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Federal Reserve Bank of Philadelphia v. Algar

on reargument: January 6, 1939.

FEDERAL RESERVE BANK OF PHILADELPHIA
v.
ALGAR ET AL.



On Reargument.

After argument and full consideration had, we see no reason to change the views expressed in the original opinion. Accordingly, the judgment below is affirmed.

BIGGS, Circuit Judge (dissenting).

Upon December 12, 1932, the appellee, Reba Cook Algar, made and delivered to Atlantic City National Bank at Atlantic City her promissory note in the sum of $2,000 payable within two months at the bank. The note was endorsed by Leonard Algar and Algar Company, the two other appellees. Federal Reserve Bank of Philadelphia, the appellant, purchased the Algar note from the Atlantic City Bank.

Upon January 27, 1933, the Algar Company, by its bookkeeper, gave its check to the Atlantic City Bank in payment of the note. The Atlantic City Bank charged the amount of the check of the Algar Company to the Algar Company's account with it. The Algar note however was never returned to the Atlantic City Bank and is the subject of the suit at bar.

At the time that the Algar Company's bookkeeper went to the Atlantic City Bank with the company's check he conferred with the note teller, Riley, who told him that the note could not be returned at that time because it was held by the appellant. The bookkeeper gave this information to Leonard Algar. No entry was made upon the books of the Atlantic City Bank indicating that the note had been paid. Within a few days after the note was paid the Atlantic City Bank failed and a receiver was appointed for it by the Comptroller of the Currency. The Federal Reserve Bank now seeks to recover the amount of the note from its maker and endorsers who plead payment.

In proof of this issue the note teller, Riley, testified as follows:

"I put the (Algar Company's) check through the work and then went to the telephone and called the Federal Reserve Bank, the discount department

"Q. Did you reach the Federal Reserve? A. I did. * * *

"Q. Mr. Riley, what was the practice at the Atlantic City National Bank when notes were paid to you before maturity, when the notes had been sent to the Federal Reserve? * * * A. My practice was to accept the check in payment of the note, rebate the interest and in many cases give a receipt for the check and in turn from the note from the Federal Reserve Bank.

"The Court: What happened with relation to the payment? What was done with the moneys charged to the account, of Algar & Company in this instance, what happened to the money?

"A. It was usually paid to me by check, which would go through the work, and then I would credit that amount of money to bills receivable on the banks's books.

"The Court: Anything done in relation to the Federal Reserve?

"A. We would recall the note. My practice was to recall the note from the Federal Reserve on the date the note was paid.

"The Court: Did not the Federal Reserve get any credit? To whose credit did it go in the bank?

"A. In the bank's books as bills receivable, credited to that account, and the Federal Reserve would return the note to us and charge our account.

"Q. Now, Mr. Riley, by what means was it your custom to notify the Federal Reserve of the payment? A. Usually by telephone.

"Q. And on how many occasions had that happened during the three months previous to the transaction in question? A. Well, it has a common occurrence.

"Q. As often as three times a week? A. Possibly, and possibly more than that. Sometimes as high as three times a day.

"Q. And when you telephoned to the Federal Reserve, whom did you ask for? A. The discount department.

"Q. And that you did on the occasion when you reported the payment of the Algar ...


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