Bank of McLain v. Pascagoula Nat. Bank

• Decision Date: 23 April 1928
• Docket Number: 27141
• Citation: 150 Miss. 738,117 So. 124
• Court: Mississippi Supreme Court
• Parties: BANK OF MCLAIN v. PASCAGOULA NAT. BANK. [*]

117 So. 124

150 Miss. 738

BANK OF MCLAIN v. PASCAGOULA NAT. BANK. ^[*]

No. 27141

Supreme Court of Mississippi

April 23, 1928

Division A

1 PLEADING. Plaintiff availing himself of opportunity to file amended declaration thereby abandoned original declaration.

Plaintiff by availing himself of opportunity afforded him by the court to file an amended complaint thereby abandoned his original declaration, since he might have stood upon same and appealed to the supreme court to settle principles of the case, or might have allowed judgment to be entered against him and then have prosecuted an appeal.

2. APPEAL AND ERROR. No error is assignable to allowing amendment to demurrer to certain count, cause of action as to which was subsequently dismissed.

No error can be assigned to action of trial court in allowing amendment to demurrer to certain count, where plaintiff thereafter dismissed its cause of action based on such count.

3 GUARANTY. Rules of construction for contracts are applicable to warranty or guaranty.

Same rules of construction apply to a warranty or guaranty as to any other contract.

4. GUARANTY. All words and clauses of alleged warranty or guaranty are to be construed together.

All words and clauses of whole statement of alleged warranty or guaranty are to be construed together, and that sense is to be given to each which best comports with the general scope or intent of the whole.

5. BANKS AND BANKING. Letter forwarding note for discount and advising return at maturity for collection constituted sale without warranty or pledge.

Letter inclosing note stating that bank forwarding same would appreciate bank to which it was forwarded handling it on a discount basis, and that note was secured by deed of trust but advising that note be returned against maturity for collection and remittance, held not to create status of debtor and creditor, but to constitute an outright sale without warranty or pledge.

6. WORDS AND PHRASES. "Discount" is to purchase or pay amount in cash less certain per cent.

"Discount" in finance is to purchase or pay amount in cash less certain per cent., as a promissory note, bill of exchange to be collected by discounter or purchaser at maturity (Words and Phrases, Second Series, "Discount").

HON. W. A. WHITE, Judge.

APPEAL from circuit court of Jackson county, HON. W. A. WHITE, Judge.

Action by the Bank of McLain against the Pascagoula National Bank. Judgment of dismissal, and plaintiff appeals. Affirmed.

Affirmed.

Paul B. Johnson and Mayson & Kelly, for appellant.

The letter is the foundation of the suit. The note was sent along solely as evidence of the amount of money that Gano owed appellee. There was no sale of the note. Appellant was to hold it and return "against maturity." That was the only power invested in appellant. No duty devolved upon appellant to collect the note; appellant was merely a trustee to an express trust to hold the note for appellee until maturity, and why? Because appellee had more of this line of paper than the National Bank Act allowed. It would be relieved of that menace, but on the notes' return at maturity would collect and remit to appellant. The expression in the letter "send the note to us against maturity, collection will be made and remittance at par," was an absolute and unconditional guaranty or warranty that collection would be made and remittance made to appellee at par on maturity of the note.

The case of Page Trust Company v. Wachovia Bank & Trust Co. et al., 37 A. L. R. 1368, 188 N.C. 166, 125 S.E. 536, is almost identically the case at bar. 12 R. C. L. 1055; 2 R. C. L. Supp. 1536. Our own court, in line with the above authority, the facts being somewhat slightly different from the case at bar and the case just referred to, has announced the same principle in the case of Richmond Paper Co. v. Bradley, 115 Miss. 307, 534, 75 So. 381, and 76 So. 544. And to the same effect are Baker v. Kelly, 41 Miss. 705; Pearsell Mfg. Co. v. Jeffries, 105 Am. St. Rep. 505, and extended note; Fegley v. Jennings, 103 Am. St. Rep. 142, 144 Fla. 203, 32 So. 873; Cowan v. Roberts, 101 Am. St. Rep. 843, 134 N.C. 415, 46 S.E. 979. Supporting this contention also are the cases of Jones v. Thayler, 74 Am. Dec. 602; Donely v. Comp, 58 Am. Dec. 274.

