City State Bank in Wellington v. National Bank of Commerce of Altus, Okl.

• Decision Date: 09 October 1953
• Docket Number: No. 15447,15447
• Citation: 261 S.W.2d 749
• Parties: CITY STATE BANK IN WELLINGTON v. NATIONAL BANK OF COMMERCE OF ALTUS, OKL. et al.
• Court: Texas Court of Appeals

Page 749

261 S.W.2d 749

CITY STATE BANK IN WELLINGTON v. NATIONAL BANK OF COMMERCE OF ALTUS, OKL. et al.

No. 15447.

Court of Civil Appeals of Texas, Fort Worth.

Oct. 9, 1953.

Rehearing Denied Nov. 6, 1953.

Porter & Lowe, Clarendon, Bullington, Humphrey, Humphrey & Fillmore, and Lee Humphrey, Wichita Falls, for appellant.

Robert B. Harbison, Altus, Okl., Nelson, Montgomery, Robertson & Sellers and Ernest Robertson, Wichita Falls, for appellees.

BOYD, Justice.

This suit was filed by the National Bank of Commerce of Altus, Oklahoma, later joined by Albert Scoggin and Frank Brock, against the Wichita National Bank of Wichita Falls and the City State Bank in Wellington, Texas. The banks will hereinafter be referred to as the Altus Bank, or appellee, the Wichita Bank, and the Wellington Bank, or appellant.

The Altus Bank alleged that the Wichita and Wellington Banks were indebted to it in the sum of $15,574.23, representing the proceeds of a deposit in the Wellington Bank by J. T. Boyd for the specific and special purpose of paying two checks totaling that amount which had theretofore been drawn by Boyd on the Wellington Bank and given to Scoggin and Brock in payment for 93 head of cattle.

These checks were deposited by Scoggin and Brock to Scoggin's credit in the Altus Bank, which bank has not been reimbursed therefor, and were forwarded by it through the Wichita Bank to the Wellington Bank for payment. The checks were received through the mail by the Wellington Bank on the morning of February 28, 1952, and on the same day remittance was made through the mail to the Wichita Bank; but later, on the same day, the Wellington Bank wired the Witchita Bank that the checks would not be paid because they were 'DRAWN AGAINST UNCOLLECTED DEPOSITS.' ON the next day the wellington bank protested the checks and returned them through the mail to the Wichita Bank 'for collection.' Before the trial, the Wichita Bank paid the proceeds of the Wellington Bank's remittance into the registry of the court.

On February 26, before the checks made to Scoggin and Brock reached the Wellington Bank, Boyd sold, through the Amarillo Livestock Auction, 92 head of the cattle he had bought from Scoggin and Brock, and had deposited to his own account in the Wellington Bank two checks he received in payment therefor, totaling $15,842.02, drawn on the First National Bank of Amarillo, hereinafter called the Amarillo checks. The Wellington Bank received the proceeds from the Amarillo checks on February 29, but had theretofore applied all of Boyd's account to his overdraft.

The case was submitted to the jury on special issues and the jury found that Boyd deposited the Amarillo checks for the specific purpose of paying his outstanding checks to Scoggin and Brock; that at the time he made the deposit Boyd instructed the officers of the Wellington Bank that the deposit was made for that purpose; that the Wellington Bank knew that the deposit was made for that purpose; that the Wellington Bank, by the exercise of reasonable diligence, should have known that such deposit was made for that purpose; and that more than twenty-four hours elapsed between the time the Scoggin and Brock checks were received by the Wellington Bank and the time the Wellington Bank deposited said checks in the mail for return to the Wichita Bank. Judgment was rendered for the Altus Bank against the Wellington Bank for the amount of the checks Boyd had given to Scoggin and Brock, and from the judgment the Wellington Bank appeals.

Appellant's first point is that the Altus Bank is not entitled to recover under the pleadings and the evidence, the contention being that the checks given to Scoggin and Brock were still owned by them and that the Altus Bank was merely the agent of the depositor for the purpose of forwarding the checks for collection, and that if anyone gained any rights on account of the conduct of the Wellington Bank in handling the checks it could only be the owner of the checks or the fund.

