Union Trust Co. of Maryland v. Townshend
Decision Date | 23 February 1939 |
Docket Number | 4386.,No. 4370,4370 |
Citation | 101 F.2d 903 |
Parties | UNION TRUST CO. OF MARYLAND v. TOWNSHEND (two cases). In re SMITH. |
Court | U.S. Court of Appeals — Fourth Circuit |
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Walter H. Buck, of Baltimore, Md. (Frank Lively, of Charleston, W. Va., on the brief), for appellant.
Selden S. McNeer, of Huntington, W. Va. (Campbell & McNeer, of Huntington, W. Va., on the brief), for appellee.
Before PARKER, NORTHCOTT, and SOPER, Circuit Judges.
This is an appeal in a controversy arising in the bankruptcy proceedings of R. R. Smith, who was adjudged a bankrupt December 23, 1931, on an involuntary petition filed November 30, 1931. The controversy relates to bonds of the Columbia Gas and Electric Company of the par value of $72,000, received by one C. M. Gohen on November 25, 1931, from the sale of Smith's one-third interest in gas properties in Kentucky and West Virginia owned by him jointly with the estate of T. E. Houston.
For some time prior to March 4, 1931, Smith and his co-owner had been attempting to sell these gas properties. They had been offered $2,000,000 for them at one time, but had rejected the offer. Smith's interest was subject to mortgages aggregating approximately $300,000 in favor of the First Huntington National Bank and the Union Bank and Trust Company of Huntington, West Virginia; and Gohen, the president of the first named bank, was representing him in attempting to secure a sale of the properties. On November 18, 1930, Smith and his co-owner had executed a power of attorney to Gohen and one Julius Frieberg of Cincinnati authorizing them to sell and convey the properties, Frieberg being named in the power of attorney because he was representing the Houston interests and Gohen because he was representing Smith.
Smith was indebted at this time to the Farmers & Merchants National Bank of Baltimore, Maryland, later merged with the Union Trust Company of that city, in the sum of $72,000, secured by the pledge of 1600 shares of the capital stock of the First Huntington National Bank. This stock was worth at the time more than the amount of the debt. The debt was past due and the bank was pressing for payment; but Smith, although unable to pay, was unwilling for the stock to be sold, and Gohen did not wish so large a block of it to be thrown on the market. They accordingly secured from the Baltimore bank an extension of time for the payment of the indebtedness, by an agreement on the part of Smith that the debt of the bank should be paid from the proceeds of the sale of his interest in the gas properties, and on the part of Gohen that he would pay the debt of the bank from such proceeds when same should come into his hands. The agreement of Smith was contained in a letter addressed by him to Gohen, mistakenly bearing date of February 4, 1931, but in reality written March 4, 1931. It is as follows:
This letter was sent by Gohen to Gideon, an officer of the Baltimore bank, agreeing to pay over to that bank the money "if and when" it came into his hands. The letter of Gohen is as follows:
Relying upon the promises contained in these letters, the Baltimore bank extended the time of payment on the debt represented by Smith's note from time to time and refrained from forcing collection until the bank stock pledged as collateral had so declined in value as not to be worth the amount of the debt.
On April 16, 1931, Smith executed an instrument revoking the power of attorney granted Gohen and Frieberg, but no notice was given the Baltimore bank of the revocation and Gohen continued to assist Smith in attempting to procure a sale of the property and had frequent communication with the bank as to the prospect of selling it. Not only was no notice given the bank of the revocation of the power of attorney, but letters were written from time to time advising the bank of the progress being made towards consummating a sale. Thus on August 4th, Smith wrote the bank as follows:
On August 6th, Gohen wrote the bank as follows:
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