First Nat. Bank in Dodge City v. Keller

• Decision Date: 07 November 1964
• Docket Number: No. 43534,43534
• Citation: 193 Kan. 581,396 P.2d 304
• Parties: FIRST NATIONAL BANK IN DODGE CITY, Kansas, Appellant and Cross-Appellee, v. Leo KELLER, Appellee and Cross-Appellant.
• Court: Kansas Supreme Court

Page 304

396 P.2d 304

193 Kan. 581

FIRST NATIONAL BANK IN DODGE CITY, Kansas, Appellant and Cross-Appellee, v. Leo KELLER, Appellee and Cross-Appellant.

No. 43534.

Supreme Court of Kansas.

Nov. 7, 1964.

Syllabus by the Court

1. The record in an action to recover damages resulting from an alleged conspiracy to obtain credit by 'draft kiting' is examined and it is held that under the facts and circumstances set forth in the opinion the trial court did not commit reversible error (1) in overruling plaintiff's motion for a directed verdict, (2) in refusing requested instructions or in the giving of instructions to the jury, (3) in rendering judgment on the jury's verdict, and (4) in overruling plaintiff's motion for a new trial.

2. Where proof of custom or practice is incidental and not relied upon as proof of the main issue in the case, e. g., belief or state of mind, it need not be specially pleaded nor need it be shown that the opposing party had knowledge of the custom or practice.

3. A bank has until midnight of the next business day after the day of receipt and acceptance of a draft on a depositor's account within which to dishonor or refuse payment of such item under the provisions of G.S.1949, 9-1210.

James A. Williams, Dodge City, and George Stallwitz, Wichita, argued the cause, Byron G. Larson and George Voss, Dodge City, W. F. Lilleston, George C. Spradling, Henry V. Gott, Ralph M. Hope, Richard W. Stavely, Charles S. Lindberg, and Ronald M. Gott, Wichita, with them on the briefs, for appellant.

Corwin C. Spencer, Oakley, argued the cause, C. A. Spencer, Oakley, with him on the briefs, for appellee.

HATCHER, Commissioner:

This was an action to recover damages resulting from an alleged conspiracy to obtain credit by a 'draft kiting' arrangement.

The basic facts are not in dispute. The dispute largely involves the inferences to be drawn from the facts.

Everett Robinson had for many years engaged in the business of buying and selling cattle and other livestock. His business headquarters were at Ness City, Kansas. He was extensively known as a cattle dealer and trader and had a reputation throughout the cattle raising area of the United States as a man of high financial responsibility and integrity.

On February 27, 1961, Robinson opened a regular commercial bank account with plaintiff. The officers of plaintiff were familiar with the reputation of Robinson, having many customers who had dealings with him and having seen many of his checks and drafts being paid to its customers. Plaintiff, First National Bank in Dodge City, Kansas, received a financial statement from Robinson showing that he had a net worth in excess of $200,000. On the basis of the financial statement and the reputation of Robinson, plaintiff opened the account and also loaned Robinson the sum of $70,000. Robinson executed the plaintiff's regular form of depository agreement showing the terms and conditions under which the account was to be carried. Robinson stated he would buy and sell approximately $200,000 worth of cattle per week and that he would pay for livestock he purchased by check drawn against his bank account and drafts drawn upon him by the sellers. He stated that he would receive payment for cattle which he sold by checks which he would deposit in his account and also by depositing drafts drawn upon the purchasers of the cattle. Plaintiff agreed to and later did give Robinson immediate credit upon many such cattle drafts and allowed him to write checks and drafts against the balance represented by such drafts.

Mr. Louis Luetters was Robinson's bookkeeper and handled most of his banking transactions. Luetters, under authority from Robinson, would draw drafts and prepare the daily deposits made by Robinson in his account with plaintiff. He also kept the books and records showing the sale, purchase, delivery and receipt of cattle by Robinson.

After Robinson had sold and shipped cattle, Luetters would draw a draft upon the purchaser. The draft was executed by Robinson as drawer, payable to the order or Robinson as payee in the amount of the sale price of the cattle. The drawee of the draft was the purchaser of the cattle. Each draft included a notation in the upper left corner stating the head count, the sex, the weight, and price per hundred or per head of the cattle which were the subject of the draft. The draft was endorsed in blank by Robinson or Luetters and deposited in Robinson's account with checks received by him. Luetters would personally deliver the deposit to plaintiff. One of the bank's vice-presidents, either Mr. Hess or Mr. Perrier, would go over each deposit with Luetters questioning him concerning all of the items in the deposit. They would then enter the deposit in Robinson's account and send the drafts so deposited by United States mail to the Commerce Trust Company, its correspondent bank in Kansas City, for acceptance and payment by the drawee of the draft.

