Farmers' Exchange Bank of Marshfield v. Farm & Home Sav. & Loan Ass'n of Missouri

• Citation: 61 S.W.2d 717,332 Mo. 1041
• Decision Date: 12 June 1933
• Docket Number: 32670
• Parties: Farmers Exchange Bank of Marshfield, by the Commissioner of Finance, v. Farm & Home Savings & Loan Association, Appellant
• Court: United States State Supreme Court of Missouri

61 S.W.2d 717

332 Mo. 1041

Farmers Exchange Bank of Marshfield, by the Commissioner of Finance, v. Farm & Home Savings & Loan Association, Appellant

No. 32670

Supreme Court of Missouri

June 12, 1933

Appeal from Greene Circuit Court; Hon. John Schmook, Judge.

Reversed and remanded.

J E. Haymes, Allen & Allen and Ewing, Ewing & Ewing for appellant.

(1) The respondent bank took the check in question as agent of L. H Garst for collection only, and is therefore not a bona fide purchaser for value; Art. 8, chap. 34, R. S. 1929. (2) A bank, which merely credits to a depositor's account the amount of a check, is not a bona fide purchaser for value of such check, unless the bank parted with something of value; and the credit of the depositor's account with the face value of the deposited check is not a parting of value such as to constitute the bank a bona fide purchaser for value of said check. Union Natl Bank v. Fox, 9 S.W.2d 1072; Tapee v. Varley-Wolter, 184 Mo.App. 476; Thompson v. Sioux Falls Natl. Bank, 150 U.S. 231, 37 L.Ed. 1063; Mann v. Second Natl. Bank, 30 Kan. 412; Drovers Natl. Bank v. Blue, 110 Mich. 31, 64 Am. St. Rep. 765; Union Natl. Bank v. Winsor, 101 Minn. 470, 118 Am. St. Rep. 641, 112 N.W. 99; Citizens State Bank v. Collins, 180 N.Y. 346, 73 N.E. 33, 105 Am. St. Rep. 765; 8 C. J. 482, sec. 700. (3) If the bank allows part, but not all, of the proceeds of a discounted or deposited check to be withdrawn before the payment of the check is refused, the bank is protected only to the extent of the amount so withdrawn before notice of non-payment. Secs. 2682, 5567, R. S. 1929; Dresser v. Railway Co., 93 U.S. 92, 23 L.Ed. 815; Southern Trust Co. v. Waugh, 277 F. 145; Bank v. Buckhert, 14 Ala.App. 511, 70 So. 82 -- certiorari denied in 196 Ala. 700, 72 So. 1019; Little v. Bank, 113 Ark. 72, 167 S.W. 75; Ashley & Rumelin v. Brady, 41 Idaho 160, 238 P. 314; McCasland v. Bank, 127 Ill.App. 37; Bank v. Green, 130 Iowa. 384, 106 N.W. 942; Fox v. Bank, 30 Kan. 441, 1 P. 789; Bank v. Wachman, 221 Mich. 512, 191 N.W. 5; Bank v. Hekrdle, 113 Neb. 561, 203 N.W. 1005; Bank v. McNair, 114 N.C. 335, 19 S.E. 389.

F. W. Barrett for respondent.

Farrington & Curtis and Paul W. Barrett, amici curiae.

