Kalodner, Van Dusen and Stahl, Circuit Judges.
In this somewhat complex case we are called upon to determine whether the court below erred in refusing to set aside a jury verdict for plaintiff-appellee Slaughter.*fn1 In order to comprehend fully the issues involved, it is necessary to set out the facts in some detail.
In 1962, appellee Slaughter and four other men, Brodie, Croft, Leighton and Tanis, agreed to join together to purchase the George W. Bennett Bryson Company (Bryson), a company with diversified business interests on the Island of Antigua in the West Indies. Trial Testimony (T.T.) 60-62. To that end they formed West Indies Company Limited (WICO), a Liberian corporation, to purchase and hold as its sole asset the shares of Bryson. Each of the five men, including appellee, received 38,000 shares of WICO common stock. Appellee did not pay cash for his shares but received them for services rendered to WICO.
To finance WICO's purchase of the Bryson stock, the five men, in December 1962, arranged to borrow $360,000. This transaction involved Doll-Stevens Associates, a corporation engaged, inter alia, in the placing of loans for projects of this nature, and Peoples National Bank of Camden County, New Jersey (Peoples), the former putting the deal together and then discounting or selling the loan to Peoples. (T.T. 208). As part of the loan transaction, the five borrowers were to execute a five-party note in the amount of $360,000, and a pledge agreement by which they agreed to pledge their total 190,000 shares of WICO common stock as collateral for the loan. Each of the five men was also to execute individually a note for $360,000 as additional security. Certain realty owned by some of the men was also to be used as collateral for the loan. If the note was repaid in twelve months, the entire $360,000 was due; if it was repaid within six months, the total obligation was to be $330,000. Appendix (App.) 14a, 75a.
When the time arrived for consummation of the loan, Slaughter was in Antigua. Because of his absence, Doll-Stevens took from the others and turned over to Peoples
(1) a four-party note in the amount of $360,000;
(2) individual promissory notes executed by all the principals save Slaughter;
(3) a pledge agreement similarly executed; and
(4) the WICO stock belonging to the four men.
Upon receipt of these documents and stock, Peoples issued a credit of $360,000 to Doll-Stevens and, at Doll's order, issued checks totaling $300,000 to WICO to enable it to complete the purchase of the Bryson stock. The understanding of the parties at the time was that appellee Slaughter, then in Antigua, would authorize the pledge of his shares of WICO stock and sign a similar note or notes as those already held by Peoples, prior to the disbursement of the funds in Antigua. The four-party note Doll-Stevens had obtained was to be replaced by a five-party note executed by Slaughter as well as the other four men.
Early in January 1963, this understanding was carried out and prior to the delivery of the checks in Antigua, Slaughter signed a five-party note for $360,000, a security note individually for $360,000, and a five-party pledge agreement. (T.T. 111-112.) Upon receipt of the checks, WICO completed the purchase of the Bryson stock.
Before leaving for Antigua to complete the transaction, Harry Doll, President of Doll-Stevens, had judgment entered in Montgomery County, Pennsylvania, on the four-party note that had previously been executed.*fn2
Upon his return to the United States, Doll transmitted the five-party instruments he had received to Peoples, as had been agreed upon, but he did not return the four-party note to its makers.
Thus far, then, in terms of the legal relationships created, Doll-Stevens became an endorser of the notes executed by the five parties which it discounted and assigned to Peoples National Bank of Camden County.
Within a few months after WICO's purchase of the stock, Bryson's financial posture began to weaken and Doll, though not holding the notes or the collateral at this time, advised all five of the borrowers that he wanted the loan paid off not later than six months from the date it had been made.
Whether as a result of Doll's pressure or at the suggestion of Peoples, or possibly both, Brodie, Croft and Leighton, and their wives, and Tanis alone, executed new notes in favor of Peoples. Slaughter and his wife refused to sign a new note, and at about this time Slaughter demanded from Peoples the return of his 38,000 shares of WICO stock being held as collateral. Peoples refused to honor this request.
The new notes were received by Peoples on June 14, 1963. At about the same time Peoples asked the appellant, The Philadelphia National Bank (PNB), if it wished to participate in the loan. PNB agreed to do so on a 65% basis, advancing $214,500,*fn3 and receiving a Participation Certificate issued by Peoples. (App. 70a.) Peoples continued to administer the loan and was designated as the "lead" bank.
In early April 1964, the Bryson financial situation had deteriorated further to the point where large bank creditors of Bryson exercised their rights under certain loan agreements and placed Bryson in involuntary receivership in Antigua. Evidently as a result of this development and because much of the collateral securing Peoples loan was located in Pennsylvania, the two banks decided that PNB should become the lead bank and administer the loan. Accordingly, on April 21, 1964, PNB issued a Participation Certificate to Peoples and took possession of the security held by Peoples, including appellee Slaughter's shares of WICO stock.
On July 8, 1964,*fn4 Slaughter, or his attorney, made a demand upon appellant PNB for the return of his stock. This request was refused, and on July 30, 1964, Slaughter initiated a replevin action against PNB in the Philadelphia Court of Common Pleas seeking the return of his stock and damages alleged to have resulted from the unlawful detention of the security. PNB removed the action to the district court and brought in Peoples National Bank of Camden County as a third-party defendant upon an indemnification claim. Peoples then filed a claim against Slaughter for nonpayment of the note underlying the entire transaction.
In March 1965, prior to trial, PNB returned appellee's stock to him. Therefore, at trial, Slaughter's sole claim was for damages suffered by reason of a diminution in the value of his stock between June 1963, when Peoples made the new loan to the four men and PNB became a "participant" in the loan, and March 1965, when the stock was returned to him. It was conceded by the parties (Appellee's Brief, p. 6) that at the time this action was filed, on July 30, 1964, the shares of stock were completely worthless.
At trial appellee sought to prove that the retention of his stock after Peoples made the new loan, in June 1963, was unlawful on the theory that the new notes accepted by Peoples from the other four men and some of their wives constituted a new transaction and "paid" or "discharged" the old note or notes. The banks attempted to show that the new notes were not taken in satisfaction of but rather as additional collateral security for the existing debt.
In seeking to hold PNB liable as of the date the appellant bank first participated in the loan, June 17, 1963, appellee Slaughter alleged in his complaint, and tried to prove at trial, that during the period from June 17, 1963 until April 21, 1964, while Peoples administered the new loan and held ...