Sponge Exch. Bank of Tarpon Springs v. Commercial Credit Co.

• Decision Date: 14 February 1920
• Docket Number: 3389.
• Parties: SPONGE EXCH. BANK OF TARPON SPRINGS v. COMMERCIAL CREDIT CO. [1]
• Court: U.S. Court of Appeals — Fifth Circuit

263 F. 20

SPONGE EXCH. BANK OF TARPON SPRINGS v. COMMERCIAL CREDIT CO. ^[1]

No. 3389.

United States Court of Appeals, Fifth Circuit.

February 14, 1920

James F. Glen and K. I. McKay, both of Tampa, Fla. (McKay &amp Withers, of Tampa, Fla., on the brief), for plaintiff in error.

N. B K. Pettinghill and M. B. Macfarlane, both of Tampa, Fla. (R E. L. Chancey, of Tampa, Fla., on the brief), for defendant in error.

Before WALKER, Circuit Judge, and GRUBB and JACK, District Judges.

WALKER Circuit Judge.

This was an action by the defendant in error, Commercial Credit Company, a Delaware corporation (herein referred to as the Credit Company), against the plaintiff in error, the Sponge Exchange Bank, a Florida banking corporation (herein referred to as the Bank), as the indorser of 13 promissory notes made to and indorsed by the United Divers' Supply Company (herein referred to as the Supply Company). The Bank pleaded, first, payment; and, second, a plea to the effect that it was never the owner of the notes sued on, and that its president indorsed them in its name solely for the purpose of lending its credit to said notes, which was well known to the Credit Company when it acquired the same. The Bank assigns as errors sundry rulings made by giving and refusing instructions to the jury, including the action of the court in overruling the Bank's motion, made at the conclusion of the evidence, to direct a verdict in its favor.

The notes sued on were acquired by the Credit Company in the course of dealings which commenced in pursuance of the terms of the following letter of its vice president:

'April 5, 1916.

'Mr. A. M. Lowe, President, The Sponge Exchange Bank, Tarpon Springs, Fla.--Deal Sir: Mr. Macrenaris and Mr. Welge called upon us with reference to advancing on the accounts of the United Divers' Supply co., representing advances for supplies, etc., made to the owners of various boats engaged in the sponge business. These accounts are of a character somewhat out of our regular line and some of our committee are disinclined to handle them for several reasons. It has been suggested that if we will furnish the money required to carry the accounts from the time the supplies are furnished until the catch is sold the transactions can be handled through your bank in a way to insure us against loss. We have expressed our willingness to advance the money under the following arrangement:

'The United Divers' Supply Co. to take notes from the various vessel owners for the amounts of their respective accounts, indorse the same, after which you will advance thereon 77 per cent., and in turn indorse them to us for a similar advance. Our charge will be on the face of the accounts at the same rate provided in our contract with the Sponge Divers' Association, namely, one-thirtieth of 1 per cent. a day on the face of the invoices, plus one-half of 1 per cent. on the amount of accounts assigned us: Provided, however, that this one-half of 1 per cent. will be refunded if said volume reaches $100,000 within a period of 12 months. Your own charge would be a matter for adjustment between you and the United Divers' Supply Co.

'It would be agreeable to us, should you prefer such an arrangement, that the amount of funds required be deposited by us in your bank, a surety bond to be given us guaranteeing deposits, you then to use the funds in making the required advances to the United Divers' Supply Co. upon the same basis of compensation as outlined above. If there is any other method that you prefer, which would afford us similar protection, we would be glad to receive your suggestion.

'Awaiting your further advices, we remain,

'Yours very truly,

Wm. H. Grimes, Vice President.'

