properly signed and in good order and form and there was nothing on the face of the certificates to put Fidelity, in the exercise of ordinary business prudence, on notice of possible fraud or invalidity.
26. Zanesville in its dealings with PAC relied upon PAC's representations; Fidelity in its dealings with PAC and in granting loans totalling $ 300,000 likewise relied upon PAC and its representations.
27. Fidelity in the issuance of safekeeping certificates for whisky warehouse receipts performed a ministerial and custodial act only; the safekeeping arrangement was inaugurated by agreement between PAC and Zanesville and solely for their benefit, and not for the benefit of Fidelity.
28. The safekeeping receipts issued by Fidelity to Zanesville described the whisky certificates by number, the number of barrels and nature of the whisky therein, together with serial numbers of the barrels, the date of original inspection for tax purposes and the exact geographical location even as to buildings where the whisky was stored. This information afforded Zanesville sufficient basis at any time it desired to check on the validity of the whisky certificates or value of the security.
29. Zanesville had available to it the same facilities for investigating the value of the security as did Fidelity.
30. The only direct communications between Zanesville and Fidelity were the letter of Zanesville to Fidelity on March 14, 1949, and the reply of Fidelity to Zanesville on March 17, 1949, as follows:
'March 14, 1949
'The Fidelity-Philadelphia Trust Co.
'Broad and Walnut Streets
'Philadelphia 9, Pa.
'Attention: Mr. J. Wayne Wilson, Credit Manager
'Dear Mr. Wilson:
'For some time we have been purchasing from the Philadelphia Acceptance Corporation certain notes of Distillery Companies secured by warehouse certificates. Recently the interest rate on these notes has increased to the extent that we are concerned as to whether or not the notes that we are holding are from high grade risks.
'We would appreciate very much if you would give us an opinion as to the responsibility of the Philadelphia Acceptance Corporation and, if possible, we would also like to have some information as to the security back of Collateral Trust Notes for which your bank is Trustee.
'Our experience over the past years with the Philadelphia Acceptance Corporation has been satisfactory with the exception of a little trouble on a note of the Alta Vineyard Company. However, we would not suffer loss on these loans. At the present we are carrying notes of the Carrollton Springs Pure Rye Distilling Corporation, the Sherwood Distilling Company and the Alexander Young Distillery.
'Any information that you might be able to give us in regard to the Philadelphia Acceptance Corporation, their Collateral Trust Notes or the three Distilleries mentioned will be greatly appreciated.
'Very truly yours, 'W. E. Decker, President
'Fidelity-Philadelphia Trust Company
'Broad and Walnut Streets
'Telephone Cable Address
'Kingsley 5-1123 'Fidelphila'
'This Information is Furnished as a Matter of Business Courtesy on the Understanding it is Confidential and No Responsibility Therefor Attaches to This Bank or any of Its Representatives.
'March 17, 1949
'Mr. W. E. Decker, President
'The First Trust and Savings Bank
'Dear Mr. Decker:
'We are glad to answer your inquiry of March 14 concerning Philadelphia Acceptance Corporation of this city.
'This corporation has had an account with us since 1938 that has been conducted properly and average balances of low five figures are maintained. From time to time we have loaned the corporation varying sums upon a secured basis, and at the present time outstandings with us are in low six figure proportions. In our dealings with this corporation we have confined our loans to those secured by whiskey in bonded warehouses in which we felt there was a ready market. These obligations have been handled in a satisfactory manner and judging from our experience, we have no reason to believe that they are other than a properly secured risk. A condensed balance sheet exhibited to us last year indicates that the net worth of the Philadelphia Acceptance Corporation is limited and is substantially less than outstanding obligations.
'With reference to your inquiry concerning this company's collateral trust notes for which we are trustee, the collateral held at present is composed mainly of a moderate six figure amount of whiskey warehouse receipts. The remaining collateral in a moderate four figure amount is composed of liquor board receivables and cash. There is presently a low six figure amount of collateral trust notes outstanding.
'We also have an account for the Alexander Young Distilling Company of this city which was opened in September, 1948, and low five figure balances are maintained. We have, on occasion, advanced sums to that company upon the assignment of accounts receivable of the Pennsylvania Liquor Control Board. Our loans are based entirely on the credit of the Pennsylvania Liquor Control Board. Outstandings of the Alexander Young Distilling Company with us last year reached a high five figure sum and are currently in medium five figure proportions. The company was out of our debt from January 6 to February 3, 1949.
'Sincerely, '(sgd) J. W. Wilson 'J. Wayne Wilson 'Credit Manager'
31. On 9 out of the 12 banking days in March, preceding March 17th, there were overdrafts in the PAC account as follows:
March 3, 1949 .......... $ 19,592.61,
" 4, " .......... 13,786.07,
" 7, " .......... 4,493.05,
" 8, " .......... 4,902.30,
" 10, " .......... 36,239.14,
" 14, " .......... 36,884.66,
" 15, " .......... 6,964.29,
" 16, " .......... 2,462.76,
" 17, " .......... 317.44.
© 1992-2004 VersusLaw Inc.