In re Zimmerman & Forshay

HAND, Circuit Judge. TMs is a companion ease to In re Gubelman, Ex parte First National Bank of Trinidad, 13 F.(2d) 732, decided herewith. There are some differences in fact: The bankrupts, as drawers, remained generally liable on the draft, and had made no specific contract with the holder (or drawer)' to transfer any credit on the drawee’s books’. Thus the ease is somewhat weaker for the appellant. Nevertheless it appears to us that the skeleton of the transaction is the same. Although it is not so proved, we think that we must assume that when, on receipt of the advice, the drawee made the entries upon its books, it did so in pursuance of a pre-existing agreement with the drawers. At any rate, it is proved that the drawee advised the drawers of what it had done, and there is no evidence that the drawers protested. Upon that assumption we tMnk that the drawers’ advice must be interpreted as a request to the drawee to transfer the credit in [528] the way which it actually adopted. Moreover, when the drawers sold the draft, they promised that it should he paid on presentation. New York Negotiable Instruments Act (Consol. Laws, c. 38) § 111. Perhaps it is conceivable that the drawee would pay the draft without being then in funds, but banking is not ordinarily done in that way, and we think that the implied agreement of the drawers was that they would, either by remittance or by a transfer of credit, cover the draft before its due date. They chose to transfer the credit, and they succeeded, because the drawee had complied with their order before bankruptcy. The prior practice between the drawers and the drawee of stopping payment of such drafts is not shown to have been exercised inimieally to outstanding drafts; certainly it was unlawful, if it was. Order reversed and priority awarded. ROGERS, Circuit Judge, through illness, was unable to take part in the decision of this case, but he had provisionally voted for affirmance.