Berry v. Bank for Savings and Trusts

• fullCitation: Berry v. Bank for Savings and Trusts, 14 So.2d 129, 244 Ala. 591 (Ala. 1943)
• Decision Date: 20 May 1943
• Citation: 14 So.2d 129,244 Ala. 591
• Docket Number: 6 Div. 67.
• Parties: BERRY v. BANK FOR SAVINGS AND TRUSTS.
• Court: Alabama Supreme Court

14 So.2d 129

244 Ala. 591

BERRY v. BANK FOR SAVINGS AND TRUSTS.

6 Div. 67.

Supreme Court of Alabama

May 20, 1943

Rehearing Denied June 30, 1943.

Hugh A. Locke, of Birmingham, for appellant.

Beddow Ray & Jones, of Birmingham, for appellee.

LIVINGSTON, Justice.

Suit on a promissory note by the Bank for Savings and Trusts, a corporation (appellee), hereinafter called the bank, against E. P. Berry, defendant in the court below and appellant here.

Defendant entered a plea of the general issue in short by consent with leave, etc. The evidence was taken orally and the cause submitted to the trial court without a jury. There was a general finding and judgment for the bank for $6,517.43.

During the year 1936 and through the year 1939, Smith and Berry, a partnership composed of W. T. Smith and Joseph A. Berry, were engaged in what was termed the commercial refrigeration business, that is, selling and installing refrigeration machinery and equipment. The partnership commenced to do business with the bank in 1936. Monthly installment notes or lease sale contracts taken by the partnership for the sale and installation of refrigeration equipment were handled by the bank in the following manner: The notes or contracts were indorsed by Smith and Berry and delivered to the bank; six per cent was deducted from the face of the notes as interest ten per cent was deducted from the face of the notes and deposited with the bank to the credit of Smith and Berry in what was called a "reserve fund." The balance was paid over to Smith and Berry. The "reserve fund" bore no interest and was left with the bank as collateral security for the payment of the note or contract, out of which it was deducted, and all other obligations then owing or thereafter incurred by the partnership to the bank. The "reserve fund" remained the property of the partnership, but was not withdrawable, except by consent of the bank, so long as the aggregate amount of the notes or contracts indorsed to the bank by the partnership exceeded the "reserve fund." Each individual note or lease sale contract was carried on the books of the bank in the name of the maker, the maker notified of the transfer to the bank, and the payments made directly to the bank by the maker. Prior to the execution and delivery of the note sued on, the partnership and the bank handled approximately ninety notes or contracts in the manner above set out.

In addition to the above, and prior to the execution and delivery of the note sued on, the bank made certain loans to Smith and Berry to secure the payment of which Smith and Berry gave their notes and assigned to the bank certain notes or lease sale contracts. The amount of these loans and the notes or contracts securing their payment was as follows: A loan of $3,000 evidenced by the note of Smith and Berry, and secured by the assignment of the notes or contract of the State Board of Administration in the amount of $5,025.21; a loan of $2,500, evidenced by the note of Smith and Berry, and secured by the assignment of the note or contract of A. J. Honeycutt in the amount of $3,135; a loan of $1,500, evidenced by the note of Smith and Berry and secured by the assignment of the note or contract of George W. Barber in the amount of $2,075; a loan of $275. evidenced by the note of Smith and Berry, and secured by the assignment of the note or contract of Alex Kartznell in the amount of $333.12. The bank also made a loan to Smith and Berry of $601, secured by a chattel mortgage on three pieces of equipment. Six per cent interest was deducted from the amounts loaned, and from all of the loans, except the $601 loan secured by a chattel mortgage on three pieces of equipment, ten per cent was deducted and placed in the "reserve fund" of Smith and Berry. The bank also made a loan of $7,500 to Smith and Berry, evidenced by their promissory note for that amount and secured by an assignment of what is called the Algernon Blair contract for approximately $11,000. This loan was made at six per cent interest and no part of the amount loaned was put into the "reserve fund."

The bank did not notify the State Board of Administration, A. J Honeycutt, George W. Barber or Alex Kartznell that the notes or lease sale contracts executed by them had been assigned to the bank as collateral security for loans made to Smith and Berry.

Prior to the execution and delivery of the note, the renewal of which is the note sued on, Smith and Berry collected the money evidenced by the notes or lease sale contracts of the State Board of Administration, George W. Barber and Alex Kartznell, and sold one of the three pieces of equipment of the agreed value of $225, pledged in the chattel mortgage of $601. The money collected and received from the sale of the equipment, was not applied on the loans made to Smith and Berry by the bank, but was, without the knowledge or consent of the bank, misappropriated...