Bank of Gulfport v. Smith

• Citation: 95 So. 785,132 Miss. 63
• Decision Date: 16 April 1923
• Docket Number: 23163
• Court: United States State Supreme Court of Mississippi
• Parties: BANK OF GULFPORT v. SMITH

95 So. 785

132 Miss. 63

BANK OF GULFPORT v. SMITH

No. 23163

Supreme Court of Mississippi

April 16, 1923

1. BILLS AND NOTES. Check negotiable instrument.

Under section 2763, Hemingway's Code, a check is a negotiable instrument.

2. BILLS AND NOTES. "Holder for value" defined.

Under section 2604, Hemingway's Code, the holder for value is one who has given value for the instrument.

3. BILLS AND NOTES. Bank not "holder for value" of check indorsed in blank and deposited for collection.

Where a check payable to one or order is indorsed in blank and deposited in a bank for collection, the bank thereby does not become a "holder for value" of the check.

4. BILLS AND NOTES. Bank paying a depositor full amount of check on same day presented becomes "holder for value."

Where the bank on the same day on presentation of a check of the depositor pays to the depositor in full the amount deposited for collection, the bank thereby becomes a holder for value of the check.

5. BILLS AND NOTES. Rights of bank and methods of procedure upon presentation by depositor of check against conditional credit stated; "holder for value."

Upon the presentation by a depositor of a check against such conditional credit, the bank may do any one of a number of things: (1) It may refuse to pay the check until collection of the deposit. (2) Cash the check solely upon the individual credit of the depositor. (3) Waive the condition of the deposit, make the conditional credit absolute, and pay the depositor's check upon the credit of the check deposited by him but not collected. In which latter event there is an acceptance of the depositor's offer, which creates a new contract superseding the previous conditional-credit contract. Or (4) the bank may combine the last two courses and pay the depositor's check on the combined credit of the depositor and of the deposited check. This also is equivalent to an acceptance of the depositor's offer to supersede the contract for conditional credit, and the bank thereby becomes the owner or holder for value of the check.

HON. C V. HATHORN, Special Judge.

APPEAL from circuit court of Pearl River county, HON. C. V. HATHORN Special Judge.

Suit by the Bank of Gulfport against Fred W. Smith. From a judgment for defendant, plaintiff appeals. Reversed and remanded.

Reversed and remanded.

Stevens & Heidelberg, for appellant.

There are several propositions of law applicable to the facts of this case which cannot be controverted. The first is that a check such as the one in question in this case payable to the order of any person, is a negotiable instrument. It is made so by the Negotiable Instrument Statute of Mississippi.

The next proposition which cannot be controverted is that if the plaintiff was a holder in due course for value of the check in question, then it was entitled to recover thereon regardless of any defense which the maker might have had as against the original payee. This is also made the law of Mississippi by the Uniform Negotiable Instruments Act.

The real issue submitted to the jury for its determination of this case, as will be found by the court on an examination of both the given and refused instructions shown in the record, was for the jury to determine whether or not the deposit slip introduced in evidence constituted the plaintiff as a matter of law the agent of the W. H. Daniel Auto Company in collecting the check. The first instruction given to the jury for the defendant told the jury that if the plaintiff "received the check introduced in evidence as the agent of the W. H. Daniel Auto Company for collection, then the bank is not a holder in due course." The second instruction given the defendant told the jury exactly the same thing except in a slightly different language. The gist of this instruction was that if the plaintiff received the check in question "on a condition and for the purpose of collection, then you are further instructed that the bank is not a holder in due course."

An examination of the instructions asked by the appellant in the court below will disclose that the lower court held that even though the appellant received the check without any notice of any infirmity therein and immediately paid out the money thereon, in other words, parted with value, still this would not constitute the bank a holder in due course if the jury believed that the language used on the deposit slip constituted the bank the agent of the W. H. Daniel Auto Company. This proposition was put directly up to the lower court in the first refused instruction asked by the appellant. This instruction told the jury that if they believed from the evidence "that at the time the W. H. Daniel Auto Company deposited the check in question with the plaintiff it was permitted by the plaintiff to withdraw the amount thereof from its deposit, then you must find for the plaintiff regardless of how the deposit slip might have read and regardless of any defense the defendant might have had as against the W. H. Daniel Auto Company." This instruction was refused by the court, though we submit that it clearly announced the law applicable to the facts of this case.