It appears to us that there is absolute liability on the part of appellee to appellant on the express, absolute and unconditional warranty stated in the letter, upon which this suit is brought, and that without reference to what the transaction may be, whether a loan, sale, pledge or hypothecation of the note. Story on Bailments, sec. 7; Trenholm v. Miles, 102 Miss. 835, 59 So. 930, Annotated Cases, 1915A 1079, 94 A. S. R. 192; Colby v. McClintock, 73 Am. St. Rep. 566; Gibbs v. Day, 32 Am. St. Rep. 537; Lewis v. U.S. 92 U.S. 618, 32 L.Ed. 513; Germania Savings Bank v. Peuser, 5 So. (La.), 75; Luckett v. Townsend, 49 Am. Dec. (Note) page 733; 3 Jones, Blackstone Commentaries, 153; McLeod v. Tutt, 1 Howard (Miss.) 288; Tutt's Adm'r v. McLeod, 3 Howard (Miss.) 223; Washington v. Soria, 73 Miss. 655; Vinson v. Corbitt, 94 Miss. 46, 47 So. 641, 21 L. R. A. (N. S.) 85; McNeer & Dood v. Norfiett, 113 Miss. 611, 74 So. 577, Ann Cases, 1918E 436; Markosky v. Rubenstein et al., 124 Miss. 274, 87 So. 278. See also the well-considered case of Binghampton Trust Co. v. Auten, 82 A. S. R. 295, 68 Ark. 29, 57 S.W. 1105. It is conclusively shown from the letter written by the appellee to appellant that it wished to borrow the money sued for.

Ford, White, Graham & Gautier, for appellee.

The Gano note was undoubtedly the property of the appellee at the time the letter was written and was negotiable without endorsement; the transaction disclosed by the letter was clearly a sale of the note by appellee bank to appellant bank; in other words, appellant bank discounted the note, that is, purchased it; the appellant was requested to handle the note on "an eight per cent discount basis;" the word discount in finance means "to purchase." 2 Words and Phrases (2 Ed.), 61.

While opposing counsel say there was no sale of the note, we are at a loss to see how they can contend that the letter expressed a guaranty to pay the note without conceding the transaction to be a sale; if the note was not purchased by appellant bank, no guaranty to it of payment could be made; because a guaranty is a contract by which one person is bound to another for the payment of the promise of a third person; it is a collateral undertaking; there must be a principal obligation.

Assuming then, the transaction between the two banks amounted to a sale of the Gano note, does the letter disclose a contract of guaranty on the part of the Pascagoula National Bank? We say not. 12 R. C. L. 1074. Also note 105, Am. St. Rep. 520; 28 C. J. 930, and authorities cited.

We find little authority in this state that will aid the court in construing the letter in question; in fact not much aid will be found in the decisions of other courts. Douglass v. Reynolds, Byrne & Co., 7 Peters 123-124, 8 Law Ed. 630. In most of the reported cases in which the written guaranties are set out, they are so clear that no trouble is encountered in construing them; a list of such cases is found in the case of Exchange National Bank v. Pontages, 46 L. R. A. (N. S.) 484; McCauley v. Cross, 111 S.W. 790; Page Trust Co. v. Wachovia Bank & Trusts Co., 37 A. L. R. 1368. Where letters are relied on as constituting a guaranty all the essential terms of a guaranty contract must clearly appear from the writing. Hopkins v. Schollert, 195 S.W. 219; Simpson v. First National Bank, 185 P. 912. See, also, Italian Discount & Trust Co. v. Merchants National Bank, 299 F. 1.

There is nothing in the record to indicate that the Bank of McLain treated the letter as a guaranty at the time. It is not shown that the McLain Bank replied to the letter, or had an oral communication with Mr. Herring, representing the appellee. If the McLain Bank had been disposed to treat the letter as a guaranty it either would have called on the Pascagoula National Bank to endorse the note or it would have replied in effect that it would be willing to handle the note provided the appellee would guarantee its payment.

It is respectfully submitted that there should be no recovery here even if the Gano note had been warranted by the Pascagoula National Bank, because to interpret the law as a guaranty would make the transaction in violation of law. A case clearly decisive of the points here involved is that of First National Bank of Tallapoosa v. Monroe, 135 Ga. 614, 69 S.E. 1123, 32 L. R. A. (N. S.) 550. See Livestock State Bank v. Fairfield National Bank, 300 Fad. 945.

Argued orally by Paul B. Johnson, for appellant, and E. J. Ford, for appellee.

OPINION

MCGOWEN, J.

The plaintiff in the court below, Bank of McLain, appellant here, filed its declaration, consisting of three counts, against the Pascagoula National Bank, appellee here, based upon a certain letter and note executed by S. A. Gano.

The appellee interposed a demurrer to the first and second counts of the declaration, and, to the third count, filed a plea of the general issue with notice of special matter. The demurrer to the first and second counts of the declaration was sustained, and the plaintiff requested, and obtained, leave to file an amended declaration, which was done.

The amended declaration charged, in effect, that on August 2 1925, S. A. Gano executed and delivered to the Pascagoula National Bank his promissory note for three thousand and twenty-seven dollars and forty-one cents, due September 15th, payable to the Pascagoula National Bank, or bearer, with interest at the rate of six per cent. per annum; that thereafter, on the 18th day of August,...