Farmers' Bank & Trust Co. v. Shut & Keihn

• Decision Date: 08 April 1915
• Docket Number: 840
• Citation: 68 So. 363,192 Ala. 53
• Court: Alabama Supreme Court
• Parties: FARMERS' BANK & TRUST CO. v. SHUT & KEIHN.

68 So. 363

192 Ala. 53

FARMERS' BANK & TRUST CO. v. SHUT & KEIHN.

No. 840

Supreme Court of Alabama

April 8, 1915

Appeal from Law and Equity Court, Mobile County; Saffold Berney Judge.

Action by the Farmers' Bank & Trust Company against Shut &amp Keihn. Judgment for defendants, and plaintiff appeals. Reversed, and judgment rendered for plaintiff.

The following is the draft drawn by Schafer directed by the court to be set out:

$1319 72/xx Scuilpa, Ala., 12/20, 1912.

At sight, with B/L attached for 236 poplar logs branded (S &amp K), pay to the order of J.W. Lee thirteen hundred and nineteen 72/xx dollars.

#2229 to 2464

To Shut & Keihn, Inc.

1018 Hennen Bldg.

New Orleans, La.

[Signed] E.D. Schafer.

Indorsed by J.W. Lee.

Ervin &amp McAleer, of Mobile, for appellant.

Gregory L. & H.T. Smith, of Mobile, for appellee.

GARDNER J.

Suit by appellant against appellee. The complaint, as originally framed, contained three counts seeking recovery upon a bill of exchange, and was amended by adding common counts for money had and received and open account.

It seemed to be conceded by counsel in briefs that the material facts of the case are without substantial conflict. The record, we think, clearly establishes the following: On or about September 4, 1912, defendant advanced for one J.W. Lee the purchase money, to wit, $2,974.43, for certain standing timber, took Lee's note for said sum, payable to the defendant's order on demand, which note was secured by a mortgage of the purchased timber. At the same time it was agreed that Lee should cut, sell, and deliver to defendant, Shut & Keihn, the said timber so purchased, at named prices, and that said defendant would credit upon Lee's note $4 per thousand feet, the credits to be made as each lot of logs was shipped, and would pay the balance of the agreed price in cash to Lee, giving him a draft therefor. The defendant was to have the timber or logs inspected. One E.D. Schafer (who drew the draft, the subject-matter of this suit) was the inspector for defendant and was by defendant authorized to draw drafts for all logs inspected by him, and it is insisted by defendant that each draft so drawn was to cover the particular logs which he, from time to time, inspected. Under such agreement Lee proceeded to cut the timber and ship same to defendant. The first shipment credit was duly given as per above statement of the agreement and draft given as above stated to Lee, for the balance, which draft was cashed by the plaintiff, Farmers' Bank & Trust Company, and which draft, as testified to by one J.W. Tucker, president of the said bank, had bills of lading for logs attached thereto.

Out of the second shipment of logs arises this suit, and the facts as clearly established in reference thereto are as follows: It was December 20, 1912. Lee and Schafer were at the place where the timber was being cut and where the logs were inspected by Schafer. As it was so near the holiday season, Lee wanted to pay his men off at that time and requested Schafer to make out a draft then, so he could then send it to plaintiff bank and get the money on it to pay the men off, rather than have to wait until Schafer went to the office to do so. This Schafer did, making out the draft as shown in the report of the case, which represented the balance due to Lee out of the 236 inspected logs after the credit of $4 per thousand feet was given on Lee's note. Schafer gave the draft then for the purpose of assisting Lee in getting the money at that time to pay off his men. Lee made out his note payable to plaintiff bank and attached the draft thereto in the presence of Schafer and mailed same to said bank, with knowledge on the part of Schafer that the proceeds of that draft, which was to be cashed by plaintiff bank, were for the purpose of paying off the men. Bills of lading were not then attached to the draft for the reason that the logs had not then been loaded and shipped. The draft was indorsed by Lee and delivered with his note to plaintiff bank and the amount thereof paid to Lee by the said bank. Subsequently Lee delivered to the bank bills of lading for poplar logs in excess of 236, as named in the draft, defendant being named in each as consignee, whereupon the bank returned to Lee his note and forwarded the draft with bills of lading attached to defendant and payment was refused. The body of the draft reads, "At sight, with B/L attached for 236 poplar logs branded (S & K), pay to the order of J.W. Lee," and in the corner thereof and to one side is found "#2229 to 2464," which represents, it is insisted, the numbers on said 236 poplar logs. The bills of lading attached to the draft, the subject of this suit, called for largely more than 236 poplar logs, but the entire 236 logs with the numbers from 2229 to 2464 were not embraced therein, but a large portion of said numbered logs were contained in said bill of lading, and for those not so numbered were substituted other poplar logs of equal dimension and of equal quality. The logs embraced in said bills of lading were by the defendant received and accepted, and by the defendant sold or otherwise disposed of.

It is insisted by counsel for appellee that the draft not being payable unconditionally, but only upon condition that the bill of lading for the logs be attached thereto, was not negotiable, and further that the numbers in the corner of the draft were sufficient to put plaintiff on notice that it was only payable upon condition that bill of lading be attached calling for logs with those numbers, and that therefore in no event could plaintiff be held to be an innocent purchaser of the draft and protected as such.

From the view we take of this case, this insistence is without influence upon the result reached, as the decision of the case does not rest upon any theory of innocent purchaser of negotiable paper.

It is next urged, in support of the judgment rendered in favor of appellee, that, before defendant had any notice of a transfer of said draft, it made demand on Lee for balance due on his note secured as previously stated herein, and such balance was unpaid and a part thereof still remains so, and that therefore the same may be set off against this claim. This is the question of greatest importance in the case, as we view it.

In the case of Archer v. People's Savings Bank, 88 Ala. 253, 7 So. 53, the president of the bank was largely indebted to it, and while so indebted was elected to such position at an agreed salary, payable monthly, in advance; but there was no contract between him and the bank as to whether said salary would be subject to such indebtedness, and no effort was made by the bank to so apply the salary. A judgment creditor of the president garnished the bank, and in its answer the indebtedness of the president to it was set up as a matter of defense by way of set-off as against the salary claimed by the garnishing creditor to be subject to the judgment. It was held that the salary was paid by the bank without any consideration of the set-off, and that the contract showed there was an implied agreement not to claim it, and that such was no defense as against said judgment creditor.

In the instant case, the agreement between the defendant and Lee provided for a credit on each shipment of $4 per thousand feet on Lee's indebtedness. The price of the logs, which Lee was thus selling to defendant, was fixed by their contract, and the defendant was to give Lee a draft for the difference--to pay Lee the difference in money. In the first shipment this was done and plaintiff bank...