Opinion
No. 155.
January 6, 1930.
Appeal from the District Court of the United States for the Northern District of New York.
Suit by A. Grant Blue, as trustee in bankruptcy of Charles W. Tryon, bankrupt, against the Herkimer National Bank. A decree formerly entered was reversed by the Circuit Court of Appeals which directed the taking of additional testimony. From the decree now entered, defendant appeals. Affirmed.
The opinion of Cooper, District Judge, is as follows:
This matter comes on the taking of additional testimony pursuant to direction of the Circuit Court of Appeals. 30 F.2d 256.
The Circuit Court of Appeals agreed with the District Court that the defendant bank should account for moneys received from the sale and rental of road machinery and other chattels belonging to the bankrupt and covered by their so-called bill of sale. Such moneys amount to $16,571.52.
The Appellate Court went further than the District Court, however, and held that the defendant should also account for:
(1) All moneys received by the defendant bank after the filing of the petition in bankruptcy, viz.: February 5, 1918, from the state of New York on road contracts between the bankrupt and the state, by reason of previous assignments of such moneys by the bankrupt to the defendant bank, less any moneys expended by the defendant bank from such moneys for the completion of the road contracts. The moneys so received from the state amount to $12,312.64, consisting of two sums, viz.: $7,850.73 received on September 14, 1918, and $4,461.91, received on November 26, 1919.
(2) So much of the road moneys received by the bank prior to said February 5, 1918, and deposited in defendant's bank to the credit of the bankrupt's account as were taken or received by the bank after October 4, 1917 (4 months prior to the bankruptcy), and applied in payment of the bankrupt's notes, except renewals.
(3) Fees and disbursements paid to the attorney filing the petition in bankruptcy.
Interest is allowed on all these sums.
Because the Appellate Court could not determine from the record how much was taken by defendant from the bankrupt's account and applied on its notes and how much was expended from the $12,312.54 for completion of the road contracts, the matter was sent back by the Appellate Court for further proof. Such proof has now been offered.
The proof was taken on February 26, 1929.
The defendant has offered proof without dispute that it expended $399.14 after February 5, 1918, for completion of the road contracts. The date of such payment is taken as of February 26, 1918.
The amount of moneys paid to or taken by the defendant bank after October 4, 1917, from the bankrupt's account in the defendant's bank, and applied to the payment of bankrupt's notes held by the defendant, is, as testified to by Robert Earl of the defendant bank, $5,402.05, of principal, and $471.05 interest, making $5,873.10. There were also new loans on notes made to the bankrupt during the 4-months period between October 4, 1917, and February 5, 1918, amounting to $5,034.05. This money was deposited in the bankrupt's account in the defendant bank, but no application of such sum is made under the District Court's understanding of the Appellate Court's decision, and no verdict given the bank therefor.
On the question of what moneys the bank had taken or received out of the money deposited by the bank in the bankrupt's account during the period 4 months prior to the bankruptcy, namely, from October 4, 1917, to February 5, 1918, and applied on the bankrupt's notes, the plaintiff claims that the bank should be charged with all the notes which matured during that period, whether they were then or later paid, and whether said to be renewed or not. The plaintiff's claim is that no notes, as a matter of law, were renewed. The amount of notes with single renewal during such period was $24,100. The amount of notes with double renewal during such period was $3,700, making a total of $27,800. The plaintiff claims that these notes should also be added to the amount due the bank as well as the $5,873 aforesaid.
According to the testimony of Robert Earl as the notes matured during the 4-month period as well as before, they were charged against the account of the bankrupt, stamped "Paid," and returned to the bankrupt with the canceled checks. It also appears that new notes for a like amount were made on the date of the maturity of the old notes which were renewed and credited to the bankrupt's account. At the close of the day, the only difference in the balance on deposit in the bankrupt's account was a sum equal to the amount of interest which had accrued on the old note, plus any payment on the principal in case there was a reduction of the old note. In 1 or 2 cases, the renewal notes were given the day before or the day after the maturity of the note. The defendant bank claims that these are renewals. The opinion of the Circuit Court of Appeals expressly excludes "renewals."
This court finds that all such notices are renewals, and that it was merely a selection of method of bookkeeping or banking practice or accounting, whether the foregoing practice was followed or another and perhaps more usual practice of substituting the new note for the old, paying in cash or by check the interest and any amount paid for reduction in amount of the maturing note, and having neither the old or new note passed through the account. These are only differences in method, and the final result is the same. This court, therefore, finds that such transactions are renewals of notes, and that it was not within the intent of the opinion of the Circuit Court of Appeals that the defendant bank should be compelled to pay the amount of such notes to the trustee in bankruptcy. These notes were later paid by the defendant out of the moneys deposited by the defendant in the Robert Earl special account. This account is made up chiefly of the $16,571.52 proceeds of the sale and rentals of the chattels and the $12,312.64 road moneys received after February 5, 1918, for all of which the defendant is compelled to account to the trustee.
