Consolidated Cigar Co. v. Texas Commerce Bank

Citation749 F.2d 1169
Decision Date10 January 1985
Docket NumberNo. 83-2426,83-2426
Parties40 UCC Rep.Serv. 559 CONSOLIDATED CIGAR COMPANY, Etc., Plaintiff-Appellee, Cross-Appellant, v. TEXAS COMMERCE BANK (Formerly Pan American Bank), Defendant-Appellant, Cross-Appellee.
CourtUnited States Courts of Appeals. United States Court of Appeals (5th Circuit)

John C. Nabors, Robert D. Remy, Joseph W. Higgs, Jr., John K. Schwartz, Houston, Tex., for defendant-appellant, cross-appellee.

Ewers, Toothaker, Ewers, Abbott, Talbot, Hamilton & Jarvis, Neil Norquest, McAllen, Tex., for plaintiff-appellee, cross-appellant.

Appeals from the United States District Court for the Southern District of Texas.

Before WISDOM, RANDALL, and JOLLY, Circuit Judges.

WISDOM, Circuit Judge:

I. FACTS AND PROCEEDINGS BELOW

The plaintiff-appellee, Consolidated Cigar Company ("Consolidated"), received three checks from Eli Witt Company totalling more than $780,000. Consolidated deposited these checks in its own demand deposit account, and its bank forwarded the checks for collection to Eli Witt's bank, the Texas Commerce Bank at Brownsville ("Commerce Bank"). Commerce Bank received the first of these checks on June 26, 1979, and processed and posted the draft. On June 27, 1979, Commerce Bank received the other two checks, which totalled approximately $750,000. This litigation concerns whether Commerce Bank had also processed and posted these two checks before it returned them.

Commerce Bank alleges that in the summer of 1979 the Bank began to experience "problems" with the Eli Witt account, and Commerce Bank's president, John Kaszynski, determined that his staff should prepare a daily report on the account's "uncollected funds". This uncollected funds position reflected deposits that had not actually been collected from the banks upon which the deposits were drawn. The uncollected funds position would be important if, as later happened, companies that had written checks to Eli Witt's account dishonored them when Texas Commerce presented them for payment.

Mr. Kaszynski, who had sole responsibility for the Eli Witt account, reviewed the uncollected funds report daily. The Bank alleged that this review routinely took place between 1:00 and 2:00 p.m. Although Eli Witt periodically wrote checks that were covered only by uncollected deposits, the Bank on each occasion decided to pay the checks.

At about 1:30 p.m. on June 28, 1979, Mr. Kaszynski received a telephone call from a director of Texas Commerce, who said that Eli Witt was experiencing "financial problems". After receiving the telephone call, Mr. Kaszynski examined the uncollected funds report for that day and decided that the Eli Witt account was in a "serious uncollected funds position". Mr. Kaszynski instructed an officer in charge of bookkeeping and check processing to retrieve any checks drawn on the Eli Witt account that were being processed that day and deliver them to him.

Up to the time of the retrieval of the checks by the bookkeeping officer, the two checks payable to Consolidated were processed with other checks. Texas Commerce had received the two checks in a cash letter from the Federal Reserve Bank of San Antonio on June 27, 1979. The checks then went to the Bank's data center, where a computer read encoded information on each of the checks. The computer updated the Eli Witt account, entered the two withdrawals as part of the uncollected funds balance that would appear on Mr. Kaszynski's desk the following day, and placed the checks in sequential order by account number. The checks then went to the bookkeeping department of the Bank the following morning. That department fed the checks into a machine that simultaneously microfilmed the checks and stamped "paid" on the face of each of the checks. These checks went to the check filers, who examined the checks for authorized signatures, post-dated items, altered dates, altered amounts, special account instructions or warnings, stop payment orders, or any other irregularity. After this examination, the filers placed each check in the customer's check file.

In the instant case, the two checks were with the check filers when the bookkeeping officer retrieved them. The parties dispute whether the filers had placed the two checks in Eli Witt's check file, or even whether any significance should be accorded such filing. In any event, Texas Commerce returned as unpaid not only the two checks that had been processed that day but also the earlier check, which the Bank indisputedly had posted the day before.

