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FEDEB.(iL RESERVE :B.Al!K
OF RICE¥01\TD
February 2, 1929.
Federal Reserve Board,
Washington, D. C.
Attention: Mr. Walter Wyatt, General Counsel.
My
dear Mr. Wyatt:
I am sending you a copy of a complaint in an action brought
by L. R. Gilbert, Trustee of Audrey Spinning Mills, Inc., against the
Phoeni.:le l£ills and other parties, including the Federal Reserve Bank of
Richmond~
You will notice the action is for the amount of a check drawn
by the Phoenix Mills to the Audrey Spinning Mills on the Commercial
National Bank of Statesville, which was sentro the latter by the Federal
Reserve Bank of RiChmond, which in turn received authority to charge the
amount of such cheCk to the reserve account of the Commerical National
Bank of Statesville.
The pertinent facts in this case so far as the Federal Reserve
Bank of Richmond is concerned are as follows:
On April 16th the Charlotte Branch of the Federal Reserve Bank
of Richmond sent to the Commercial National Bank of Statesville checks
totaling $20,561.03 and on the same day checks were sent from the main
office to the Commercial National Bank of Statesville totaling $1,176.J.2.
These checks were apparently received by the .Oommercial National Bank of
Statesville on April 17th and were cancelled and charged to the drawers.
On that day the Commercial National Bank of Statesville sent to the
Charlotte Branch of the Federal Reserve Bank of RiChmond a remittance
letter which contained a form directing the Federal R~serve Bank of
Richmond to charge these checks to the reserve account of the Com;nercial
National Bank of Statesville. The remittance letter above mentioned was
received by the Charlotte Branch of the Federal Reserve Bank of Richmond,
at which the reserve account of the Commercial National Bank of Statesville
was kept, on the morning of April 18th.
At the close of business on April 17th the reserve account of
the Commercial National Bank of Statesville showed a credit balance of
$1,084.62. Various credits were made to the account of the Commercial
National Bank of Stateaville on the morning of April 18th. These credits
apparently consisted of checks formerly deposited and becoming available
in the reserve account, a Shipment of currency amounting to $5,000.00,
and a transfer of $4,000.00. The Charlotte Branch also received a draft
for $12,500.00 drawn by the. Commercial National Bank of Statesville on
the American Trust Company of Charlotte, so that the apparent balance
exceeded the amount of the cash letters which were accordingly charged
against it. About midday on April 18th, but after the charge of the cash
X-6242 :1~9
.._ji ...
-2-
Mr. Walter Wyatt,
Federal Reserve Board,
Washington, D. C.
February 2, 1929
letters·, the Charlotte Branch was advised that the Commercial National
Batik of Stat~sville had been closed. ·The American Trust Company received
a similar notice and returned the draft for $12,500.00 which had been
presented through the Clearing House. This draft was charged against the
account of the Commercial National Bank of Statesville, causing an apparent overdraf~·, Thereupon the cash letters which had been charged to
the account earli~r in the day were charged baCk and credited to the
Commercial National Bank of Statesville, leaving an apparent balance of
approximately $11,000.00. On April 19th and 20th the reserve account of
the Commercial National Bank of Statesville was credited with the sums
of $1,001.48, $1,654.27, and $1,330.71, which were apparently checks
deposited prior to April 18th but which became available on the 19th and
20th. The net result of these debits and credits left a balance of
$17, 114•20, We were holding this balance in suspense to await the action
of the court in the Lake City case.
The present suit, however, may present some additional questions
not involved in that case, particularly with respect to the credits made
after April 18th.
I remain,
Very truly yours,
(s)
MG'IIV L
M,
~. Wallace,
dounsel.
O'"l'
'<)
,f'
x-6242-a
160
STATE OF NORTH CAROLINA.,
COUNTY OF MECKLENBURG.
)
)
)
IN THE SUPERIOR COURT.
)
)
)
)
)
)
)
)
)
L. R. Gil bert, Trustee in
Bankruptcy of Audrey Sp~nning
Mills, Inc,,
Plaintiff,
versus
Phoeni:k Milia, ±hc4• W~ldon
Bank &: Ttu~ t Co • • The C6mmer-
~)
cial Natioilal :Batik of Rale 1igh~
N. c., Federai Reserve :a&nk df
Richrnond, and C. L • .Williams,
Receiver of The Commerical
National Bank of Statesville,
N. C., .
)
)
)
)
)
)
Defendants.
