Jackman v. Continental Nat. Bank

• Decision Date: 08 December 1926
• Docket Number: No. 7376.,7376.
• Citation: 16 F.2d 728
• Parties: JACKMAN v. CONTINENTAL NAT. BANK et al.
• Court: U.S. Court of Appeals — Eighth Circuit

16 F.2d 728 (1926)

JACKMAN v. CONTINENTAL NAT. BANK et al.

No. 7376.

Circuit Court of Appeals, Eighth Circuit.

December 8, 1926.

Justin D. Bowersock, of Kansas City, Mo. (Bowersock, Fizzell & Rhodes, of Kansas City, Mo., on the brief), for appellant.

M. M. Bogie, of Kansas City, Mo. (Henry L. Jost, of Kansas City, Mo., on the brief), for appellees.

Before VAN VALKENBURGH and BOOTH, Circuit Judges, and PHILLIPS, District Judge.

VAN VALKENBURGH, Circuit Judge.

In April, 1922, appellant was the owner of 275 shares of the capital stock of the Continental National Bank, a national banking association organized under the laws of the United States, with its place of business in Kansas City, Mo. On April 28, 1922, appellant executed and delivered to said bank his promissory note for the sum of $10,437, payable on demand, with interest from date at the rate of 6 per cent. per annum. Concurrently therewith, through his agent Charles Beggs, appellant delivered to said bank 100 shares of said capital stock, and the president of the bank acknowledged receipt thereof by letter in words and figures following:

"Exhibit F.

"Kansas City, Mo., April 28, 1922.

"Mr. R. C. Jackman, Lawrence, Kansas, — My dear Mr. Jackman: Mr. Beggs of the H. P. Wright Investment Company has today handed us your note of April 20th, payable to this bank on demand for $10,437.00, and we have paid to him this amount in cash.

"This letter will also acknowledge receipt from Mr. Beggs of certificate No. 1205 for 100 shares of capital stock of this bank. This we are to hold in trust for your account, being authorized to sell any part of it at any time we desire, providing we can realize for you $106 per share or better. The entire proceeds of any sale to be credited on the above described note, and it is agreed that the stock will be sold by us and your note liquidated from the proceeds of such sales.

"Very truly yours "J. F. Meade, President."

The sum of $10,437, the consideration for said note, was credited to the account of H. P. Wright Investment Company, with which Beggs was associated, and appellant received for it Fidelity Trust certificates of that value.

In January, 1923, the appellee bank voted to liquidate its affairs, and appellees Cleary, Hagerman, McDermand, Smith, and Meade were named as a liquidating committee for that purpose. At the time this suit was instituted the creditors of said bank had been paid in full, and stock dividends to the amount of 30 per cent. had been declared. Appellant demanded of the liquidating committee the sum of $5,250, being the accrued dividend upon 175 shares of stock held by him. Payment was refused for the assigned reason that appellant was indebted to the bank in the sum of $10,437, with accrued interest from January 31, 1925, no part of which had been paid. July 8, 1925, appellant filed his petition to recover the dividends alleged to be due. Appellees answered, setting up, by way of counterclaim, the amount due on said note. For reply, appellant admitted the execution and delivery of the note, but denied that he had borrowed from the bank the sum named therein; that as a part of the same transaction the bank agreed to sell the 100 shares deposited with it, and to liquidate the note from the proceeds thereof. Appellant, therefore, denied any indebtedness to the bank which could be interposed by way of set-off or counterclaim to his demand for dividends.

In their answer appellees prayed judgment for the amount of the note with interest thereon, and, further, that said judgment be decreed a charge against the interest and share of the plaintiff in the liquidating fund of the appellant bank. This prayer was conceived to convert the suit into a proceeding in equity, and the following stipulation was filed: "It is hereby stipulated by the above named parties that, by reason of the equitable defenses set up, and the equitable relief prayed in the answer, this entire cause and all issues therein, may be heard from the equity side of the court without the intervention of a jury, and, in accordance with such agreement, said cause is now submitted to the court for decree upon the pleadings and the evidence heretofore taken."

The court entered a decree in favor of appellee bank in the sum of $6,502.63, being the amount of the note with accrued interest, less dividends computed to be $5,870.09. The judgment in favor of the bank was decreed to be a special lien and charge against such other and further dividends and indebtedness as might accrue and be owing to appellant by said bank.