II. DISCUSSION

A. The District Court's Instructions to the Jury

Under the Texas Commercial Code, a bank can refuse collection on checks presented for payment any time before the completion of the bank's posting of the check or before midnight of the working day following the receipt of the items, which ever is the earlier. Tex.Bus. & Comm.Code Sec. 4.109. 1 The parties concede that if Texas Commerce had completed posting, the return of the checks was improper and the bank must honor the checks. At trial, the main issue was whether the Bank had posted the two dishonored checks before the bookkeeping officer retrieved them. Consolidated argued that the filing of the checks constituted the last stage of processing; that these two checks were in fact filed before the officer retrieved them; and that "posting", as defined in section 4.109, was therefore complete.

Texas Commerce countered that section 4.109 recognizes two aspects of posting a check: a mechanical processing and a discretionary, or decisional, review of those materials after batch processing of the day's collection presentation. Texas Commerce argued both at trial and on appeal that the physical path of the check through the bank facilities is therefore only a partial indication of whether an item has been posted. Although a bank is usually in the best position to understand and to describe its own procedure, the disagreement on this issue is a genuine issue of fact to be resolved by the jury. See Southeastern Pipeline Service, Inc. v. Citizens & Southern Bank, 5 Cir.1980, 617 F.2d 67, 69. Here, a conclusion as to whether the check was posted requires a factual determination of the steps comprising the defendant's usual procedures for posting checks in accounts with large uncollected funds.

On appeal, the Bank contends that the district court's instructions impermissibly over-simplified the factual questions and led the jury to conclude that if the checks had been filed, then the Bank had processed the checks within the meaning of section 4.109. The pertinent part of the judge's instructions are set forth in the margin. 2

Texas Commerce correctly points out that whether the checks had been filed is only an indication of whether they had been posted: It was the jury's duty to determine whether filing actually constituted the end of the processing or whether there were additional steps to be taken before an item could be considered posted. If the district court's instructions created in the jury's mind the impression that a filing of the check was the end of processing at Texas Commerce, and thus tantamount to a posting, then the district judge improperly resolved a question of fact that was for the jury's exclusive determination.

In assessing Texas Commerce's challenge to the jury instruction, "the test is not whether the charge was faultless in every particular but whether the jury was misled in any way and whether it had understanding of those issues and its duty to determine those issues". Smith v. Borg-Warner Corp., 5 Cir.1980, 626 F.2d 384, 386. If the charge leaves the reviewing court with "substantial and ineradicable doubt as to whether the jury has been properly guided in its deliberations", it cannot stand. Martin v. City of New Orleans, 5 Cir.1982, 678 F.2d 1321, 1325.

Applying these standards to the challenged instructions, we find that the district court's instructions were adequate to inform the jury of its duty. Throughout the trial there was substantial conflict over not only whether the two returned checks had been filed but also whether a "decisional" phase of the check processing was complete. Counsels' closing remarks placed special emphasis on this question. It is safe to assume that both issues were in the front of jurors' minds. See Coughlin v. Capitol Cement Co., 5 Cir.1978, 571 F.2d 290, 300, holding that in assessing instructions to jury the court must also consider pleadings, evidence, and arguments of counsel. Finally, in giving the verdict instruction, the judge charged: "If you are satisfied from the preponderance of the evidence that the entire processing of posting had already been concluded, and that check was already in the file drawer, that those two checks were in that file drawer, then you should [return a verdict for the plaintiff]" (emphasis added). We conclude that this charge and the charges as a whole sufficiently instructed the jurors that they were to determine, first, whether filing was the last step in posting a check and, second, whether the check had been filed. The instructions specifically require the jury to make a determination not only of whether the check was in the file drawer, but also of whether the process of posting was complete. The written instructions expressly mentioned "ascertaining that sufficient funds are available", which adequately encompasses the extra decisional step the Bank elected to take for accounts with uncollected funds reports.

The Bank's allegation of error because of the district court's refusal to propound special interrogatories to the jury is also without merit. If a trial judge's charges are adequate, he is under no obligation to accept a party's recommendations or proposed interrogatories. See Chemetron Corp. v. Business Funds, Inc., 5 Cir.1982, 682 F.2d 1149, 1171; Miley v. Oppenheimer Co., 5 Cir.1981, 637 F.2d 318, 334.

B. Prejudgment Interest

On cross appeal, Consolidated Cigar contends that the district court erred in denying...

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