The plaintiff, complaining of the defendants, alleges:
That the plaintiff was heretofore duly appointed and qualified,
I.·
and is now acting as the Trustee in :Bankruptcy of Audrey Spinning Mills,
Inc., a corporati.on duly organized and existing under the Laws of the State
of North Carolina, which was heretofore, to-wit, on or about the 19th of
I
·September, 1928, duly adjudicated a bankrupt by the United States District
Court, for the Eastern District of North Carolina.
II.
That as plaintiff is informed and believes the defendant,
:Phoenix Mills, Inc., is a corporation duly organized and existing under
the laws of the State of· New York, and is now, and was at the times hereinafter referred to engaged in doing business in this state, and at such
times owned and operated, and still owns and eperates a cotton mill in the
county of Iredell, in this State.
-:J
....
X-6242-8,4 C·i
III.
_LU..iL
That the defendant, Weldon Ba:lk: & Trust Company,
is a banking corporation duly organized and existing under the
Laus of the State of North Carolina, with its home office and
principal place of business in the Town of Weldon, Halifax
County, North Carolina, and as such corporation is duly authorized and empowered to receive and handle for collection cheCks
drawn upon other batiks.
IV.
That
t~e
defendant, Commercial National Bank of
Raleigh, N. C., is a banking co:r,-poration duly organized and
existing under the Acts of Congress, with its home office and
principal place of business in the City of Raleigh, Wake County,
North Carolina, and as such corporation is duly w. thorized and
empowered to receive and handle for collection checks drawn upon
other banks.
v.
That the d.e:fendant, :&'ederal Reserve Bank of Richmond,
is a banking corporation duly or@anized and existing under the Acts
of Congress, especially under that.. Act known as the Federal Reserve
Act, and is dllly authorized and empowered to receive and handle for
collection checks drawn upon other banks, and at the times hereinafter
referred to was, and still is, engaged in business in this State,
with its principal office and place of business in Charlotte,
Mecklenburg County, North Carolina, where at all such times it maintained,
and still .maintains, a branch bank.
VI.
That the defendant, C. L. Williams, was heretofore, to-wit,
on or about April 19th, 1928, duly appointed Receiver of The Commercial
-3National :Bank of Statesville, N. C., by the ComptroH:er of the Currency
of the United States, and immediately qualified as _such Rectiver,
and as such has since been in charge, and is stil1 in charge,
of winding up and liquidating the business and affairs of said
bank, which was at the times hereinafter referred to a banking
corporation duly organized and existing under the Acts of
Congress, and duly authorized and empowered to receive deposits
of money to pay checks drawn on such deposits when duly
presented, and to receive and handle for collection checks,
and otherwise engage in the banking business under said Acts
of Congress, and at all such times had and maintained its
principal office and place of business in this State in
Statesville, Iredell County, North Carolina.
VII.
That heretofore, to-wit, on or about April lOth,
1928, the defendant, Phoenix Mills, Inc., being indebted to the
Audrey Spinning Mills, Inc. in the sum of $6,928.94, for cotton
yarns theretofore sold and delivered by said Audrey Spinning
Mills, Inc. to said Phoenix Mills, Inc., forwarded through the
United States mails to said Audrey Spinning Mills, Inc., its
check drawn on. the Commercial National :Bank of Statesville,
N. C. in words and figures as follows, to-wit:
NO. ·386.
"PHOENIX MILLS, INC.
STATESVILLE, N. C.
APRIL 10, 1928.
PAY TO THE
ORDER OF
.A.udrey Spinning Mills, Inc.
$6928.94
Six Thousand Nine Hundred Twenty-eight and 94/100 ------ DOLLARS
PHOENIX MILLS, INC.
TO
THE COMMERCIAL NATIONAL RANK
STATESVILLE,
N. C.
C. W. MCLAn!
Agent • 11
which said check was issued by said Phoenix Mills, Inc. to
said Audrey Spinning Mills, Inc. in payment of the indebtedness
aforesaid.
