Lassiter v. Powell

• Decision Date: 05 November 1947
• Docket Number: No. 5626.,5626.
• Citation: Lassiter v. Powell, 164 F.2d 186 (4th Cir. 1947)
• Parties: LASSITER v. POWELL et al.
• Court: U.S. Court of Appeals — Fourth Circuit

164 F.2d 186 (1947)

LASSITER v. POWELL et al.

No. 5626.

Circuit Court of Appeals, Fourth Circuit.

November 5, 1947.

Murray Allen, of Raleigh, N. C. (W. M. Hicks, of Oxford, N. C., on the brief), for appellant.

B. S. Royster, Jr., of Oxford, N. C. (Clyde A. Douglass, of Raleigh, N. C., on the brief), for appellees.

Before PARKER, SOPER and DOBIE, Circuit Judges.

SOPER, Circuit Judge.

This is a suit in equity on two lost notes executed by Robert G. Lassiter, the defendant, and payable to the National Bank of Granville. One note was dated November 25, 1932, for $15,500, and was payable in 90 days; the other was dated February 11, 1933, for $1,000, and was payable in 60 days. The plaintiffs are the trustees for the creditors and stockholders of the First National Bank of Granville. The District Court entered judgment for the plaintiffs for the face value of the notes with interest, but conditioned execution upon the giving of a bond by the plaintiffs for $60,000 to indemnify and save harmless the defendant from any liability that might be asserted against him on the two notes in suit, and also on another note to be discussed hereinafter. The defendant appeals.

The principal contention advanced by the defendant is that the two notes in suit were discharged by a subsequent note signed by him and accepted by the plaintiffs in full settlement of the notes in suit and of certain other negotiable paper not involved in this suit. The notes in suit were payable to the National Bank of Granville, but they were acquired prior to March 5, 1933, by the First National Bank of Granville which was formed by a merger of the National Bank of Granville with the First National Bank of Oxford. The notes and at least one other note were secured by a bond of the Consolidated Indemnity & Insurance Company in the amount of $17,500.

On March 5, 1933, the First National Bank of Granville was closed and ordered to suspend operations by proclamation of the President of the United States, and J. W. Medford was appointed Conservator of its assets by the Comptroller of the Currency. When Medford took over the First National Bank, the two notes in suit did not come into his possession since they had previously been pledged by the bank to the Reconstruction Finance Corporation.

On August 30, 1933, the defendant addressed a letter to the First National Bank, attention J. W. Medford, Conservator. The letter set forth that the First National Bank held three notes of the defendant, including the two notes in suit, aggregating $17,000. It also stated that the bank held a note of the defendant for $4,200 which had been given in renewal of two notes originally payable to W. Z. Mitchell; that the defendant understood he was not liable on this note; and further that he was entitled to a credit of $1,660 which had been paid by him on this latter obligation. Enclosed was a note signed by the defendant, dated August 21, 1933, and payable to the First National Bank one year after date for $15,500. It was offered by the defendant in full settlement of all the notes held by the bank referred to in the letter, including the two notes in suit. The note, referred to herein for convenience as the compromise note, was accompanied by a bond executed by the Consolidated Indemnity & Insurance Company for the same amount, the bond reciting that the defendant's indebtedness to the First National Bank had been reduced to $15,500. The letter, note and bond were received by Medford and retained by him, but at no time did he indicate his acceptance of the defendant's offer. On December 19, 1933, an agreement was executed between the First National Bank, the Oxford National Bank, and the plaintiffs. The agreement recited that the First National Bank had been restored to solvency, and that pursuant to a plan of reorganization approved by the Comptroller of the Currency, the assets of the First National Bank were to be conveyed to the Oxford National Bank, with the exception of certain non-liquid and depreciated assets listed in an attached schedule, which were to be transferred to the plaintiffs as liquidating trustees of the First National Bank. Included in the items conveyed to the plaintiffs were the two notes in suit, as well as the other notes of the defendant referred to in his letter of August 30, 1933, but the schedule made no reference to the compromise note of August 21, 1933. It has been suggested that through these transactions the compromise note became the property of the Oxford National Bank because the note was not listed amongst the excepted assets to be transferred to the plaintiffs, but this is obviously incorrect. Although the compromise note was not in the schedule of assets transferred to the plaintiffs, it was nevertheless delivered to them with the defendant's letter of August 30, 1933, and with the bond mentioned therein, along with the other questionable assets of the First National Bank. Moreover, it is conceded that the compromise note did not create a new obligation but related to the same indebtedness as that covered by the notes in suit, and consequently it is inconceivable that it was the intention of the parties under the agreement of December 19, 1933, that the compromise note should be transferred to the Oxford National Bank, while the notes in suit should be transferred to the plaintiffs, as liquidating trustees. The failure to list the compromise note, together with the notes in suit, amongst the assets transferred to the plaintiffs may have been due to the fact that the notes in suit were not actually in the possession of the parties at the time but were in the possession of the Reconstruction Finance Corporation as collateral security and were not actually received by the plaintiffs until September, 1934.

