Citizens Bank & Trust Co. of Belzoni v. Harpeth Nat. Bank of Franklin

• Decision Date: 14 July 1919
• Docket Number: 20750
• Citation: 82 So. 329,120 Miss. 505
• Court: Mississippi Supreme Court
• Parties: CITIZENS BANK AND TRUST COMPANY OF BELZONI v. HARPETH NATIONAL BANK OF FRANKLIN ET AL

82 So. 329

120 Miss. 505

CITIZENS BANK AND TRUST COMPANY OF BELZONI v. HARPETH NATIONAL BANK OF FRANKLIN ET AL

No. 20750

Supreme Court of Mississippi

July 14, 1919

Division A

1 CARRIERS. Bill of lading attached to draft.

The contention that a bank purchasing a draft with bill of lading attached does not assume any of the liabilities of the seller of the goods and is not liable on a warranty made by the seller of the goods represented by the bill of lading, cannot be sustained.

2. BANKS AND BANKING. Power of national banks. Personal property. Statute.

When as a consequence of a purchase of drafts with bill of lading attached, a national bank becomes the owner of personal property as an incident to the purchase of the drafts, such purchase is not prohibited by Revised Statutes, section 3136 (Comp. St., 9661).

3 INJUNCTION. Dissolution. Sufficiency of showing.

When upon a motion to dissolve a temporary injunction, the affidavits and pleadings show a sharply controverted question of fact, the injunction should not be dissolved on mere affidavits, but the cause should proceed to final hearing.

4. BANKS AND BANKING. Failure to remit proceeds or drafts collected. Necessity of demand.

Where drafts with bill of lading attached had been forwarded by the holder to another for collection, there can be no conversion by failure to promptly remit the proceeds, in the absence of a demand from the owner thereof.

HON. E N. THOMAS, Chancellor.

APPEAL from the chancery court of Humphreys county, HON. E. N THOMAS, Chancellor.

Action by S. Castleman against S. M. Fleming, Citizens Bank & Trust Company of Belzoni, Harpeth National Bank of Franklin and others, with cross-bill for an injunction by the Citizens Bank & Trust Company of Belzoni. From an order dissolving the temporary injunction granted cross petitioners such petitioner and others appeal.

Reversed, and cause remanded.

James M. Cashin and G. G. Lyell, for appellant.

In our original brief we have said all that we care to say upon this subject, merely reiterating what is there set out at greater length, to the effect that the rule announced by our court in the Searles case, and many, many times repeatedly reaffirmed, is too firmly imbedded in our jurisprudence to be now disturbed. The fact that on March 31, 1919, in the Mark's case, this court by a decision in Banc, reaffirmed the former adjudication, makes us feel assured that the rule will not be disturbed.

As stated in our original brief, this court will now bear in mind the marked distinction between our line of cases on that subject and those from other states. This distinction, or substantial difference, results from the enactment by our legislature of the bill of lading statute, section 4852, Code 1906, requiring a collecting bank, or other agency, to hold the proceeds of all drafts, with bills of lading attached, for ninety-six hours after the delivery of the bill of lading before remitting the proceeds.

In none of the other states, or, certainly, it does not appear in any of the adjudicated cases from other states, cited by opposite counsel in their brief, that such other states have a statute similar to ours.

This statute makes all the difference in the world in the rule that must obtain in Mississippi, even if the law as announced in the Searles case and others, would be unsound, but for the existence of said statute a thing we do not concede. The two cars of wheat were consigned to Fleming & English, notify S. Castleman. The drafts in question in the instant case were drawn by Fleming & English on S. Castleman at Belzoni, Mississippi. They were payable in Mississippi and were paid in Mississippi and the delivery of the two cars of wheat was made in Mississippi. It was a Mississippi transaction in dealing with S. Castleman were chargeable with notice of this statute, and with the legal effect of same. It was the opinion of Judge Edward Mayes that the Harpeth National Bank was estopped from Contending that it was a purchaser without notice. This statute makes of every alleged purchaser, a purchaser with notice of the fact that the consignee has a right to tie up the proceeds of the draft in Mississippi, and here litigate with the consignor, and with any alleged owner of this draft, an action for breach of warranty, etc.

