Citizens First Nat. Bank of Tyler v. Cinco Exploration Co.

• Decision Date: 07 July 1976
• Docket Number: No. B--5738,B--5738
• Citation: 19 UCCRep.Serv. 1182,540 S.W.2d 292
• Parties: 19 UCC Rep.Serv. 1182 CITIZENS FIRST NATIONAL BANK OF TYLER, Petitioner, v. CINCO EXPLORATION COMPANY, Respondent.
• Court: Texas Supreme Court

Page 292

540 S.W.2d 292

19 UCC Rep.Serv. 1182

CITIZENS FIRST NATIONAL BANK OF TYLER, Petitioner, v. CINCO EXPLORATION COMPANY, Respondent.

No. B--5738.

Supreme Court of Texas.

July 7, 1976.

Rehearing Denied Sept. 29, 1976.

Ramey, Flock, Hutchins, Garinger & Jeffus, Mike Hatchell, Tyler, for petitioner.

Prappas, Caldwell & Moncure, Brantly Harris and Tommy D. Solomon, Houston, for respondent.

McGEE, Justice.

Cinco Exploration Company brought this suit against Citizens First National Bank of Tyler for the sum of $30,000 which Citizens Bank allegedly wrongfully disbursed contrary to Cinco's written instructions. Both Cinco and Citizens filed motions for summary judgment. The trial court granted Citizens' motion and rendered judgment that Cinco take nothing. The court of civil appeals reversed and remanded the case for a trial on the merits. 529 S.W.2d 852. Both Citizens National Bank and Cinco Exploration Company filed applications for writ of error. We reverse the judgment of the court of civil appeals and affirm the judgment of the trial court.

On November 9, 1973 Cinco Exploration Company entered into a letter agreement with Paul B. Goodgame and S. Harry Bergman by which Goodgame and Bergman agreed to assign an oil and gas lease to Cinco. The pertinent provisions of this letter agreement read as follows:

'1. Messrs. Paul B. Goodgame and S. Harry Bergman are the owners of a certain Oil, Gas and Liquid Hydrocarbon Lease dated June 15, 1973. . . .

'2. Goodgame and Bergman agree to assign to Cinco Exploration Company the lease described in Article 1 of this agreement, . . .

'3. Messrs. Goodgame and Bergman will exercise their best efforts on or before Nov. 18, 1973, To obtain full execution of the amendments shown as Exhibits 'A' and 'B' of this agreement and made a part hereof, to an Oil, Gas and Liquid Hydrocarbon Lease.

'4. Upon delivery of the assignment referred to in Article 2 of this agreement, And upon the receipt of satisfactory evidence by Cinco Exploration Company of acceptance by the Cameron Minerals Group Of the lease amendments shown as Exhibit 'A' and 'B' of this agreement, Cinco shall pay to Paul B. Goodgame and S. Harry Bergman, jointly, The cash sum of $30,000.00.' (Emphasis added).

In essence, this agreement provided that Goodgame and Bergman would use their best efforts to obtain two amendments to the lease to be executed by the lessors. Upon receipt by Cinco of satisfactory evidence that the lessors had agreed to the two amendments, Cinco was to pay Bergman and Goodgame $30,000. On November 16, 1973 Goodgame and Bergman executed the lease assignment assigning the lease to Cinco and attached to the assignment a documentary draft upon Cinco for $30,000 which they placed for collection with Citizens First National Bank of Tyler. Citizens forwarded the draft to its correspondent American Bank of Commerce of Victoria for presentment and collection. On November 19, 1973 American Bank received the documentary draft and presented it to Cinco for payment. Cinco informed American Bank that the draft was not in compliance with the letter agreement Cinco had entered into with Bergman and Goodgame. Cinco told American that the two lease amendments were not enclosed with the documentary draft and that Cinco had not yet received any other evidence that the lessors had accepted the two lease amendments. On November 20, 1973, acting pursuant to Cinco's instructions with funds supplied by Cinco, American Bank wrote a letter to Citizens Bank. Enclosed with the letter was a cashier's check payable to Citizens in the sum of $30,000 together with a copy of the November 9, 1973 letter agreement entered into between Cinco, Bergman, and Goodgame. The letter from American Bank addressed to Citizens stated as follows:

'Citizens First National Bank

P.O. Box 2020

Tyler, Texas 75701

Gentlemen:

Enclosed is a Cashier's Check for payment of your site (sic) Draft dated November 16, 1973 Payable to Mr. Paul B. Goodgame and Mr. S. Harry Bergman pursuant to article eight of the letter agreement dated November 9, 1973 between Mr. Goodgame, Mr. Bergman and Cinco Exploration Company (copy enclosed). Your payment is contingent (sic) Upon performance of all other articles of the letter agreement and will constitute an unreserved acceptance of the lease assignment upon performance of all articles in the subject letter agreement, Including, but not limited to the execution of the lease amendments A and B indicated in article four of the letter.' (Emphasis added).

