United Milk Prod. Co. v. Lawndale Nat. Bank of Chicago
|United States Courts of Appeals. United States Court of Appeals (7th Circuit)
|392 F.2d 876
|UNITED MILK PRODUCTS COMPANY, a Delaware Corporation, Plaintiff-Appellant, v. LAWNDALE NATIONAL BANK OF CHICAGO, a National Banking Association, Defendant-Appellee.
|15 April 1968
Donald S. Manion, Harold S. Lansing, Ronald B. Kaplan, Nicholas G. Manos and Bernard M. Kaplan, Chicago, Ill., for plaintiff-appellant.
Samuel W. Block, John G. Stifler, David Altman, Chicago, Ill., for appellee; Raymond, Mayer, Jenner & Block, Chicago, Ill., of counsel.
Before HASTINGS, Chief Judge, and KILEY and FAIRCHILD, Circuit Judges.
This suit by United Milk Products Company (United) has four counts, two of which seek recovery of money damages under the diversity statute, 28 U.S.C. § 1332, and two of which seek to rescind certain allegedly fraudulent transfers. The second two counts are brought by United under the auspices of the creditors committee formed in its Chapter 11 bankruptcy proceeding. The four counts arise from allegedly unauthorized transactions between United's officers and the defendant, Lawndale National Bank of Chicago (Bank). The district court dismissed United's original and first amended complaint, on defendant's motions for failure to state claims upon which relief could be granted. United has appealed. We affirm.
The motion to dismiss admits the following facts. United is a Delaware corporation and the Bank an Illinois corporation. On January 30, 1964, Ivan Ezrine, chairman of United's board of directors, and Melvin S. Rosen, United's secretary, met with officials of the Lawndale Bank. At that meeting the Bank agreed to loan United $150,000 and received a note executed by the two officers in the name of United. It was agreed that the loan would be secured by 51,000 shares of the common stock of Oak Lawn Investments, Inc. and 54,000 permanent reserve shares of George Washington Savings and Loan Association of Chicago owned by United. At the same meeting Ezrine and Rosen executed a corporate resolution form which stated that the board of directors of United had adopted a resolution designating the Bank as a depository for corporate funds and authorizing the Bank to pay out funds upon checks drawn by Rosen or Ezrine. The $150,000 was then deposited in an account in United's name. Finally, at the January 30 meeting, Ezrine and Rosen signed a letter directing the Bank to pay $125,000 to the City Trust Company, Bridgeport, Connecticut, for credit to Glendale, Inc. On January 31, 1964, the Bank made the transfer as directed. On February 3, 1964, the Bank received an additional bank resolution form designating as additional signatories certain of United's officers in addition to Ezrine and Rosen. This resolution was signed by Kenneth Livingston, United's vice-president and member of United's board of directors. Also forwarded to the Bank on this date were signature cards signed by all officers of United.
On February 4, 1964, a telegram was received which was signed by Melvin Rosen and which directed the Bank to transfer an additional $23,000 to Glendale. The Bank also made this transfer. On February 6 the agreed collateral for the loan was transferred by United to the Bank. The $150,000 loan was completely repaid by United in installments beginning May 14, 1964, and concluding February 20, 1965. United filed a Chapter 11 bankruptcy petition on May 20, 1965.
United alleges in Count I of its amended complaint that it made the payments to the Bank upon the note through a mistake in that at the time the payments were made United was not aware that it was relieved of its obligation to repay the note because the bank had transferred $148,000 of United's money to Glendale, Inc., at a time when the Bank was chargeable with knowledge that these transfers were unauthorized and were for the personal benefit of Ezrine and Rosen.
Count II alleges that the Bank was grossly negligent in that it transferred $148,000 of United's money to Glendale, Inc., when it knew or should have known that Ezrine and Rosen were not authorized to order the disbursements.
Count III is brought by direction of the creditors committee of United's bankrupt estate to set aside as fraudulent and recover the amount of the debits made by the Bank against United's accounts for the disbursements to the credit of Glendale, Inc.
Count IV is to recover for the estate the payments made by United on the note on the ground that there was no consideration for the payments which were made on a "non-existing debt" of United.
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