VIII.
That said check was received by the Audrey Spinning
Mills, Inc., at Weldon, N. C., in the U. S. mail on the afternoon of Thursday, April 12, 1928, after the close of banking
hours; it was duly endorsed and deposited by said mills with
the defendant, Weldon Bank & Trust Company, for collection on
the morning of Friday, April 13, 1928, and on the sama day was
duly endorsed and forwarded by said defendant to the defendant,
Commercial National Bank of Raleigh, N. C., for collection; that
it was received by the latter on Saturday, April 14, 1928, and on said
date was duly endorsed and forwarded by it to the Charlotte
Branch of the Federal Reserve Bank of Richmond, for collection;
that it was received by the latter on April 16, 1928, and on
said date was duly endorsed by it and forwarded to fhe Commercial National Bank of Statesville, for payment.
IX.
That the Federal Reserve Bank of Richmond, through
its Charlotte Branch,
forwar~d
said check to The Commercial
National Bank of Statesville in a letter containing other checks
drawn upon the latter, and which said Charlotte Branch held
'for collection, the total amount of the checks thus forwardad
to said Commercial National Bank of Statesville in said letter
for payment being $20,561.03.
x.
That said check,. together with the other checks
eontained in said letter, were received by The.Commercial
X-6242 ... a
-5National Bank of Statesville on Tuesday, April 17, 1928; and
on said date it wrote to the Federal Reserve :Balli: of Richmond
directing it to pay said check, and the other checks aforesaid,
and charge them to its reserve account with said Federal Reserve
Bank; that said letter was received by the defendant, Federal
Reserve :Bank, on the morning of Wednesday, April 18, 1928; that
at the close of business on said date the books of said Federal
Reserve :Bank showed that the balance in the reserve account of
said CoL:i".lercial National Bank of Statesville was $13,429.19;
that inasmuch as the balance in said. reserve account as shown
by its books was less than the total amount of the checks forwarded to The Commercial National Bank of Statesville for payment as aforesaid the Federal Rese_rve Bank of Richmond refused
to pay the check of the Aud.r.ey Spinning Mills,
Inc~,
hereinbefore
set forth, and on said lSth day of April, 1928, notified the Commercial National Bank of Raleigh of the non-payment thereof,
and charged the amount of said check back against said Cammercial Bank of Raleigh; the Commercial National Bank of Raleigh
in turn notified the Weldon Bank & Trust Company af the nonpayment of said check, and charged the latter's account with
the amount thereof; the Weldon Bank & Trust Company thereupon
notified the Audrey Spinning Mills, Inc., of the non-payment
of said check, and the latter in turn duly notified the defendena, Phoenix lUlls, Inc. , of the non-payment thereof.
XI.
That notwithstanding the presentment of said check
to The Conmercial National Bank of Statesville for payment
on April 17, 1928, as hereinbefore alleged, the said bank fail
x-6242-a
-6ed and refused to pay said check, or to cause the sam3 to b6
paid by the Federal Reserve ]a:nk of Richmond, and that notwithstanding such failure the Cashier of said Cornraercial
National ]aru{ of Statesville wrongfully and uri1awfully stamped
said check as paid on April 18, 1928.
XII.
That said Commercial National ]ank of Statesville
suspended business on the 18th of April 192?, and did not reopen on the 19th, and on or about said date the defendant,
C. L. Williams, was appointed as Receiver for said bank, as
hereinbefore alleged.
XIII.
That after repeated demands by the Audrey Spinning
Mills, Inc., upon said Phoenix Mills, Inc., to pay the indebtedness for which said check was issued, the latter on May 16,
1928, declined at that time to pay the same, or at least postponed payment thereof,. upon the ground that there. was a question
as to whether or not the collecting banks who handled the check
aforesaid were responsible for the
non-p~ent
thereof, and on
July 2nd, 1928, declined to pay said indebtedness upon the alleged ground that the Audrey Spinning Mills, Inc., had. notreceived the proceeds of
sai~
check through the fault of the
defendant banks who had hapdled same.
