Court Opinion

ID: 9641745
Source: CourtListenerOpinion
Date Created: 2023-08-22 17:39:38.72664+00
Date Added: 2024-06-11T18:10:38.216951
License: Public Domain

LEWIS, Circuit Judge
(dissenting).
While solvent the Watkins National Bank of Lawrence, Kansas, decided to cease business and liquidate. Rev.St., §§ 5220, 5221 (12 U.S.C.A. §§ 181, 182). It published the notices required by the latter section. It entered into a contract with the Lawrence National Bank of Lawrence, Kansas, the material parts of which are set out in the opinion supfa. As required by that contract the Watkins Bank gave its promissory note to the Lawrence Bank on October 22, 1928, payable on or before two years after date for $589,823.59, which equalled in amount all of its deposits of every kind and its cashier’s and certified checks as shown by its books. The note did not include its rediscounts, capital stock liability, surplus and undivided profits; amounting to $261,-447.62. As collateral security for the payment of the note the Watkins Bank agreed to assign and turn over to the Lawrence Bank all its assets, and the latter’s duty under the contract was to realize what it could out of the assets received from the Watkins Bank to pay said note. The Lawrence Bank opened an account, “Watkins National Bank Liquidation Account,” and when collections outright were made or transfer by agreement of liability of the debtor to the Lawrence Bank from the Watkins Bank, credit was given to this account, which amounts so entered were later credited on said note, which resulted in its payment within less than two years after its date. A settlement was then had between the two banks, but the Lawrence Bank withheld $15,287.-86, and appellees in this suit recovered judgment therefor, from which defendant below has appealed.
As clearly shown by the pleadings, opening statements of counsel when the trial came on, and the proof, the controversy arises from this: All of the books, card indexes and records of the Watkins Bank were turned over to the Lawrence Bank to be used by it in execution of the contract on its part. Those books had a depository account entitled “Morgue Account.” No individual name appeared upon it. When turned over to the Lawrence Bank it had a total deposit credit of $16,023.38. The Watkins Bank was an old institution, and this morgue account had been built up over a period of 40 years. It was a consolidation of some 2,000 depository accounts. Some of the depositors had been students at the state university at Lawrence who went away leaving small deposits in their accounts. Others did likewise. Their postoffice addresses were unknown, and after a few years what small balance each had was transferred to this morgue account. However, a system of card index was kept showing the name and amount of each depositor whose balance had been transferred to this account. The Lawrence Bank paid out of this morgue *37account a total of $735.52, leaving a balance of $15,287.86, for which amount judgment was rendered. The note for $589,-823.59 covered in its amount the morgue account, and because of that fact and the fact that the Lawrence Bank assumed the duty'to realize on the assets and pay the liabilities it insisted that it was entitled to retain the amount recovered to protect itself against claimed liability on the morgue account.
Clearly the fund in controversy does not belong to the Lawrence Bank. It belongs to the Watkins Bank, and the former knew that the latter had ceased business, was in liquidation when the contract was made, and the National Bank Act (12 U.S.C.A. § 21 et seq.) contemplates that all of the bank’s assets must be distributed to those to whom they lawfully belong. The requisite notices had been published to that end so that all creditors might be advised.
It therefore seems that the two banks had in mind what has just been said when they entered into the contract, particularly paragraph number 8 thereof. That paragraph required that the note be fully paid on or before its maturity either by the maker or by Mrs. Watkins, a guarantor, and that if Mrs. Watkins made payment the remaining assets in the hands of the Lawrence Bank should be turned over to her, but if payment should be made prior to maturity out of the pledged assets the remaining assets should be turned over to the Watkins Bank; and whether paid by Mrs. Watkins or out of the pledged assets on or prior to maturity all obligations of the Lawrence Bank on the contract should thereupon cease. More than one month prior to the maturity of the note it had been fully paid out of pledged assets. Under the clear terms of this paragraph the obligations of the Lawrence Bank then ceased, and it was its duty to return the remaining assets in its hands to the Watkins Bank, which it refused to do to the extent stated. It was no longer liable oil the contract to make further payments to morgue account depositors or other character of depositors. Its obligations in that respect had ceased and terminated. The first sentence of paragraph 18 of the contract is in confirmation of this conclusion. This is again confirmed, I think, in Mrs. Watkins’ written guarantee. It provides that if the $589,823.59 note should not be paid from the pledged assets, then she would paj to the Lawrence Bank “an amount equal to the balance then remaining unpaid to said party of the second part under the terms of said contract; and that said party of the first part (Mrs. Watkins) shall thereupon be entitled to the remaining assets pledged as collateral to said note then held by said party of the second part, according to the .terms of said agreement hereinabove referred to.” It is true, of course, that the contract between the banks was made for the benefit of third parties, but to the extent therein limited. No one claiming to be a beneficiary under the contract is here asserting a claim to the fund in question, and I know of no rule or principle under or by which he would be entitled to enlarge or extend the expressed and limited obligation of the Lawrence Bank for his benefit.
Clearly, though in deference, the judgment below in my opinion should be affirmed.