Appeal from the United States District Court for the Northern District of Illinois, Western Division, No. 73 C 29 WILLIAM J. BAUER, Judge.
Fairchild, Chief Judge, and Cummings and Sprecher, Circuit Judges.
The principal question before us in this interpleader case is whether a holder in due course of a check on which payment has been stopped has a claim to a fund deposited in court by the drawer of the check superior to any unsecured claim of cattle owners for the sale of whose cattle the check was originally issued to another. The district court held that the rights of the holder in due course were superior to those of the cattle owners. We affirm.
Hebel and Wiemkin, individually and doing business as Walnut Auction Sales (hereafter collectively designated "Walnut"), deposited a fund in court and filed a complaint in interpleader against Ebersole and Nicholson (hereafter "Ebersole"); Central National Bank of Sterling, Illinois; Saunders, Conley, and Barber (hereafter "S & C Cattle Co."); First Security National Bank of Beaumont, Texas, as executor of the McFaddin estate (hereafter "McFaddin Estate"); and Ault. Depositing another fund, Central National Bank filed a separate interpleader action joining the other defendants in the original action. The interpleader actions were consolidated, and Central National Bank was subsequently dismissed as a party.
The defendants-claimants answered and asserted various cross-complaints and counterclaims. In particular, S & C Cattle Co. sought recovery in a separate counterclaim as a holder in due course of a check issued by Walnut, and McFaddin alleged a separate claim against Walnut and Ebersole for conversion. Each party also asserted these same theories as bases for recovery of a portion or all of the funds in the interpleader action.
Events leading up to this lawsuit may be briefly summarized. On April 9, 1973, Ebersole sold approximately 661 head of cattle at a consignment sale conducted by Walnut. These cattle came from four sources. The McFaddin Estate supplied approximately 545 head, which were purchased by Ebersole on March 30, 1973 for $126,373.40, $5,000.00 was paid as a downpayment, and Ebersole gave three checks for the remainder. All three checks were dishonored when presented for payment, either due to "Uncollected Funds" or "Insufficient Funds."
Ault supplied 38 head of cattle to Ebersole for $12,345.22, and Ebersole agreed to send a check for that amount as soon as Ebersole received the cattle and the cows passed a pregnancy test. The checks were never sent.
S & C Cattle Co. supplied 13 head of cattle for which it apparently was not paid, and Carpentier (not a party in this suit) supplied 67 head for which he received full payment from Ebersole.
All the cattle, approximately 661 head, were sold at auction by Walnut on April 9, 1973, grossing $173,330.07. Walnut deducted its expenses and a commission of $5,040.94, and remitted the balance of $168,259.13 to the consignor Ebersole. This balance was paid by two checks, one for $121,737.53 and the other for $46,521.60, both drawn on Walnut's "Custodial Account for Shippers' Proceeds."
Ebersole deposited the $46,521.60 check in its account in the Central National Bank of Sterling. The $39,165.37 deposited into court by Central National Bank represents the remaining balance of this Ebersole account.
Ebersole endorsed the Walnut check of $121,737.53 to S & C Cattle Co. on April 9, 1973, the same day the cattle were sold, in partial payment of a debt which then amounted to $203,020.95 for cattle sold to Ebersole at various times between March 4 and April 3, 1973.
Shortly after April 9, 1973, Walnut was informed that Ebersole had not paid for the McFaddin Estate and Ault cattle. On April 13, 1973 Walnut stopped payment on the larger check it had issued to Ebersole, and the stop payment order was honored when S & C Cattle Co. presented the check for payment. Walnut then commenced this interpleader action, and deposited $121,737.53, the amount of the check, into the Registry of the Court.
Jurisdiction in the district court was based on interpleader, 28 U.S.C. § 1335. See also 28 U.S.C. § 1332. State Farm Fire & Cas. Co. v. Tashire, 386 U.S. 523, 530-31, 18 L. Ed. 2d 270, 87 S. Ct. 1199 (1967). An initial question that we must dispose of is the matter of our own jurisdiction. Pursuant to the parties' stipulation, the district court heard the claims for future resolution. After trial the court entered a judgment distributing the interpleaded funds. The judgment contained nothing to indicate it was not final, and the district court was not asked to and did not make an express determination that there is no just reason for delay ...