That a controversy there-
fore exists between the Phoenix Mills, Inc., and the defendant
banks, as to who is liable to the plaintiff for the payment
of the amount of said check representing the indebtedness of
said Phoenix Mills, Inc., to said Auarey Spinning Mills, Inc.
X-6242-a
XIV;
That the Audrey Spinning Mills, Inc., accepted said
cheCk from the defendant, Phoenix Mills, Inc., in payment of
the indebtedness aforesaid upon the condition that said check
would be paid by said Commercial National Barik of Statesville
when duly presented for payment; and that said cheCk was not
paid by said barik when presented, as hereinbefore alleged, so
that said Phoenix Mills, Inc., remains liable to the plaintiff
as the Trustee in Bankruptcy of said Audrey Spinning Mills, Inc.
in the sum of $6,928.94, with interest thereon at the rate of
6% per annum from April 10, 1928, until paid.
xv.
That the Weldon Bank & Trust Company, the Commercial
National Bank of Raleigh and the Federal Reserve Bank of Richmond each in receiving and handling said check aforesaid for
collection on behalf of said Audrey Spinning Mills, Inc. became
its agent for the collection thereof, and each undertook to
exercise due diligence in procuring the proceeds of said check
from said Commercial National Bank of Statesville, and in remitting the same in due course to said Audrey Spinning Mills, Inc.
XVI.
That as the plaintiff
of said banks consented to,
~s
informed and believes each
acqui~~ced
and
participate~
in the
method and manner in which said check was handled for collection, and failed and neglected to comply with its contract and
agreement with said Audrey Spinning Mills, Inc., as hereinbefore
alleged.
XVII.
That as the plaintiff is informed a11d believes the
_g ....
x-6242-a
defendant, C.
L• Williams, Receiver of the Commercial National
Bank of Statesville, has in hand funds for distribution to
those having lawful claims against said bank, and the plaintiff
is further informed and believes thatafter April 18th, 1928,
the reserve account of said Commercial National Bank of Statesville with the Federal Reserve Bank of Richmond was further increased and now amounts to the sum of $17,114.27, and as the
plaintiff is advised and believes, inasmuch as the Commercial
National Bank of Statesville
aut~orized
and directed the
Federal Reserve Bank of Richmond to pay said check out of said
reserve account, as hereinbefore alleged, such authorization
and direction constituted an equitable assignment of said reserve account to the amount of said check.
XVIII •.
That as the plaintiff is advised and believes he
is entitled to have the liability of the defendants, and each
of them, to him determined, and to recover judgment against
the defendants, and each of them,in accordance with such determination, and is further entitled to have the rights of the
parties against the defendant, C. L. Williams, Receiver, and
their rights in
~nd
to the aforesaid reserve account held by
the Federal Resprve Bank of Richmond, determined and adjudged,
and so far as
~y
be necessary to collect the amount due him
from the defendants, or from such of them as may be liable to
him, is entitled to be subrogated to the rights of the defenda.nts against said Receiver, and to their interest in and to
said reserve account held aforesaid by the Federal Reserve
Bank of Richmond.
x-624~-a.
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i68
WHEREFORE, the plaintiff
pray~
that the liability
of the defendants, and .that of each of them- t.o him be
determined,
and that he recover judgment against them, and each of them,
in accordance with such determination, arid for such other or
further relief in the premises as the plaintiff is entitled to
have, and for the cost of this action to be taxed by the Clerk
according to law.
(sgd)
W. S. O'B Robinson, Jr,
(sgd)
John M. Robinson
Attorneys for the Plaintiff.
STATE OF NORTH CAROLINA.,
COUNTY OF HALIFAX.
L. R. Gilbert. being fU'st d.uly sworn,
s~s
that he
is the plaintiff in the above en titled action; that he has read
the foregoing complaint and knows the contents thereof, and that
the same is true of his own knowledge, except as to those matters therein stated to be alledged upon information and belief,
and as ·to such matters he believes it t() be true.
(sgd)
Sworn to and subscribed before me,
this the
~day
of December, 1928.
{Sgd) Janie Hccyw:ood
Notary Public
Com. expires Fel,). 16, 1929.
L •. R. Gilbert, Trustee
@FedFRASER