After the Credit Company had so acquired several notes given to the Supply Company and indorsed by it and the Bank, the latter not giving a surety bond under the option stated in a paragraph of the letter, the following written agreement was entered into:

'This agreement, entered into this 8th day of May, 1916, by and between the Sponge Exchange Bank of Tarpon Springs, Florida, party of the first part, and Commercial Credit Company, a Delaware corporation, its successors or assigns, designated as second party, witnesseth:

'That whereas, first party, in order to obtain funds necessary to assist the United Divers' Supply Company of Tarpon Springs, Florida, in conducting its operations, desires to sell to second party notes given to the United Divers' Supply Company by its various customers and indorsed to said first party by said United Divers' Supply Company:

'Now, therefore, in consideration of the premises, the parties hereby agree as follows:

'Second party will from time to time, during the continuance of this agreement, buy such notes belonging to first party as may be acceptable to

second party, and will pay therefor one hundred per cent. (100%) of the face of said notes, of which 77% shall be paid in cash upon acceptance thereof by second party, and the remaining 23%, less any deductions and plus any overpayments by the debtors, and less charges hereinafter mentioned to be paid to said first party immediately upon payment of any such note to second party: Provided that no payments of any such remainder shall be made so long as any note purchased hereunder is due and unpaid.

'The total compensation to be paid by first party, it is agreed shall be one-thirtieth of 1 per cent. of the face of said notes for each day from date of purchase by and until paid to second party, plus $5 per $1,000 only on the first $100,000 of notes purchased within any 12 successive months' period. Said $5 per $1,000 will be refunded to first party as soon as $100,000 or more of notes have been purchased hereunder within any 12 successive months' period.

'In witness whereof, first party has caused these presents to be executed this 8th day of May, 1916.

'(Signed) Sponge Exch. Bank, (Seal) 'By A. M. Lowe, President. (Seal)

'Attest: R. W. Pinholster, Cashier.

'Accepted by Commercial Credit Company this 17th day of May, 1916.

'By Wm. H. Grimes, Vice President. (Seal) 'By S. G. Rosson, Secy.-Treas.'

The following resolution was adopted by the board of directors of the Bank at a regular meeting on May 2, 1916, a copy of which was sent by the Bank to the Credit Company:

'The president presented a proposition from the United Divers Supply Co. as follows: The United Divers' Supply Co. are to take notes from the captains or owners of the vessels for money and provisions advanced them. The United Divers' Supply Co. to indorse said notes to the Sponge Exchange Bank, for an advance of 77 per cent. of their face value, up to the amount not to exceed $30,000.00, and the bank to indorse them to the Commercial Credit Co. of Baltimore, who will reimburse them. The $30,000.00 to be used by the United Divers' Supply Co. to pay all loans now outstanding and to discount bills. Said advances made by this bank to be covered by marine insurance. Every vessel is to settle its note at the end of the current trip, and the United Divers' Supply Co. is to make up any and all shortages that may arise from a poor trip.

'Moved by G. E. Noblit and seconded by Walter Topliff, that if the United Divers' Supply Co. signs an agreement covering all of these points and others that may be added before the final closing of the agreement, that the proposition be accepted. Motion carried.'

The following written agreement was entered into between the Bank and the Supply Company on May 10, 1916, and duly signed:

'For the purpose of raising money for conducting their business, the United Divers' Supply Co. agrees to take notes for provisions and cash furnished the sponge boats which they operate, said notes to be signed by the actual owner of the vessel, if possible; if not by the owner, by the captain in charge of the vessel. Attached to each note shall be a bill of the merchandise and cash furnished the vessel, and insurance policy covering such merchandise and cash advance.

'It is further agreed that, when these boats come in and sell their catch, these notes shall be the first thing paid, regardless of any other account against the vessel. Should a vessel fail to bring in sufficient sponge on the trip to pay their notes, the United Divers' Supply Co. agrees to make up the shortage. It is understood and agreed that these notes must be paid each trip before any further advances will be made.

'In consideration of these notes and agreement, and 1 per cent commission per annum on sum used the Sponge Exchange Bank agrees to take these notes, which shall bear the indorsement of the United Divers' Supply Co., and indorse them to the Commercial Credit Co. of Baltimore, who will advance 77 per cent....