Bank of Forest v. Capital Nat. Bank

• Decision Date: 15 June 1936
• Docket Number: 32199
• Citation: 169 So. 193,176 Miss. 163
• Court: Mississippi Supreme Court
• Parties: BANK OF FOREST v. CAPITAL NAT. BANK et al

169 So. 193

176 Miss. 163

BANK OF FOREST v. CAPITAL NAT. BANK et al

No. 32199

Supreme Court of Mississippi

June 15, 1936

Division A

Suggestion Of Error Overruled October 5, 1936.

APPEAL from chancery court of Hinds county HON. V. J. STRICKER Chancellor.

Suit by the Bank of Forest against the Capital National Bank and others. From a decree dismissing the suit, plaintiff appeals. Reversed and remanded.

See also, 173 Miss. 99, 160 So. 578, 101 A. L. R. 589.

Reversed and remanded.

Wm. I. McKay, of Vicksburg, O. B. Triplett, Jr., of Forest, and Lotterhos & Travis, of Jackson, for appellant.

It was error for the court below to sustain a demurrer to the amendment to the bill of complaint. After remand of the case, leave of court was obtained and an amendment to the bill of complaint filed. The doctrine is so well established that upon remand of a case, even where the court has given specific instructions as to the procedure in the trial court, the parties shall have the right to amend the pleadings just as fully as they could have before the first appeal was taken, that it seems unnecessary to cite authorities.

Griffith's Chancery Practice, sections 697 and 700; Perkins v. Watson, 92 Miss. 452, 46 So. 80; Haines v. Haines, 98 Miss. 830, 54 So. 433; Middleton v. Davis, 105 Miss. 152, 62 So. 164; Strauss v. National Parlor Furniture Co., 76 Miss. 343, 24 So. 703; Barataria Canning Co. v. Ott, 88 Miss. 771, 41 So. 378; Burroughs v. Vance, 75 Miss. 696, 23 So. 548; People's Bank v. Pennington, 137 Miss. 653, 102 So. 386.

It was error for the court below to permit proof that general creditors of Hiawatha Milling Company received only five per cent through the bankruptcy.

It was error for the court below to permit the report of the trustee in bankruptcy to be placed in evidence.

On a trial of the question of insolvency of a person who has gone into bankruptcy it is held that the test is not what his assets subsequently brought, nor what the subsequent history of his properties may be.

Chicago Title Co. v. Roebling, 107 F. 71; Rutland County Bank v. Graves, 156 F. 168; In re Cleveland Discount Co., 9 F.2d 97.

It was error for the court below to sustain the defendants' motion after the conclusion of the trial and permit introduction in evidence of the appraisers' reports with reference to the properties of Hiawatha Milling Company.

Freeman v. State, 108 Miss. 818, 67 So. 460.

The court below committed error in dismissing the bill of complaint, but to the contrary the court should have granted the complainant a decree for the full amount of the note, plus interest from February 21, 1930, plus a ten per cent attorneys' fee, less, however, the credits already made on said note. Since the Capital National Bank had no authority to take renewal notes on behalf of the Bank of Forest, the debit of fifteen thousand dollars made against the Bank of Forest on February 21, 1930, should be cancelled.

7 C. J. 605.

Since the Capital National Bank unlawfully surrendered and permitted to be cancelled the note which matured February 21, 1930, the measure of damages of the Bank of Forest, as the owner of the note, is the face amount thereof.

19 A. L. R. 555; Federal Reserve Bank v. Malloy, 68 L.Ed. 617, 31 A. L. R. 1261; Anderson v. Gill, 79 Md. 317, 29 A. 527; Bank of Shaw v. Ransom, 112 Miss. 440, 73 So. 280; Capitol State Bank v. Lane, 52 Miss. 677; Parodi v. State Savings Bank, 74 So. 280, 113 Miss. 364; Peoples Gin Co. v. Canal Bank, 144 So. 858; Mangum v. Ball, 43 Miss. 288; 2 Paton's Digest, sec. 1467-A; National Bank v. American Bank, 74 Am. St. Rep. 527; Kirkland v. Bank, 58 N.E. 753; First National Bank v. Commercial Bank, 242 P. 356; National Bank v. U. S. F. & G. Co., 71 F.2d 618; Fifth National Bank v. Ashworth, 2 L. R. A. 491; Bank v. Union Trust Co., 23 L. R. A. 611; A. L. I. Restatement Agency, sec. 402.

In the case at bar the Capital National Bank was not authorized to deliver the note owned by the Bank of Forest to the Hiawatha Milling Company except upon payment in cash. Hence, when delivery was made without payment in cash the Capital National Bank became liable for the amount of the note, plus interest.

There are a great many authorities squarely on the proposition that the collecting agent becomes liable for the face amount of the paper when it accepts anything besides cash in settlement and surrenders the original paper. Although we would like very much to quote some of these opinions to the court, we feel that in the interest of keeping this brief within reasonable limits we can only cite these cases to the court so that the court may examine the cases if it deems further authority necessary on this proposition.

Andrew v. Darrow Bank, 217 N.W. 438; Virtue v. Danberry Bank, 218 N.W. 58; Gowling v. Amer. Express Co., 76 S.W. 712; Bank v. First National Bank, 83 S.W. 537; Landa v. Bank, 94 S.W. 770; Hobby v. King Trailer Co., 273 S.W. 650; Essex Nat. Bank v. Bank, Fed. Cas. No. 4532 (CC Ill.); Commercial Bank v. Union Bank, 11 N.Y. 203; Nunnemaker v. Lanier, 48, Barb. 234; Revere Bank v. National Bank, 66 N.Y.S. 662; McClure v. Osborne, 86 Ill.App. 465; First National Bank v. Commercial Bank, 242 P. 356; 6 Michie, Banks and Banking, sec. 65, page 110.