Appellant cites Tillman County Bank v. Behringer, 113 Tex. 415, 257 S.W. 206, 36 A.L.R. 1302; Garver v. Howard, 113 Tex. 371, 257 S.W. 209; and Behringer v. City Nat. Bank, Tex.Civ.App., 296 S.W. 674, as authority for the proposition that the Altus Bank is not entitled to recover from appellant the amount of the Scoggin and Brock checks. Since in none of these cases was our precise question before the court, we do not think they sustain appellant's contention. The first cited case was a suit by the depositor of a cashier's check on a bank in a distant town, against the bank in which he deposited it 'for collection.' That bank sent the check to its correspondent bank, which bank in turn sent it to the drawer bank. Several days after the check reached the drawer bank, that bank failed, the check not having been paid, and the amount of the check was charged back to the plaintiff's account by the defendant bank. The plaintiff alleged and the court found that defendant's correspondent bank was negligent in handling the collection. The Supreme Court held that the correspondent bank was the agent of the depositor and not of the forwarding bank, and that its negligence did not render the forwarding bank liable. The second cited case was similar to and was disposed of on the authority of the first one. The last cited case was a suit by the plaintiff in the first case against the correspondent bank. It was held that this suit was barred by limitation.

The weight of authority seems to be that when commercial paper is endorsed without restriction by a bank depositor and is at once passed to his credit by the bank to which he delivers it, he becomes the creditor of the bank, and the bank becomes the owner of the paper, and in making the collection is not the agent of the depositor, notwithstanding a custom or agreement to charge the paper back to the depositor in the event of dishonor. Burton v. United States, 196 U.S. 283, 25 S.Ct. 243, 49 L.Ed. 482; City of Douglas v. Federal Reserve Bank of Dallas, 271 U.S. 489, 46 S.C. 554, 70 L.Ed. 1051, 3 R.C.L., p. 632, sec. 261; Brusegard v. Ueland, 72 Minn. 283, 75 N.W. 228; National Bank of Commerce v. Bossemeyer, 101 Neb. 96, 162 N.W. 503, L.R.A.1917E, 374; Walker & Brock v. D. W. Ranlett Co., 89 Vt. 71, 93 A. 1054; Aebi v. Bank of Evansville, 124 Wis. 73, 102 N.W. 329, 68 L.R.A. 964, 109 Am.St.Rep. 925.

But it is not necessary that the Altus Bank should be the owner of the Scoggin annd Brock checks in order to enable it to sue. It could do so under the doctrine that the holder of a negotiable instrument may sue for its collection. Art. 5935, § 51, Vernon's Ann.Civ.St.; Funkhouser v. Chemical Bank & Trust Co., Tex.Civ.App., 53 S.W.2d 146, writ refused; Neyland v. Lanier, Tex.Civ.App., 273 S.W. 1022; Felthouse Lumber Co. v. Tijerina, Tex.Civ.App., 164 S.W.2d 732. One who appears to be the legal holder may sue. Thompson v. Cartwright, 1 Tex. 87; McMillan v. Croft, 2 Tex. 397; Hays v. Cage, 2 Tex. 501; Andrews v. Hoxie, 5 Tex. 171. And it is immaterial whether any consideration moved from the Altus Bank to the original payees of the Scoggin and Brock checks. Eason v. Locherer, 42 Tex. 173; Hughes v. Dopson, Tex.Civ.App., 135 S.W.2d 148; 10 C.J.S., Bills and Notes, § 515, p. 1140.

Appellant contends that it ws error to render judgment for the Altus Bank because no issue was submitted and no jury finding made to the effect that appellant's officers ever agreed, or that there was any understanding between them and Boyd, that the deposit of the Amarillo checks was to be regarded as a special deposit for the purpose of paying Boyd's checks to Scoggin and Brock. Appellant requested the submission of such issues. It seems that such findings would be immaterial since the jury found that the officers of the bank accepted the deposit after being instructed by Boyd that the deposit was made for the purpose of paying the Scoggin and Brock checks.

In First Nat. Bank of Schulenburg v. Winkler, Tex.Civ.App., 146 S.W.2d 201, the court held that where a bank has on deposit a fund, all or a part of which is known by it to be impressed with a trust character, it cannot apply any of that fund...