Atkinson & Co. v. Hibernia Nat. Bank In New Orleans

• Decision Date: 01 March 1937
• Docket Number: 34003
• Citation: 173 So. 768,186 La. 1074
• Parties: ATKINSON & CO. v. HIBERNIA NAT. BANK IN NEW ORLEANS
• Court: Louisiana Supreme Court

173 So. 768

186 La. 1074

ATKINSON & CO. v. HIBERNIA NAT. BANK IN NEW ORLEANS

No. 34003

Supreme Court of Louisiana

March 1, 1937

Rehearing Denied March 29, 1937

Appeal from Civil District Court, Parish of Orleans; Hugh C. Cage Judge.

Suit by Atkinson & Company against the Hibernia National Bank in New Orleans wherein the defendant called in warranty the liquidators of the Hibernia Bank & Trust Company and the Reconstruction Finance Corporation. From a judgment dismissing its call in warranty and from judgment on the merits, defendant appeals.

Affirmed in part, and reversed in part.

Rosen Kammer, Wolff & Farrar, of New Orleans, for appellant.

Miller, Bloch & Martin, of New Orleans, for appellee Atkinson & Co.

Dufour, St. Paul, Levy & Miceli, Samuel J. Goodman, and Anna Judge Veters, all of New Orleans, for appellee J. S. Brock and others.

OPINION

FOURNET, Justice.

This suit was instituted by Atkinson & Co., the owner of 400 bales of cotton, to recover negotiable warehouse receipts therefor which they alleged are in the possession of defendant without legal right thereto.

The defendant, Hibernia National Bank in New Orleans, in answer to plaintiff's demand, admitted that the receipts are in its possession but averred that they are held by it in pledge to secure the payment of four drafts, aggregating the sum of $ 9,000, which, together with the collateral security, it had purchased from the Hibernia Bank & Trust Company, in liquidation, and, in reconvention, prayed for judgment for the amount of its claim, plus interest and attorney's fees and for recognition and enforcement of its pledge. It also called in warranty the liquidators of the Hibernia Bank & Trust Company and the Reconstruction Finance Corporation.

Both parties called in warranty filed exceptions of no cause and no right of action to defendant's demand, which were maintained, and the suit, as to them, was dismissed. Subsequently, the case was tried on the merits, and judgment was rendered in favor of plaintiff.

The defendant has appealed from the judgment dismissing its call in warranty and also from the judgment on the merits.

For the purpose of brevity we shall refer to Atkinson & Co. as plaintiff; the Hibernia National Bank in New Orleans as New Bank; the Hibernia Bank & Trust Company, in liquidation, as Old Bank, and the Reconstruction Finance Corporation as Finance Corporation.

Plaintiff is a commercial partnership composed of Eugene Atkinson, Clifford Atkinson, and William H. Couret, engaged in the business of dealing in cotton futures. The partnership was a customer of the Old Bank for a number of years prior to the time it went into liquidation on May 20, 1933, and in order to obtain loans to carry on its business, it entered into an acceptance agreement on November 11, 1919, whereby it was agreed that all drafts accepted by the bank were for the account of the plaintiff and that plaintiff should deposit in advance sufficient funds in cash to meet the maturities of the drafts. Plaintiff also agreed to deposit additional collateral whenever the bank deemed the margin of collateral held by it to be insufficient to protect the bank's acceptances for plaintiff's account, and in order to further protect the bank, gave it an irrevocable power of attorney to transfer any property held in pledge by it which "the said bank may hold as collateral for its protection against the said acceptances or otherwise." (Italics ours.) Such sales could be made if the bank deemed it advisable, at either public or private sale, "without recourse to judicial proceedings, or demand, appraisement, advertisement, notice or putting in default all of which are hereby expressly waived." The contract also provided that the plaintiff should pay 10 per cent attorneys' fees upon all amounts due the bank by them "on outstanding acceptances by the bank for account of the undersigned [Plaintiff], or otherwise, in case it should be necessary to employ an attorney to protect any of the Bank's rights hereunder."

