Citizens' Bank v. Frazier

• Decision Date: 14 April 1930
• Docket Number: 28588
• Citation: 157 Miss. 298,127 So. 716
• Parties: CITIZENS' BANK v. FRAZIER
• Court: Mississippi Supreme Court

127 So. 716

157 Miss. 298

CITIZENS' BANK v. FRAZIER

No. 28588

Supreme Court of Mississippi

April 14, 1930

Division B

1 CONTRACTS. Construction. Fairness and reasonableness. Courts must, if possible, give contract construction squaring its terms with fairness and reasonableness.

2 CONTRACTS. Construction. Legality.

Contract should, if possible, be construed so as to make it legal.

3 INSURANCE. Insuring cotton securing loans. Bank's obligation under agreement.

Where bank agreed to keep cotton covered by trust deeds insured up to aggregate amounts of loans made for cotton purchases, bank's obligation to borrower as regards procuring insurance was that of agent.

HON. J. I. STURDIVANT, Judge.

APPEAL from circuit court of Oktibbeha county HON. J. I. STURDIVANT, Judge.

Action by the Citizens' Bank against A. V. Frazier. From the judgment, plaintiff appeals. Reversed and remanded.

Judgment reversed and cause remanded.

Magruder, Walker & Magruder, of Starkville, for appellant.

A Mississippi banking corporation is not authorized to insure property and such an attempt is ultra vires and void. Likewise a contract made by a bank to absolutely procure insurance for a party is ultra vires and void.

Chapter 21, Fletcher's Encyclopedia of Corporations; 3 Encyclopedia of Corporations, section 1548; Divide County v. Baird, 212 N.W. 236, 51 A.L.R. 296; United States, F. & G. Company v. Bassfield, 114 So. 26; Alabama Red Cedar Co. v. Tennessee Valley Bank, 76 So. 980; Chapter 85, Hemingway's Code of 1927; 3 R. C. L. 422-25.

Daniel & Greene, of Starkville, for appellee.

If a bank assumes the duty and responsibility under contract to keep appellee's cotton insured, and by negligence fails or refuses to carry out same, it is liable for whatever loss appellee sustained, if the bank was negligent in fact.

If the contract was ultra vires, and appellee acting in good faith, relied upon said agreement between him and the bank, whereby as a result thereof he sustained loss under said contract, and said bank having already accepted the considerations and benefits accruing to it under the terms of said contract, could not set it up as being ultra vires and repudiate it.

New Orleans & N.E. R. Company v. Jemison, 110 So. 785; M. & O. R. Company v. McCarthy, 96 U.S. 258; Grenada Bank v. Moore, 95 So. 449; 7 C. J. 567.

Where an employee of a bank undertook to get an insurance agent over the phone, but the connection on the line was bad, and he couldn't get in touch with them; and then he wrote a letter that night, but forgot to mail it and a fire occurred while the letter was in the postoffice such facts constitute negligence for which the bank is liable.

OPINION

Griffith, J.

Early in the fall of 1928 appellant bank solicited the cotton account of appellee, and in response thereto it was proposed by appellee that the business would be given to appellant provided the latter would keep the cotton insured up to the aggregate amounts of all loans made to appellee for cotton purchases, to which provision appellant agreed. In pursuance of said arrangement appellee, on October 6, 1928, obtained from appellant a loan of two thousand five hundred for said cotton account, and gave his note secured by a deed of trust on forty-five bales of cotton, said then to be stored in appellee's cotton warehouse. At this date the cotton appears to have been insured for three thousand dollars. On October 27, 1928, appellee borrowed from the bank an additional sum of three thousand dollars, and secured same with a deed of trust on forty-one additional bales, said to have been likewise stored. This last loan was made on Saturday about noon. The bank immediately requested its bookkeeper, who was a subagent for a principal insurance agency at Starkville, to procure insurance for an additional amount of two thousand five hundred so as to make the total insurance, held by the bank on said cotton, equal to the said loans of five thousand five hundred dollars. The said subagent thereupon attempted to get into communication with the principal agency by telephone, but was unsuccessful by reason, as it is alleged, of faulty telephone equipment, and, after two or three such attempts, he finally wrote a letter to the said principal agency. This letter was not mailed until after the close of business on...