Robinson stated at the time the account was opened that he generally conducted business with six to ten regular customers, and that the defendant, Mr. Leo Keller, of Oakley, Kansas, was one of them. Keller did business under the name of Oakley Sales Co. and Oakley Livestock Commission Co. Plaintiff, with the approval of Robinson, indicated it would check into the financial condition of each of his regular customers.

Robinson drew 35 drafts upon defendant and deposited them in his account with plaintiff. Defendant accepted and paid 33 of the drafts. He did not pay the last two drafts presented to him which were drawn for the total sum of $44,518.30, the amount involved in plaintiff's action. The 33 drafts paid by defendant totaled approximately $725,000. The notations on the 35 drafts during this period of time indicated a sale and shipment of 5,140 head of cattle to defendant. The defendant actually received only 595 head of cattle worth approximately $78,000. Defendant never received cattle from Robinson equaling the value of the drafts drawn upon him. In order to reimburse himself he drew a draft back on Robinson or accepted a check from Robinson in the amount he paid out above the value of the cattle received.

The defendant testified that when he accepted and paid a draft drawn on him by Robinson he believed he was purchasing cattle. When the cattle did not arrive defendant called Robinson and was informed that the cattle had been sold to someone else en route and the defendant could draw on Robinson for the amount of the draft plus commission.

Neither the plaintiff nor the defendant talked to the other about their arrangements with Robinson and neither in their dealings with Robinson relied on the statements of the other.

The defendant received $2,255.90 as commission from Robinson by virtue of the reimbursement drafts upon cattle purchased from Robinson but not received by the defendant.

The plaintiff would charge and collect by debit to Robinson's account a service charge of $.50 per $100 per month on the 'float.' Plaintiff received as a service charge the sum of $1,582.16 for the month of March, 1961, the sum of $1,952.22 for the month of April, 1961, and the sum of $1,843.62 for the month of May, 1961. Robinson had dealings with persons other than the defendant through his account with the plaintiff bank which resulted in a loss to plaintiff. Plaintiff has sustained a loss of $318,618.21 upon drafts which were credited to Robinson's account and which were returned unpaid long after May 29, 1961. Robinson was adjudged a bankrupt on June 7, 1961.

Plaintiff brought this action to recover damages from the defendant in the sum of $44,518.30, which is the sum of the last two drafts which Robinson drew on defendant and defendant refused to pay. Plaintiff is seeking to recover damages against the defendant resulting from an alleged conspiracy between Robinson and the defendant and is not seeking to recover on defendant's liability on the drafts.

The defendant answered and also filed a setoff and counterclaim in which he sought to recover from the plaintiff the sum of $123,973.08 for four drafts which it had drawn on Robinson's account and which plaintiff had refused to honor.

The trial court sustained a motion for a directed verdict as to the setoff and counterclaim. The jury returned a general verdict in favor of the defendant on plaintiff's claim and the trial court entered judgment thereon. The plaintiff has appealed from the verdict and judgment and the defendant has cross-appealed from the trial court's order directing a verdict for the plaintiff on defendant's setoff and counterclaim.

The appellant first contends that the trial court erred in refusing to direct a verdict in its favor when the only reasonable inference which could be drawn from the undisputed evidence was that the appellee conspired and participated with Robinson in a 'draft kiting' scheme which enabled Robinson to fraudulently obtain credit from the appellant bank and as a consequence thereof it suffered damages.

The appellant suggests that where the evidence reasonably admits of but one conclusion and clearly shows the right of the plaintiff to a verdict a motion for a directed verdict should be sustained. (Missouri Pacific R. Co. v. Richards, 158 Kan. 178, 146 P.2d 359; Johnson, Administrator v. Huskey, 186 Kan. 282, 350 P.2d 14.)

We take no issue with appellant's statement of the law but we cannot agree with appellant's factual conclusion or the inference which it draws from the evidence. The evidence tends to show that both parties had implicit confidence in the financial responsibility and integrity of Robinson and that each was taken in by him without any fraud or misrepresentation on the part of the other. However, this...