Upon receiving this letter and the cashier's check from American Bank, Citizens inquired of Bergman whether he had done everything that he was supposed to do under his letter agreement with Cinco. Upon receiving an affirmative answer, Citizens deposited the $30,000 to the account of Goodgame and Bergman. On January 18, 1974 American Bank's attorney wrote Citizens stating that Bergman and Goodgame had failed to furnish Cinco with the two lease amendments as required under the November 9, 1973 letter agreement. American's attorney returned the lease assignment executed by Bergman and Goodgame and demanded the return of the $30,000 Citizens had paid to the account of Bergman and Goodgame. When Citizens refused, Cinco instituted the present suit against Citizens on March 27, 1974.

Before us, Citizens asserts that we should uphold the trial court's action in granting a summary judgment in its favor. Conversely, Cinco argues that its own motion for summary judgment should have been granted. Cinco contends that when Citizens accepted the $30,000 cashier's check and undertook disbursement in accordance with American's letter of transmittal, Citizens became an agent of Cinco as a matter of law. As a result, Cinco asserts that Citizens had a duty to follow all of the instructions contained in American's letter of November 20, 1973. Thus, Cinco argues that by its failure to require Bergman and Goodgame to furnish the two lease amendments Or satisfactory evidence that the amendments were accepted by the lessor, Citizens breached its duty as Cinco's agent and became liable to Cinco as a matter of law. On the other hand, Citizens contends that summary judgment was properly rendered in its favor. Citizens argues that no agency relationship existed between it and Cinco; therefore, it owed no duty, and breached no duty, to Cinco. Alternatively, Citizens has also argued that if it owed a duty, the summary judgment proof shows it discharged its obligation to Cinco. The summary judgment entered in favor of Citizens is appropriate only if the record establishes a right thereto as a matter of law. It is well established that a defendant moving for a summary judgment assumes the burden of showing as a matter of law that the plaintiff had no cause of action against him. Gaddis v. Smith, 417 S.W.2d 577 (Tex.1967). Thus, the question becomes whether Citizens' summary judgment proof established as a matter of law that there was no genuine issue of material fact as to one or more of the essential elements of Cinco's cause of action. Gibbs v. General Motors Corporation, 450 S.W.2d 827 (Tex.1970); Torres v Western Casualty and Surety Company, 457 S.W.2d 50 (Tex.1970).

The court of civil appeals found the creation of a 'special deposit' between Cinco and Citizens. A 'special deposit' is the traditional designation of the bailment or agency or trust whereby the bank keeps or transmits identical property or funds entrusted to it. The usual creditor-debtor relationship does not arise. Hudnall v. Tyler Bank and Trust Company, 458 S.W.2d 183 (Tex.1970). In order for a 'special deposit' situation to exist, there must be an agreement between the depositor and the bank upon the use of deposited funds for a specific purpose. See, First State Bank & Trust Co. v. First Bank of Truscott, 32 S.W.2d 494 (Tex.Civ.App.--Eastland 1930, writ ref'd). It must be shown that the bank agreed to the obligation. However, if the agreement of the bank is to be Implied by its acceptance of a deposit accompanied by written limitations imposed by the depositor, 'the writing should set forth by clear direction what the bank is required to do.' Citizens National Bank v. Hill, 505 S.W.2d 246, 248 (Tex.1974) (Emphasis added). In the case now before us, the court of civil appeals stated:

'(I)t is without dispute that Citizens accepted Cinco's funds and disbursed the same to Bergman and Goodgame. Therefore, Citizens will be held to have Impliedly consented to Cinco's proposal as set forth in American's letter of November 23, 1973 (sic).' 529 S.W.2d 852, 856. (Emphasis added).

The court of civil appeals also concluded that the terms of the letter of November 20, 1973 which American forwarded to Citizens were ambiguous and that fact questions were presented as to the intention of the parties. Thus, the court held that summary judgment had been improperly rendered in favor of Citizens.

We do not agree that this controversy involved the creation of a 'special deposit.' It was not Cinco who instituted the collection process which ultimately culminated in this lawsuit. The action taken by Cinco in forwarding the $30,000 cashier's check to Citizens was in response to the collection effort earlier initiated by Bergman and Goodgame. It was these two individuals who mounted the initial collection effort by placing a documentary draft with Citizens Bank for collection. However, we do believe...