The controversy centers upon the nature of the transaction whereby appellant's 100 shares of bank stock were deposited with appellee bank. Appellant claims that the closing sentence of Exhibit F intended to, and in terms does, relieve him from any further liability on the note; that the appellee bank agreed, not only that the stock should be sold, but that the note should be liquidated from the proceeds of such sale. Appellees claim such interpretation is inconsistent with the provision that the stock was to be held in trust, and that the bank was not authorized to sell any part of it, unless it could realize $106.00 per share or better. They contend that the exhibit must be read in its entirety, and, when thus read and harmonized, the concluding sentence amounts to no more than an agreement to sell the stock at the specified price, if possible, and that the proceeds of any sale made should be applied to the liquidation of the note. They point out that the interpretation urged by appellant would amount to a sale of the stock to the bank, or a pledge of the same as collateral for the note; that either of these acts would be violative of express prohibitions contained in the National Banking Act. It is, of course, conceded that the stock was not sold at any price in the sense contemplated by Exhibit F. In our judgment, the exhibit upon which reliance is placed is not without ambiguity, and for better understanding of its terms resort must be had to the circumstances leading up to the transaction as disclosed by the testimony.

The witness Beggs, who acted as the agent of appellant, and was called by appellant to sustain the issues upon his part, testified as follows:

"We had some Fidelity Trust Company trustee certificates for sale, and we offered them for sale. Mr. Jackman advised that he was interested in purchasing them, and also advised that he would like to sell 100 shares of Continental. * * * I tried to sell the stock.

"Q. Did you go to see Mr. Meade with regard to it? A. I did.

"Q. What conversation did you have with Mr. Meade about it? A. I believe I had two or three. I believe the first one was that he was not interested in buying the stock, and asked me whose stock it was. I didn't feel at liberty to tell him, and I don't know whether at that time he suspected that it was Mr. Jackman's stock or not; but the result of the conversation was that Mr. Meade volunteered this loan to Mr. Jackman — a personal loan.

"Q. That is, Mr. Meade told you he would make Mr. Jackman a personal loan. A. Yes; Mr. Meade told me Mr. Jackman's note was good at the bank if he wanted to make a personal loan.

"Q. Did you communicate that to Mr. Jackman? A. I did. * * *

"Q. Did Mr. Jackman make some reply? A. Yes, sir. * * *

"Q. What did you tell Mr. Meade that Mr. Jackman had said? A. I believe I told Mr. Meade that Mr. Jackman wanted to sell the stock. * * * My recollection is that Mr. Meade offered this loan, and that he did not have a place for the stock at this time — something like that, but if Mr. Jackman wanted to borrow the money — or I believe at that time the transaction had been made known to Mr. Meade through permission I had from Mr. Jackman, and Mr. Meade offered to make a loan and accept this stock in trust. The transaction, I believe, was based on that condition — the stock was to be taken and sold at 106, if it could be sold. That is my recollection of that.

"Q. Did you communicate that to Mr. Jackman? A. I had several conversations with Mr. Jackman. * * *

"Q. Did you receive the note and stock from Mr. Jackman? A. Yes, sir.

"Q. And what did you do with them? A. I believe I took them, personally, over to the bank. * * * I delivered the note and the Continental National stock, and got credit from the bank for the amount."

Upon cross-examination the witness Beggs stated that on April 28, 1922, his company was offering for sale Fidelity Trust certificates, and had on hand for sale such certificates to the value of $10,437. Witness sought to interest Jackman in the purchase of those certificates, and Jackman offered to sell 100 shares of Continental National Bank stock in order to get the money to take up these certificates. Witness also undertook to interest Mr. Meade, president of the Continental Bank. He (Beggs) never understood that Meade was buying the Continental Bank stock, or that the bank was buying it, but the bank was going to receive it in trust for the account of Mr. Jackman, and try to market it for not less than $106. Witness could find no market for the Continental Bank stock at that time. He stated that his conversation with Meade was to the effect that he (Meade) was to market it, if possible, at $106 or better, and, if he could market it for that, the proceeds of the sale would apply as a credit on the note, and, if there was anything left, the bank was to account to Jackman for the remainder. The testimony of Meade is to the same effect.

Appellant testified to a telephone conversation with Meade in which the latter "told me it wasn't necessary for me to sell that stock; that they would be glad to loan me any amount of money I wanted to buy the Fidelity Trust certificates. I told him that didn't serve my purpose, as I was endeavoring to clean up, and wouldn't undertake any new obligation at that time. * * * I told him I didn't care to make the trade unless I could dispose of the stock — that...