Citizens Fidelity Bank & Trust Co. v. Kilpatrick, 27856

• Decision Date: 20 June 1950
• Docket Number: No. 27856,27856
• Court: Missouri Court of Appeals
• Parties: CITIZENS FIDELITY BANK & TRUST CO. v. KILPATRICK.

Page 301

231 S.W.2d 301

CITIZENS FIDELITY BANK & TRUST CO. v. KILPATRICK.

No. 27856.

St. Louis Court of Appeals, Missouri.

June 20, 1950.

Milton Keiner, St. Louis, and Bullitt, Dawson & Tarrant, Louisville, Kentucky, of counsel, for appellant.

Joseph M. Walsh, St. Louis, for respondent.

BENNICK, Commissioner.

This is an action upon a check for $452.50 which was drawn by defendant, R. L. Kilpatrick, against his account in the Mercantile-Commerce National Bank in St. Louis and in favor of one W. C. Wooten of Louisville, Kentucky.

Defendant is a resident of St. Louis, and is engaged in business in that city under the name of R. L. Kilpatrick & Company, Commissioners.

On and prior to December 16, 1946, the date of the issuance of the check, Wooten maintained a checking account in Citizens Fidelity Bank and Trust Company, an institution engaged in the general banking business in Louisville.

The balance in Wooten's account varied greatly from time to time, and consisted of only $5.29 when the bank opened for business on December 16th.

On that day Wooten indorsed the check from defendant and deposited the same to his account along with cash in the amount of $47.50, making a total deposit of $500. The deposit slip recited that all items drawn on or payable at other banks were accepted subject to final payment, and that if returns were not received in due course for any reason, such items might be charged back to the depositor.

Later in the day after it had accepted Wooten's deposit, and before the check had been presented to the drawee bank in St. Louis for collection, the Louisville bank permitted Wooten to withdraw the sum of $500, leaving him with the balance of $5.29 which he had had standing to his credit when the bank had opened for business on that day. In other words, the effect of the transaction was to allow Wooten to withdraw the entire uncollected proceeds of the check, and to put the responsibility on the bank of protecting itself according to whatever its rights might be in the event the check was not paid upon presentment to the drawee bank.

On December 19th, three days after the transaction between Wooten and his own bank, a check he had drawn on his bank in favor of defendant was returned to defendant's bank in St. Louis on account of insufficient funds. An earlier check which had been delivered to defendant unsigned had been returned to Wooten for his signature; and on December 19th Wooten was in arrears to defendant in the total sum of $835, representing the aggregate of both such checks.

On that day, that is, on December 19th, defendant gave written notice to his own bank, the Mercantile-Commerce National Bank in St. Louis, to stop payment on the check here in question, and when the check was later presented on December 23rd, payment was refused and nonpayment duly protested.

Demand having been unsuccessfully made upon Wooten for payment of the check, the Louisville bank, proceeding upon the theory that it was the owner and holder of the check in due course, instituted this action against defendant, Kilpatrick, the drawee of the check, in the magistrate court in the City of St. Louis.

Taken on appeal to the circuit court, the case was tried to the court alone upon an agreed statement of facts. Judgment was rendered in favor of defendant; and following an unavailing motion for a new trial, plaintiff bank gave notice of appeal and by subsequent steps has caused the case to be transferred to this court for our review.

The ultimate question on this appeal is whether the judgment of the lower court was for the right party.

Since the result in the case depends upon the title acquired by plaintiff bank, and since the entire transaction by which the bank acquired the check from Wooten took place in Kentucky, the legal effect of such transaction would ordinarily be judged by Kentucky law. However the parties have not invoked Kentucky law, which means that in such circumstance the case is to be determined by the law of our own state, whether it be the common law or a statute that is to be applied. Noell v. Chicago & E. I. Ry. Co., Mo.App., 21 S.W.2d 937.

Defendant argues that plaintiff bank did not become the owner of the check, but merely acquired it is Wooten's agent for collection of the proceeds. The bank insists, on the other hand, that it became the owner of the check, at least to the extent of the amount which it permitted Wooten to withdraw, which, as it happens, was the full amount of the check.

So far as concerns the rule at common law, the courts of the several states have not been wholly in accord upon the question of the title acquired by the bank of deposit in the case of paper received for collection under varying circumstances. Suffice it merely to say that our own state has adhered to the majority rule, 7 Am.Jur., Banks, sec. 452, that when a customer of a bank indorses and deposits a check in a bank, and the bank immediately gives him credit for the amount of the check with the unrestricted right to draw against the same, the bank in that event, and in the absence of an agreement to the contrary, becomes the owner of the check and not the agent of the depositor for its collection. Farmers' Exchange Bank of Marshfield v. Farm & Home Savings & Loan Ass'n of Missouri, 332 Mo. 1041, 61 S.W.2d 717; Jefferson Bank v. Merchants Refrigerating Co., 236 Mo. 407, 139 S.W. 545; National City Bank of St. Louis v. Macon Creamery Co., 329 Mo. 639, ...