(1) The respondent, Farmers Exchange Bank of Marshfield, took the check in question from L. H. Garst without an understanding as to ownership of the check, under an unrestricted endorsement in the usual course of business, gave credit therefor to Garst, the depositor, with the right to draw thereon, which was done, and title to the check passed to the respondent bank, a bona fide purchaser for value. Foristel v. Security Natl. Bank Sav. & Tr. Co., 320 Mo. 436, 7 S.W.2d 997; Handley v. Globe Refinery Co., 106 Mo.App. 20, 79 S.W. 1163; Mudd v. Farmers & Merc. Bank of Hunnewell, 175 Mo.App. 398, 162 S.W. 314; Jefferson Bank v. Refrigerator Co., 236 Mo. 407, 139 S.W. 545, 11 A. L. R. 1074; Citizens State Bank of Atlanta v. Ferson, 208 S.W. 136; 11 A. L. R. 1060-1070; 42 A. L. R. 497-502; 68 A. L. R. 731-734. Even in cases of checks or other negotiable paper sent for collection a prior course of dealing or custom in giving the depositor credit for the item sent for collection with the right to draw on the credit and partly drawing thereon by the depositor works a transfer of title to the check or other negotiable paper. Ayres v. Farmers & Merc. Bank, 79 Mo. 421; Bullene v. Coates, 79 Mo. 426; Flannery v. Coates, 80 Mo. 444; May v. Bank of Hughesville, 291 S.W. 170. The fact that a bank has the right to charge the check or credit back against the account of the depositor does not prohibit the bank from being a purchaser for value. Dymock v. Midland Natl. Bank, 67 Mo.App. 97, 11 A. L. R. 1067-1070. The Farmers Exchange Bank of Marshfield was a bona fide purchaser for value of the check in question within the negotiable instruments law. Secs. 2654, 2655, 2680, 2822, R. S. 1929. (a) Bank deposit is presumed to be a general deposit and one claiming otherwise has the burden of showing the deposit was not a general deposit. Ellington v. Cantley, 300 S.W. 529; Daly v. Peoples Bank, 299 S.W. 838; Paul v. Draper, 158 Mo. 197. (b) The Bank Collection Code (Art. 8, chap. 34, R. S. 1929; Laws 1929, pp. 205-209) is merely a codification of the law as it existed prior to 1929, and applies only as between banks and not in cases as the one at bar. Bank of Republic v. Republic State Bank, 42 S.W.2d 31; Cairo Natl. Bk. v. Blanton Co., 287 S.W. 839. Compare: Midwest Natl. Bank & Tr. Co. v. Parker Com. Co., 211 Mo.App. 413, 245 S.W. 217; Thompson v. Bank of Syracuse, 278 S.W. 810, 11 A. L. R. 1046; Ayers v. Farmers & Mer. Bank, 79 Mo. 421; Bullene v. Coates, 79 Mo. 426; Foristel v. Security Natl. Bank Sav. & Tr. Co., 320 Mo. 436, 7 S.W.2d 997. See also cases supra under Paragraph 1. The Bank Collection Code does not change the Negotiable Instruments Law, which governs all cases except as between banks, under the Bank Collection Code. Secs. 2664, 2665, R. S. 1929; Brannon, Negotiable Instruments Law (4 Ed.) pp. 311-318. (2) A mere credit to a depositor's account by a bank for the amount of a deposited check does not constitute the bank a holder in due course, but if the depositor owes the bank, or a part of the credit is withdrawn by the depositor, or there is a prior different course of dealing between the bank and the depositor, the bank is a holder in due course. Tapee v. Varley-Wolter Co., 184 Mo.App. 470, 171 S.W. 19, 6 A. L. R. 256; 24 A. L. R. 901; 42 A. L. R. 497; 60 A. L. R. 247; 11 A. L. R. 1060. See cases cited under Paragraph 1, supra. (3) There was no defect or infirmity in the title of Garst, who received a valuable consideration for the check and the bank is therefore protected for the full amount of the check. The defendant did not make any claim in the trial court that there was any defect in the title of the transferor of this check. Secs. 2682-2684, R. S. 1929; Citizens Bank of Edina v. Kriesghauser, 211 Mo.App. 33, 244 S.W. 107; Bank of Polk v. Wood, 173 S.W. 1093; Bath Natl. Bank v. Sonnenstrohl, 249 N.Y. 391, 164 N.E. 327; Foristel v. Security Natl. Bank Sav. & Tr. Co., 320 Mo. 436, 7 S.W.2d 997; Jefferson Bk. v. Merchants Ref. Co., 236 Mo. 407, 139 S.W. 548; Link v. Jackson, 158 Mo.App. 63, 139 S.W. 588; Jones v. Bank, 144 Mo.App. 428, 128 S.W. 829; Downs v. Horton, 287 Mo. 414, 230 S.W. 103.

Sturgis, C. Ferguson and Hyde, CC., concur.

OPINION

STURGIS

This case comes to this court from the Springfield Court of Appeals on the dissent of one of the judges of that court who deemed the majority opinion affirming the judgment of the trial court for plaintiff to be in conflict with certain decisions of the other Courts of Appeals. This gives us the same jurisdiction as would an appeal direct to this court. The suit is on an ordinary bank check payable to the order of L. H. Garst for $ 1973.75 drawn on the Nevada Trust Company, a banking institution at Nevada, Missouri. It was drawn and signed by the defendant, Farm & Home Savings & Loan Association of Nevada, Missouri, a building and loan association of this State, and was given to L. H. Garst, the payee, in settlement of a loan made to him. The plaintiff bank came into possession and claim of ownership of this check in this manner: L. H. Garst, the payee of the check lived at Marshfield, Missouri, was engaged in business there, and was and had been for several years a customer of the plaintiff bank of that town. On receiving the check in question, dated June 5, 1930, from the defendant, Farm & Home Savings & Loan Association at Nevada, drawn on a bank of that city, Mr. Garst at once took the same to the plaintiff bank at his home town, indorsed the same in blank, that is, merely wrote his name on the back of the check, and handed it over the counter to the plaintiff bank, together with a deposit slip or ticket made out by himself dated June 6, 1930, to be signed and which was signed by plaintiff bank and returned to him as evidence of the deposit. This deposit slip had written or printed thereon the words "All checks credited subject to final payment. Please indorse and list each check separately." There were appropriate blank spaces on this slip to show the amount deposited of currency, silver and gold, which spaces in this case were left blank, and then followed: "Checks as follows: Farm & Home, $ 1973.75." The word "Duplicate" was written or printed thereon and just preceding the plaintiff bank's signature at the bottom were the words: "This slip is a duplicate of our memorandum of money or checks you have left in our care."

This is all that took place at the time and the question presented by this appeal is whether the title and ownership of this check passed to and vested in the plaintiff bank, or did such bank receive it for collection as the collecting agent of the depositor, L. H. Garst, subject to certain rights growing out of that agency, but with the general title to the check and its proceeds remaining in the payee Garst. In other words, was the relationship between these parties created by this transaction that of debtor and creditor or that of agency. As having some bearing on this question, it was shown that the plaintiff bank at once, under date of June 6, 1930, placed on its books to depositor Garst's credit the full amount of the check, $ 1973.75. At the beginning of that day Garst's credit balance in plaintiff bank was $ 314.66, which was increased by the amount of this check, $ 1973.75, and checks of Garst were cashed to the amount of $ 327.33, so that at the end of the day's business Garst had a balance of $ 1961.08 or $ 12.67 less than the deposited check. On the next day the plaintiff bank cashed two small checks of Garst amounting to $ 9.11, leaving his balance in the...