The notes in suit and the compromise note were retained by the plaintiffs until February 8, 1937, but, except for this retention, the plaintiffs did not at any time during this interval by word or deed indicate to the defendant their acceptance of the offer of compromise contained in his letter of August 30. At no time did the plaintiffs request payment of the compromise note; nor did the defendant at any time make demand for the return of the notes in suit.

Some time in 1934, the Consolidated Indemnity & Insurance Company was forced into liquidation, and the Superintendent of Insurance of the State of New York was designated the Liquidator of Consolidated. The plaintiffs held the bonds of Consolidated securing the notes in suit, the compromise note, and the other instruments and as the notes in suit had not been paid, the plaintiffs filed a claim against Consolidated to recover on the bond which secured them. After some preliminary negotiations, the plaintiffs executed an assignment of the notes in suit and the compromise note to the Liquidator of Consolidated, and the latter agreed to recommend to the referee that 50 per cent. of the plaintiffs' claim be allowed, i. e., $8,250. The plaintiff's claim for $16,500 was based entirely on the two notes in suit and not on the compromise note. The compromise note was assigned to the Liquidator because of his insistence that all three notes be conveyed to him; but it is quite evident that the plaintiffs and the Liquidator treated the compromise note of August 21, 1933, for $15,500 as a renewal of the note of November 25, 1932, for like amount, because the compromise note was so described in correspondence between the parties and in the presentation of the plaintiffs' claim to the Liquidator. The claim upon the Liquidator was made at the request and for the benefit of Lassiter, who told the plaintiffs that sufficient assets to liquidate the notes had been pledged with the Indemnity Company.

Pursuant to the agreement between the plaintiffs and the Liquidator, the referee allowed the plaintiffs $8,250, that is, 50 per cent. of the plaintiffs' claim on the two notes aggregating $16,500. The plaintiffs, however, received dividends on this claim in the amount of only $495, between the date of the allowance of the claim and April 11, 1944. Consequently, the plaintiffs were dissatisfied and, taking advantage of a provision in the agreement between them and the Liquidator, they returned the dividends to him and demanded that the notes be reassigned to them. It then transpired that the notes in suit and the compromise note were lost despite a careful search to find them, and accordingly on April 11, 1944, the Liquidator executed an assignment of all of his rights in the notes to the plaintiffs. The bonds of the Consolidated were returned to the plaintiffs at the same time. On March 10, 1945, this suit was instituted after several ineffectual demands had been made upon the defendant for payment.

The principal defense in the pending case is that the plaintiffs accepted the compromise note in full payment of all indebtedness and are therefore precluded from recovering on the notes in suit. The defendant does not deny that he is indebted to the plaintiffs in the sum of $15,500; indeed his letter of August 21, 1933, while questioning his liability on other obligations, admits an indebtedness of this amount. He points out, however, that the compromise note was not in fact offered as a renewal but in full payment of all prior obligations, and he contends that the plaintiffs accepted it as such and hence must be denied recovery in this case under the rule established in North Carolina that one who accepts part payment in satisfaction of a debt cannot afterward recover any part of the original indebtedness. One may not obtain the...