Two matters have come up on this hearing which are claimed by the defendant to be new matters. One of these is the defendant's claim that it paid for repairs to machinery the sum of $716.20, and received in rental of machinery $319, leaving a balance of $405.20, and that neither of these amounts were included in the sums heretofore found by this court and affirmed by the Circuit Court of Appeals as having been received from rental of machinery or expended in repairs on the machinery of the bankrupt, or machinery of the bankrupt subsequently sold by defendant bank.
This court is unable to find from the record that any such amounts were mentioned or included in the sum found at the conclusion of this trial by this court and by the Court of Appeals as having been received or expended for repairs, and such sum of $405.20, with interest from February 26, 1920, is allowed in addition to the other amounts, this court believing that such is the spirit and intent of the decision of the Circuit Court of Appeals.
The other matter is the sum of $460.90, expended by the bank in the effort to obtain from the state payment of losses on the bankrupt's road contracts with the state under a statute passed about 1919 or 1920 to relieve road and perhaps other contractors, who had admittedly suffered heavy losses, in the performances of their contracts with the state because of the increased costs, due to the war arising from higher costs of labor and materials and expensive delays due to embargoes and other difficulties during the war. This is a new matter, and not heretofore brought into this trial.
This court believes the Appellate Court intended that the bank should be credited with any lawful expenditures made by it in connection with the completion of the roads and obtaining payment therefor. Therefore such expenditure is allowed as an offset to the amount due the plaintiff trustee.
The amounts are:
Attorneys' fees .................... $365.00 Printing bill ...................... 90.00 Engineering expenses ............... 4.13
Interest is allowed from February 26, 1920.
On the proof taken on February 26, 1929, the defendant's president, Robert Earl, testified that the moneys represented by the overdrafts totaling $503.73 were used by the bankrupt for completion of the road contracts. Inasmuch as this amount is specifically referred to in the opinion of the Appellate Court, this court feels precluded from allowing such a sum as a credit to the defendant bank.
Coming now to the question of amount for which judgment should be rendered, the court has itself computed the interest on the various amounts, and this computation has been made to the 26th day of February, 1929.
Net proceeds of sale and rental of chattels ..................... $16,571.52 Interest from Nov. 26, 1919, to Feb. 26, 1929 ................. 9,197.25 __________ Total ................................ $25,788.77
Road moneys received after February 5, 1918:
First payment ................. $ 7,850.73 Int. from Sept. 14, 1918, to Feb. 26, 1929 ............ 4,891.09 Second payment ................ 4,461.91 Int. from Nov. 26, 1919, to Feb. 26, 1929 ............ 2,476.40 __________ $19,680.13 Moneys paid attorney for filing petition in bankruptcy .................. $ 75.00 Interest from Feb. 1, 1918, to February 26, 1929 ........ 49.87 _______ $124.87 Overdraft ..................... $503.73 Interest from Feb. 1, 1918, to February 26, 1929 ........ 334.93 _______ $838.66 Moneys applied on notes by the bank out of bankrupt's funds on deposit ............ $5,873.10 Interest from the meantime between October 4, 1917, and Feb. 5, 1918, viz.: Dec. 4, 1917, to Feb. 26, 1929 ........................ 3,934.20 _________ Total ..................... $9,807.30
Total amounts chargeable against the defendant:
$25,768.77 19,680.13 124.87 838.66 9,807.30 __________ $56,219.73
Credits against the same —
Money expended on road contracts ........ $399.14 Interest thereon from Feb. 26, 1918, to Feb. 26, 1929 ................ 263.34 _______ $662.48 Moneys expended in endeavoring to obtain recoupment of loss under statute later declared unconstitutional $460.90 Interest on same from Feb. 26, 1920 to Feb. 26, 1929 ................. 248.85 ________ $709.75 Additional money spent on repairs to road machinery ..................... $405.20 Interest on same from Feb. 26, 1918, to Feb. 26, 1929 ................ 267.41 ________ $672.41 Total amount of credits ................. $2,044.39 Balance due plaintiff, for which judgment may be rendered .............. $54,175.34
Judgment may be entered accordingly.
Defendant bank may have the right to file its claim in the bankruptcy for the amount due it from the bankrupt estate within 60 days after the termination of the litigation.
Charles E. Snyder and Snyder, Cristman Snyder, all of Herkimer, N.Y., for appellant.
Cornelius J. Danaher, of Meriden, Conn., and Willis, Doolittle Guile, of Utica, N.Y. (Woodward W. Guile, of Utica, N.Y., of counsel), for respondent.
Before L. HAND, SWAN, and MACK, Circuit Judges.
Affirmed on opinion below.