The bench and bar of Mississippi will all agree that whether there was ever any greater lawyer in Mississippi than the late Judge EAWARD MAYES, that he was at feast one of the greatest lawyers of this or any other state. It was the opinion of Judge EDWARD MAYES that the contention that we are now making is sound, and that the decisions of this court in the Searles case and others and down to the Mark's case, are sound, notwithstanding the enactment in this state in 1916 of the Negotiable Instruments Act.

When that act was passed by the legislature of Mississippi, it, together with other banking and commercial statute of Mississippi, were compiled by Mr. Thomas H. Dixon, the Secretary of the Mississippi Bankers Association. Judge Edward Mayes, firm, of which the writer was then a member, were attorneys for the Mississippi Bankers Association. Mr. Dickson employed Judge Edward Mayes to prepare an "Introductory Comment upon the Uniform Negotiable Instrument Act." and such comment was published by Mr. Dickson in a little volume called "Banking and Commercial Statutes of Mississippi, 1916."

On page 55 of said compilation will be found the comment of Judge EDWARD MAYES upon section 58 of said act. That section covering the question when a negotiable instrument is subject to original defenses.

His comment reads: "Section 58.--This section makes the proceeds of notes and checks taken and held in due course, inviolable in the hands of a third party. See, also, section 52. But a special question arises in the case of drafts drawn through hands, with bills of lading attached. By common usage of trade, a draft, in this attitude, is subject to the question that the goods against which it is drawn may not come up in quality or quantity, and there may be a come back against the drawer. In such case it would seem that the bank takes the proceeds of such drafts, with notice of infirmity in the same, and takes it subject to section 4852 of the Code of 1906."

That comment was the unbiased legal judgment of that great lawyer, and we respectfully submit that it is as sound as any legal opinion ever given by him. We submit, therefore, that the chancellor manifestly erred in declining to follow the rule in the Searles case and subsequent decisions following the rule there announced.

The purpose of section 4852 of the Code, above referred to and requiring a bank or other collecting agency of a draft with bill of lading attached, to retain the funds so collected for ninety-six hours after the delivery of the bill of lading, would have little meaning and effect if the doctrine of the Searles case were overturned. It would, in effect, amount to a repeal of the section to do so. While a decision favorable to us on this point means a reversal of the case, yet we pass on to briefly answer another contention of counsel.

It is said, and cases are cited, holding that a national bank cannot become the purchaser of personal property, and hence, it is argued, could not warrant the quality of same.

The answer to this is that there is no evidence in this record that the Harpeth National Bank is a national bank except as indicated by its name, and that is not sufficient evidence. Furthermore, there is nothing in the pleadings setting up the contention that if, as a result of its connection with the drafts and ladings, that it has become a purchaser of same, that such purchase was ultra vires. Furthermore it is estopped to claim it had no such powers, 88 M. & M. 180, Middle paragraph.

All the parties are now before the court except that when the chancellor improvidently and improperly dissolved the injunction, the time for Flemming & English to answer had not arrived, and complete and perfect justice between all the parties can be had in the chancery court upon a reversal of the decree of the chancellor therein.

We confidently and respectfully submit that the decree of the chancellor should be reversed, and the injunction reinstated, and the cause remanded for further proceedings in accordance with the rule of the Searles case and others.

Percy & Percy, for appellee.

In our original brief and argument the case of First National Bank v. Felker, 185 F. 678, was so conclusive upon the question of the conversion of property of the Harpeth National Bank by the Citizens Bank & Trust Company, we did not care to burden the court with any extensive citation of authorities; but there are two authorities which lay down the doctrine supporting the doctrine announced in the case of First National Bank v. Felker, supra, and we wish to submit same to the court. In 38 Cyc. page 2025, the principle is laid down, "Any use or disposition of a thing without the consent of the owner, or any misuse or abuse of a possession obtained with his consent, is an actionable conversion." Again, "any sale unauthorized by law or the consent of the owner which deprives him of personal property is an actionable conversion."

In Laverty v. Snethern, 68 N.Y. 522, 23 Am. Rep. 184 "the defendant received a promissory note from the plaintiff made by a third person and indorsed by the plaintiff, and gave a receipt therefor, stating that it was received for negotiation and the note to be returned the next day or the avails thereof. The plaintiff testified in substance that he told the defendant not to let the note go out of his reach without receiving the money. The defendant, after negotiating with one Foote about buying the not,...