In the second instruction asked by the plaintiff which was refused by the court, substantially the same proposition was set forth. This instruction told the jury that if they believed from the evidence that the defendant "executed the check in question and delivered it to the W. H. Daniel Auto Company and the W. H. Daniel Auto Company deposited the same with the plaintiff and that he executed the check in question and delivered it to the W. H. Daniel Auto Company with the amount of the check and permitted it to withdraw the amount thereof, then that the plaintiff was an innocent purchaser for value."

The third refused instruction for the plaintiff also told the jury that if the plaintiff without notice of any infirmity in the check permitted the W. H. Daniel Auto Company to deposit it to its checking account and on the same day to withdraw from said account the full amount thereof, then the jury must find for the plaintiff, regardless of how the deposit slip might have read and regardless of whether thereafter it might have charged the amount of said check back to the account of W. H. Daniel Auto Company.

The proposition of law involved in this appeal is so simple that we shall not indulge in a lengthy brief. We submit that the uncontradicted facts of this case disclose that the appellant was an innocent purchaser of a negotiable instrument for value and without notice, and, therefore, was entitled to recover. In the Law of Bank Checks, by Johns Edson Brady, on page 89 thereof, it is stated that where a check is deposited by a customer with the bank and the bank allows the depositor to draw against the deposit, it pays value and is a holder in due course of the check deposited. In support of this text, the author cites the following cases: Symonds v. Riley, 188 Mass. 470, 74 N.E. 926; Jefferson Bank v. Merchants' Refrigerating Company, 139 S.W. 545; National Bank of Phoenixville v. Bonsor, Pa. S.Ct. 275; Bank of Saluda v. Feaster (S. C.), 68 S.E. 1045. It seems to us that this statement of law cannot be denied.

It is a rare case which comes before this court for decision in which there can be found another case where the facts are almost identical. Sometimes this happens but as above stated it is rare. Fortunately for the appellant in this case, the supreme court of the state of Missouri has decided every principle of law involved on this appeal in a case where the facts were almost identical with the facts of this case, and every proposition was decided by the supreme court of Missouri in favor of appellant's contentions here. We refer to the case of Jefferson Bank v. Merchants' Refrigerating Company, reported on page 545 of Volume 139 of the Southwestern Reporter.

The court held in this case that when the bank permitted the depositor to withdraw the full amount of the deposit the very day it was made, it simply waived the provision that it accepted out of town checks only for collection and said with reference to its waiver that it was "a right it unquestionably had."

There can be no question but that the handling of the check involved in this case, its deposit by the Daniel Auto Company on May 28th, and on the same date the withdrawal by the Daniel Auto Company of more than the amount of this deposit, constituted a waiver on the part of the Bank of Gulfport of its right to insist on handling the check only as a collection item.

We submit further that the first special plea filed by the defendant was based solely and alone on the language used in the deposit slip. This plea did not even allege that the defendant had any defense even as against the payee of the check. It simply charged that the plaintiff couldn't recover because the deposit slip in question constituted the plaintiff the agent of the W. H. Daniel Auto Company. Demurrer was presented to this plea, but it was overruled by the court, and the whole record in the case discloses that the lower court was proceeding upon the idea that if this deposit slip did create an agency, then the plaintiff could not recover.

In conclusion we submit that there was and is but one judgment which could be properly rendered in this case and that is a judgment for the plaintiff for the full amount sued for, and we, therefore, respectfully submit that the judgment of the lower court should be reversed and a judgment rendered here in favor of the plaintiff for the full amount sued for.

Wm. A. Shipman, for appellee.

I agree with counsel for appellant that a check such as the one involved in this lawsuit is a negotiable instrument. I further submit that it was a negotiable instrument before the...