Citizens Nat. Bank of Dallas v. Hill

• Decision Date: 30 January 1974
• Docket Number: No. B--4104,B--4104
• Citation: 505 S.W.2d 246
• Parties: CITIZENS NATIONAL BANK OF DALLAS, Petitioner, v. Larry HILL and I. H. Lawson, Respondents.
• Court: Texas Supreme Court

Page 246

505 S.W.2d 246

CITIZENS NATIONAL BANK OF DALLAS, Petitioner, v. Larry HILL and I. H. Lawson, Respondents.

No. B--4104.

Supreme Court of Texas.

Jan. 30, 1974.

Rehearing Denied Feb. 28, 1974.

Akin, Gump, Strauss, Hauer & Feld, Henry D. Akin, Dallas, for petitioner.

Woodruff & Smith, Stephen E. Hulme, Dallas, for respondents.

REAVLEY, Justice.

Larry Hill and I. H. Lawson transmitted funds to Citizens National Bank of Dallas for credit to an account owned by Wayne Cook Associates, Inc. The money was intended by Hill and Lawson to be used for a loan to Skidmore-Crooke Manufacturing Company, but Wayne Cook withdrew the money from the account and used it for other purposes. By their suit, at this stage, Hill and Lawson seek to recover from Citizens National Bank. The trial court entered judgment n.o.v. for the bank on the ground that no liability was proved against it and thus the bank had been entitled to a directed verdict. The Court of Civil Appeals held that under the evidence and findings of the jury the deposits of Hill and Lawson were special deposits which the bank was obligated to restrict solely for purpose of a Skidmore-Crooke loan. 495 S.W.2d 615. We agree with the trial court.

Hill and Lawson had no accounts or previous relations with Citizens National Bank. They made no direct contact with that bank in placing the disputed funds there but instructed their banks in Nederland and Beaumont to wire credit instructions through other Dallas banks. Citizens National Bank received the following credit note from Mercantile National Bank at Dallas: 'Due to Bank Credit: Citizens National Bank, Dallas, Texas. As per our phone advice today for credit and advice Wayne Cook Associates Trust Account by order of Larry J. Hill for Skidmore Crook loan as requested by Nederland State Bank, Nederland, Texas: $10,000.' Citizens National Bank also received the following credit note from Republic National Bank of Dallas: 'We credit your account $10,000. Confirming telephone instructions for account of Wayne Cook and Associates Trust Account for loan to Skidmore Crook Manufacturing Co. until sale on or about Feb. 20, 1970.'

The record contains no further information about the telephone communications mentioned in the credit notes. Consequently, the only basis for charging Citizens National Bank with liability to Hill and Lawson is the above quoted text of the notes or advices. The plaintiffs argue, and the Court of Civil Appeals has held, that Citizens National Bank was required to handle these funds specially to insure that they were used for the specific purpose because the purpose was disclosed to the bank by the credit notes.

Wayne Cook, who had business relations with Hill and Lawson, conducted auctions of various equipment and properties. He had two accounts with Citizens National Bank designated 'Wayne Cook Associates, Inc.' and 'Wayne Cook Associates, Inc. Trust Account.' Cook himself could draw from either account, and he did so to deplete the funds deposited by Hill and Lawson. Cook's liability to them has been determined at the earlier stage of this litigation.

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 relation does not arise. Hudnall v. Tyler Bank and Trust Company, 458 S.W.2d 183 (Tex.1970); Linz v. Eastland County, 39 S.W.2d 599 (Tex.Comm.App.1931); First Nat. Bank of Ranger v. Price, 262 S.W. 797 (Tex.Civ.App.1924, no writ); Young v. Bundy, 158 S.W. 566 (Tex.Civ.App.1913, no writ); McBride v. American Ry. & Lighting Co., 127 S.W. 229 (Tex.Civ.App.1910, no writ). It has been said by Texas courts that an agreement between depositor and bank upon the use of deposited funds for a specific purpose establishes that the funds constitute a special deposit. See First State Bank & Trust Co. v. First Bank of Truscott, 32 S.W.2d 494 (Tex.Civ.App.1930, writ ref'd); City State Bank v. National Bank of Commerce, 261 S.W.2d 749 (Tex.Civ.App.1953, writ ref'd n.r.e.); Narrell v. First Nat. Bank of Temple, 241 S.W.2d 361 (Tex.Civ.App.1951, no writ); Hays v. Shaw, 69 S.W.2d 807 (Tex.Civ.App.1934, no writ); Cotulla State Bank v. Herron, 191 S.W. 154 (Tex.Civ.App.1917, no writ)....