If the damages are to be based on the actual value of said note, the complainant is entitled to recover the full amount thereof, because by attachment proceedings it could have obtained complete protection if the Capital National Bank had not been guilty of a breach of duty. The burden of proof is on the Capital National Bank to show insolvency at the time when the attachment could have been obtained.

7 C. J., Banks and Banking, 623, sec. 297, and note 52; 19 A. L. R. 555, 560; 2 Paton's Digest, par. 1465-A; First National Bank v. Bank, 58 F.2d 553; Citizens Bank v. Third National Bank, 49 N.E. 171; Nat. Revere Bank v. Bank, 64 N.E. 799; Patten v. Merchants Bank, 86 Am. Dec. 273; First National Bank v. Bank, 33 Am. Rep. 618; 32 Am. Dec. 569, annotation; First National Bank v. First National Bank, 252 S.W. 594; Dern v. Kellogg, 74 N.W. 844; Omaha Bank v. Kiper, 82 N.W. 102; Fitch v. Scott, 3 How. 314; A. L. I. Restatement, Agency, sec. 381; Partee v. Crawford, 163 So. 389; Citizens Bank v. Third National Bank, 49 N.E. 171; National Bank v. American Bank, 74 Am. St. Rep. 527; Lord v. Hingham Nat. Bank, 71 N.E. 312; Armory v. Delamirie, 1 Strange 505, 93 English Reprint 664; U.S.C. A., Title 11, sec. 107, clauses "c" and "f," and annotation 151, and sec. 1, clause 15; Black on Bankruptcy, sec. 236; 7 C. J. 197, sec. 292; McGill v. Commercial Credit Co., 243 F. 637; In re Chappell, 113 F. 545; Schuette v. Swank, 109 A. 531; Stern v. Paper, 183 F. 228, 198 F. 642; Rutland Bank v. Graves, 156 F. 168; In re Cleveland Discount Co., 9 Fed. (2d), 97; In re Klein, 197 F. 241; Empire State Trust Co. v. Fisher, 57 A. 502; Arnold v. Knapp, 84 S.E. 895.

The burden of proof is on the Capital National Bank to prove insolvency, if it is to reduce the amount of damages to less than the face amount of the paper.

7 C. J.. 622; In re Ann Arbor Co., 278 F. 749; First State Bank v. Fox, 10 F.2d 116; Jenkins v. North Pole Ice Co., 83 Pa. S.Ct. 360; Keystone Brewing Co. v. Schermer, 88 A. 657; Lamb v. Kelley, 125 S.E. 102; Jobbers' Co. v. Goldstein, 265 S.W. 1085; Freeman v. State, 108 Miss. 818, 67 So. 460.

The evidence shows in fact that at the time when the Bank of Forest could have obtained an attachment but for the wrongful conduct of the Capital National Bank, the Hiawatha Milling Company was solvent under the bankruptcy definition.

7 C. J. 37; Freeman v. State, 108 Miss. 818, 67 So. 460.

We especially call attention to the fact that on the first appeal this court held the defendants liable and reversed the case for further proof, if needed, to determine the amount of the liability. Such proof was introduced in the present record and on this record a final judgment should be entered.

McCoy v. Tolar, 128 Miss. 202, 90 So. 628; Hattiesburg Bottling Co. v. Price, 143 Miss. 14, 108 So. 291; Davis v. Dansler Lbr. Co., 126 Miss. 812, 89 So. 148; Couret v. Connor, 123 Miss. 456, 86 So. 277; Grenada Grocery Co. v. Tatum, 113 Miss. 388, 74 So. 286; Hinds v. Cole, 123 Miss. 254, 85 So. 199; Joe Duck Kwong v. Levee Commissioners, 164 Miss. 250, 144 So. 693; Fowlkes v. Hardin, 109 Miss. 318, 68 So. 468; Booker v. Federal Land Bank, 164 So, 877.

As we understand it the court desires a brief on the question whether the Bank of Forest might have maintained an action against Hiawatha Milling Company on the notes maturing February 21, 1930, after said notes had been surrendered to Hiawatha Milling Company by the Capital National Bank and new notes taken, maturing May 15, 1930. This question must be answered in the negative.

Immediately when the Capital National Bank surrendered the entire lot of paper to Hiawatha Milling Company and took renewals on February 17, 1930, the Hiawatha Milling Company was thereby protected from any claim of liability or responsibility prior to maturity of the new paper.

The fundamental basis of the entire law of negotiable paper is that one who deals with the holder of negotiable paper, when acting in good faith and without actual notice of defects in the title, will be protected. This is the fundamental difference between the law of negotiable instruments and the law of ordinary personal property.

3. R. C. L., Bills and Notes, secs. 12, 190; A. L. I., Restatement, Agency, sec. 6, Comment (b); McGee v. Carver 141 Miss. 463, 106 So. 760; Gidden Motor Co. v. Johnston, 155 Miss. 328, 124 So. 367.

As to the effect of the taking of renewal notes by the holder of negotiable paper, we find the rule to be clearly established that no action can...