Additional stipulations in the contract authorized and empowered the bank, "at any time, to appropriate and apply to the payment and extinguishment of any of the said acceptances or any of the obligations or liabilities direct or contingent, of any of the undersigned [Plaintiff] to the Bank, whether now existing or hereafter contracted, and whether then due or not due, up to the amount of One Million Dollars ($ 1,000,000), any and all moneys, stocks, bonds or other property of any kind, whether now or hereafter in the hands of the Bank, on deposit or otherwise, to the credit of or belonging to the undersigned, or any of them, including any moneys or other properties in transit to or from the Bank for any purpose; * * *" and that "the bank may transfer any acceptance and may deliver any or all of the collateral held by it therefor, to the transferee or transferees, who shall thereupon be vested with all the powers and rights above given to the bank in respect thereto. * * *" (Italics and brackets ours.)

Following the execution of the acceptance agreement, the parties established a custom whereby plaintiff, from time to time, borrowed money from the bank and, as evidence thereof gave its acceptance draft to its own order, payable at sight, after some designated number of days, which draft plaintiff then indorsed in blank and delivered to the bank. Plaintiff received payment of the total amount, less such sum as represented interest until the maturity of the draft. The bank would hold the draft unaccepted, or accept and sell it as said bank saw fit. Under such custom and practice, the bank never informed plaintiff whether the drafts, executed by it, had been accepted or negotiated by it, or whether the drafts were being held by the bank without acceptance, and according to the agreement and custom, without inquiry, plaintiff paid the amount due on such drafts to the bank, at which time they were returned to plaintiff and showed on their face whether or not they had been accepted and negotiated.

At the time the Old Bank went on a restricted basis on the 3d of March, 1933, it held six such drafts, to-wit: (1) For the sum of $ 15,776.26, dated February 28, 1933, payable at sight thirty days after date, which was paid voluntarily on March 23, 1933, by plaintiff according to its contract and custom; (2) for the sum of $ 3,000, dated February 1, 1933, which is now in the possession of and held by the Finance Corporation; (3) for the sum of $ 1,500, dated February 13, 1933; (4) for the sum of $ 1,500, dated February 14, 1933; (5) for the sum of $ 3,000, dated February 27, 1933; and (6) for the sum of $ 3,000, dated March 1, 1933. Each of the last four drafts were payable at sight sixty days after date and were sold, transferred, and assigned to the New Bank on the 20th of May, 1933. Contemporaneous with the sale the Old Bank delivered and surrendered to the New Bank the four drafts, together with the instruments of pledge and the collateral security, including the warehouse receipts covering the 400 bales of cotton, and also the acceptance agreement of November 11, 1919. In consideration of the transfer, the New Bank paid the liquidators of the Old Bank the full face amount of the drafts, plus accrued interest thereon.

From the brief filed by counsel for plaintiff, it appears that plaintiff rests its case solely upon the contention that the warehouse receipts were pledged to secure the Old Bank for the acceptance of plaintiff's drafts and that since the bank did not accept the four drafts, plaintiff was under no obligation thereon and consequently, when the New Bank purchased the unaccepted drafts it did not acquire any obligations of plaintiff. The trial judge adopted plaintiff's views as his reason for judgment in favor of plaintiff and the dismissal of defendant's reconventional demand.

We are of the opinion that the trial judge erred in his conclusion, for the reason that the Old Bank held these drafts from the time they were executed by plaintiff until the Old Bank went into liquidation on May 20, 1933, and failed to accept or return them, which amounted to the acceptance thereof. Section 137 of Act No. 64 of 1904; First Nat. Bank of Winnfield v. Citizens' Bank of Campti, 163 La. 919, 113 So. 147.

Furthermore we find that, in addition to the contents of the acceptance agreement and the custom that arose thereafter between plaintiff and the Old Bank, each of the pledge agreements contained a stipulation that the warehouse receipts were delivered by plaintiff to the Old Bank in order to secure the bank upon the acceptance of the draft referred to and all other drafts accepted by the bank for the account of the drawer, "as well as to secure the payment of any other obligation or liability, direct or contingent, of any of the undersigned [Plaintiff] to said bank, whether due or to become due, and whether now existing or hereafter arising, with interest, attorney's fees, expenses and costs, up to the amount of One Million Dollars ($...