National Indem. Co. v. Spring Branch State Bank, 3871
| Decision Date | 02 February 1961 |
| Docket Number | No. 3871,3871 |
| Citation | 343 S.W.2d 539 |
| Parties | NATIONAL INDEMNITY COMPANY, Appellant, v. SPRING BRANCH STATE BANK, Appellee. |
| Court | Texas Court of Appeals |
Powell, Rauhut, McGinnis, Reavley & Brown, Houston, for appellant.
Duncan Neblett, Houston, for appellee.
This is an appeal from an order overruling plaintiff's motion for summary judgment. In the judgment we find this recital: * * * 'the Court * * * finds that the law and the facts are with the defendant,' * * * and decreed that plaintiff take nothing. The decree is assailed on two points; they are substantially to the effect that the Court erred because: (1) The bank had sufficient knowledge of the trust character of the funds standing in the name of The Mullan Company to create a duty of inquiry as to the true ownership thereof, and appellee was guilty of conversion when it applied such trust funds to its own use; (2) That the appellant, as the equitable owner of the trust funds on deposit in the name of The Mullan Company, has a superior right thereto as opposed to appellee bank which applied such funds to payment of a prior existing debt owed personally by the trustee.
A statement is necessary. The appellant went to trial on its original petition. Pertinent to this discussion it alleged substantially that on March 15, 1955 plaintiff entered into a general agency agreement with Mullan doing business as The Mullan Company, whereby plaintiff appointed such company as its general agent in Texas for such insurance coverage as plaintiff might authorize from time to time; that by this agreement the Mullan Company was authorized to collect premiums for insurance on behalf of plaintiff; that by a trust agreement entered into by plaintiff and The Mullan Company on March 15, 1955, it was expressly confirmed that all premiums received by Mullan relating to plaintiff's business be held in trust by plaintiff until such premiums were paid over to plaintiff; that during the period prior to July 1956 The Mullan Company, while conducting the business of a general insurance agency followed the practice of collecting premiums for insurance companies it represented, depositing those premiums to its account in the defendant bank, and subsequently remitting to the insurance companies the net premium after deducting premium commissions; that pursuant to the above agreements, this practice was followed by The Mullan Company with respect to premiums collected by it for plaintiff; that defendant bank knew that The Mullan Company was in the business of operating an insurance agency and was aware of that company's practice of depositing the insurance premiums it collected for plaintiff and other insurance companies in its account at such bank; that on June 23, 1956, The Mullan Company collected for plaintiff the sum of $3,091.21 in insurance premiums; that this sum was deposited in the bank on or about June 23, 1956, to the account of The Mullan Company; that of this amount collected and deposited the net amount of $2,327.14 ($3,091.21 less commission of 17 1/2%) was the property of and held in trust for the plaintiff; that on or about June 28, 1956 the entire funds which were held by The Mullan Company in trust for plaintiff and which were on deposit in the defendant bank were appropriated by the bank on account of an obligation owed to the bank by Mullan Company; that demand was made by plaintiff on defendant bank to pay over to it such sum, all of which it refused to do, and prayed for appropriate relief. Defendant seasonably filed its answer in which it entered only a general denial. Thereafter the parties took the oral deposition of A. W. Schmidt, President of the bank. The deposition of Mr. Schmidt, together with the exhibits identified and tendered into Court constitute the evidence in this case. The plaintiff in its motion for summary judgment alleged substantially that the deposition of Schmidt establishes that the bank converted to its own use the money in question by charging the account of Mullan Company with an obligation of Mullan Company to the bank; that the records of the bank, set forth as exhibits to the deposition, reflect the exact transactions, and there is no area for dispute as to these facts; that plaintiff relies upon the testimony of the President of the bank regarding his knowledge as an admission of such facts and that under the law, charges the bank with a duty to restore the trust funds converted to its own use, and by reason of the testimony of Mr. Schmidt only an issue of law is presented, and that there is no genuine dispute as to the facts.
We have considered Mr. Schmidt's testimony, including the exhibits attached to it very carefully and as we view this testimony we think the following facts are without dispute. The record shows that the account was opened November 9, 1953 under the name of Joseph N. Nullan, Jr., dba The Mullan Company as a joint account with his wife, Zenobia Mullan, authorized to sign checks on said account; that on January 4, 1956, Mullan transferred $13,500 from appellee bank to Republic National Bank in Dallas for his account; that on January 10, 1956, Mullan's second wife, Juanita, opened an account at appellee bank with an initial deposit of $7,457.29; that Schmidt did not know on June 28, 1956 that The Mullan Company was in financial difficulty nor did he suspicion any such thing; that Schmidt said that on or about this date Mullan's account had been larger in the past than it was at that time; that the account in question was just an ordinary checking account used by Mullan in his business; that the bank had no knowledge at all that appellant may have been a beneficiary of any deposit in its bank, nor did it have any knowledge of any trust agreement between Mullan or The Mullan Company or any insurance companies, including appe...
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