversation was had. (Minutes Jan. 22, 1907, p. 91.) Whatever was said, the result was that Mr. Lawrence did not insist upon his request. The notes were offered to the company and were accepted, and Dickson returned for a time to his place with it. (Minutes Jan. 22, 1907, p. 119). E. Russell Coles, the last indorser on the notes, was a bookkeeper for Deyo. (Minutes Feb. 6, 1902, pp. 255, 256.) Three notes were at that time made out in the manner above mentioned, and delivered to the Westchester Trust Company. The American Surety Company paid the amount of its liability ($10,000) on Dickson's bond, and one...