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DORSEY v. RECONSTRUCTION FINANCE CORP.

March 8, 1951

DORSEY
v.
RECONSTRUCTION FINANCE CORP.



The opinion of the court was delivered by: Campbell, District Judge.

Plaintiff brings this action, seeking damages in the amount of $125,000 occasioned by the alleged wrongful mishandling by defendant of collateral pledged by plaintiff to the National Bank of the Republic of Chicago to secure certain notes executed by plaintiff, which notes and collateral were assigned to defendant by the Bank. Defendant denies liability and counterclaims, alleging that plaintiff still has not paid two judgments entered against him in favor of defendant in this court in 1937.

It appears from the pleadings that, on March 26, 1931, plaintiff executed three 30-day notes to the Bank in the principal amounts of $85,694.45, $5,689.71, and $1,329.69. The first two notes were executed by plaintiff personally, and the third was executed by Victor A. Dorsey & Co., but personally guaranteed by plaintiff. The third note has been fully paid. In his answer to the counterclaim, plaintiff asserts that any action on the second note is barred by the Statute of Limitations.

Stated briefly, plaintiff makes the following assertions: (1) That $11,000 of the indebtedness to the Bank represents the purchase price of 60 shares of the Bank's own stock, sold to him in October, 1930. He claims that the price was originally evidenced by his note for $11,000 which was later renewed and consolidated with other notes in the $85,694.45 note. He alleges that the sale of the Bank stock was void under the provisions of 12 U.S.C.A. § 83, and that the note should be reduced by that amount; (2) That the liquidation of his collateral brought sums sufficient to pay his obligations as early as June 21, 1944, and that, since that time, he has made repeated requests for a refund of alleged overpayments, as well as for the return of the remaining collateral; (3) That subsequent to June 21, 1944, defendant arbitrarily sold additional collateral held as security for his debts; (4) That subsequent to the maturity of his debts, he requested defendant from time to time to sell his collateral when the market was high, but defendant did not comply with his requests; (5) That he did not receive credit for the proceeds of the sale of a group of bonds of the Empire State Oil Co. held by defendant as collateral.

On the other hand, defendant contends that the notes have not been fully paid for the following reason: In 1931 the Bank credited plaintiff in the amount of $30,000, which sum was received by plaintiff from the Arkansas Natural Gas Corporation in settlement of a claim against it by the Victor A. Dorsey & Co. This money was paid over to the Bank in payment of plaintiff's personal obligation. Subsequently, creditors of Victor A. Dorsey & Co. brought garnishment proceedings against the Bank to recover a portion of the amount so paid. They obtained judgments in the amount of $9,084.69, which judgments were affirmed upon appeal. See Dorsey & Co. v. Central Republic Trust Co., 277 Ill. App. 126. The Bank paid the judgments, and plaintiff's account was debited in the amount of the judgments plus interest.

In the course of these proceedings, defendant served plaintiff with three sets of Requests for Admissions — 50 paragraphs in all. Plaintiff answered some of them and objected to others. Defendant opposes the objections, and moves to strike plaintiff's answer to the First Request.

Plaintiff now moves for partial summary judgment. Defendant moves for summary judgment on the following grounds: (1) 12 U.S.C.A. § 83 does not deny the validity of a note given to a bank in payment for shares of its own capital stock; (2) A pledgee is not obligated to sell the pledged collateral at a specified time even upon request of the pledgor; (3) Even assuming that the $5,000 note is barred (which defendant denies), a creditor may hold and realize on collateral pledged to secure a debt, although action on the debt is barred by the Statute of Limitations; (4) Where an account is rendered by one party to another and is retained by the latter beyond a reasonable time without objection, this constitutes a recognition by the latter of the correctness of the account and establishes an account stated. (Defendant asserts that, at plaintiff's request, it sent a statement of account to plaintiff on November 7, 1944 showing a large balance still due, which statement has never been objected to by plaintiff until this suit.)

The pleadings of the parties have developed into such a muddle, it is necessary that the Court separate them in the following manner:

A. As to defendant's First Request for Admissions (Paragraphs 1 to 30) —

Defendant requests that plaintiff admit the truth of the thirty statements, nearly all of which have to do with exhibits attached to the Request. For the most part, plaintiff's Answer to the Request is unresponsive and, to make matters worse, is directed to the exhibit numbers rather than the paragraph numbers. Reduced to its simplest terms, plaintiff's Answer amounts to this:

He admits — Request Paragraphs 20, 21 and 27.

  He does not answer — Paragraph 28. He admits the
  genuineness of the documents referred to in —
  Paragraphs 1, 2, 3, 5, 16, 17, 18, and 19.

He does not admit — Paragraphs 29 and 30.

  He has insufficient knowledge to admit or deny
  the exhibits referred to in — Paragraphs 6 to 14,
  and 23 to 26.
  He objects to — The exhibits referred to in
  Paragraphs 4 and 22 on the ground that ...

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