First Nat. Bank v. First Nat. Bank

• Decision Date: 10 December 1925
• Docket Number: (No. 553-4292.)
• Citation: 278 S.W. 188
• Parties: FIRST NAT. BANK OF COLEMAN v. FIRST NAT. BANK OF BROWNWOOD.
• Court: Texas Supreme Court

278 S.W. 188

FIRST NAT. BANK OF COLEMAN v. FIRST NAT. BANK OF BROWNWOOD.

(No. 553-4292.)

Commission of Appeals of Texas, Section B.

December 10, 1925.

Error to Court of Civil Appeals of Third Supreme Judicial District.

Action by the First National Bank of Coleman against the First National Bank of Brownwood and J. W. Gates, in which defendants filed cross-actions against each other. Judgment for plaintiff and judgment for second defendant against first defendant were affirmed in part and reversed in part, and remanded by the Court of Civil Appeals (264 S. W. 1020), and plaintiff brings error. Judgment of the Court of Civil Appeals reversed. Judgment of district court affirmed.

Snodgrass, Dibrell & Snodgrass, of Coleman, for plaintiff in error.

G. N. Harrison, of Brownwood, E. H. Cavin, of Houston, and Critz & Woodward, of Coleman, for defendant in error.

Wilkinson & McGaugh, of Brownwood, for Gates and others.

SHORT, J.

This suit was originally brought in the district court of Coleman county, and the venue was afterwards changed to Brown county. On the 30th day of March, 1917, J. W. Gates and his wife, Alice E. Gates, being the owners of 625.6 acres of land in Coleman county, had negotiated a loan from the Bankers' Loan & Securities Company at Fort Worth, giving the land as security, and evidencing the transaction by certain negotiable promissory notes signed by Gates and wife and the execution and delivery of a deed of trust on the land to secure the payment of said notes at the several times of their maturity. Among these notes were three, one of which was given for $5,000, another for $4,000, and another for $3,500, payable to the Bankers' Loan & Securities Company. The plaintiff in error, the First National Bank of Coleman, where Gates lived, was his local bank. This loan appears to have been negotiated for Gates by one B. E. Hurlbut, who was an abstracter and loan agent living at Brownwood in Brown county. Gates took these three notes to his local bank and drew in favor of said bank, the plaintiff in error here, on an ordinary customer's form, three drafts in favor of the plaintiff in error on the Bankers' Loan & Securities Company for the respective amounts of each note, attaching these drafts to these notes respectively. The plaintiff in error then entered upon its books a credit in favor of Gates for the full amount of the notes and sent the notes with the drafts attached to its regular correspondent, the defendant in error the Brownwood National Bank, with a letter of instructions to allow Mr. Hurlbut to inspect the papers before forwarding them to Fort Worth. This was done on April 7, 1917.

The defendant in error received these papers comprising seven in number, to wit, the three notes, the three drafts, and the letter of instructions. In accordance with the instructions given, the defendant in error called Hurlbut's attention to the papers, who, after looking at them, expressed a wish to take them from the bank. This the defendant in error declined to allow him to do; whereupon, Hurlbut told the defendant in error to return the papers and he would communicate with Mr. Gates further about them. The defendant in error did return the papers to the plaintiff in error, but without any explanation. Whereupon, the cashier of the plaintiff in error called up the defendant in error by telephone and asked for the reason why the papers had been returned. The defendant in error explained that Hurlbut wanted to take the papers out of the bank and that the defendant in error was unwilling to trust the papers in Hurlbut's possession. Whereupon, the cashier of the plaintiff in error stated that inasmuch as the defendant in error would not trust Hurlbut, it was unwilling to risk the possession of the papers with him, but that Mr. Gates would be seen about it. Gates was seen, and in the conversation Gates proposed to take the papers to Brownwood and allow Hurlbut to inspect them in his presence and then to redeliver them to the defendant in error, to which the plaintiff in error agreed. So, the plaintiff in error delivered the package of papers to Gates, who did go to Brownwood, and after allowing Hurlbut to inspect the papers, he and Hurlbut went to the defendant in error bank and made a redelivery of the package of papers, stating that Mr. Hurlbut was assisting him in securing a loan on his land, and Hurlbut being present assented to this statement. This was on the morning of the 10th of April, 1917. In the meantime, Hurlbut had informed Gates that the Brownwood bank could not handle the $3,500 note with the draft attached in favor of the plaintiff in error drawn as it was, because it was a cash item, and requested Gates to draw a draft on the Bankers' Loan & Securities Company for $3,500, payable to the defendant in error, which Gates did, together with his wife, and instructed Hurlbut to use either one of the drafts which would get the money for him. This draft was in Hurlbut's possession at the time that the package of papers was redelivered by Gates to the defendant in error, but the existence of this draft was unknown to the defendant in error as well as to the plaintiff in error.

On the same day, that is to say, on the 10th of April, 1917, some time in the evening when there were several people in the bank transacting business, Hurlbut appeared at the cashier's window of the defendant in error and presented this draft drawn in favor of the defendant in error by Gates and wife, to which was attached the note which Gates had originally attached to the original draft drawn in favor of the plaintiff in error, and asked that the draft be cashed and that his account be given credit with the proceeds, at the same time demanding and receiving a deposit slip showing that fact. The cashier merely looked at the draft without examining any other paper attached to it and complied with the request. On the 11th day of April, 1917, the defendant in error having forwarded this particular draft with the note attached to its correspondent at Fort Worth, the same was presented to the Bankers' Loan & Securities Company and paid; the note accompanying it being retained by the loan company.

Hurlbut committed suicide on account of financial difficulties on the 18th day of May, 1917, having in the meantime withdrawn from the defendant in error bank substantially all of the proceeds of this note. The other two notes with the respective drafts attached had been approved by Hurlbut and forwarded to Fort Worth, where they were duly paid and the proceeds of the payment were remitted by the defendant in error to the plaintiff in error, but for some reason not explained by the record no investigation was made with reference to the $3,500 note and the draft attached until after Hurlbut's death, when the facts above related were made known to the plaintiff in error and a demand was made by the latter upon the defendant in error for this sum, which demand having been refused, suit was instituted by the plaintiff in error against the defendant in error and Gates.

A trial was had to a jury upon special issues, and upon the jury's answers, judgment was rendered in favor of the plaintiff in error against the defendant in error for the amount of the note and interest as well as against Gates and judgment over in favor of Gates against the defendant in error, from which judgment the defendant in error appealed to the Court of Civil Appeals, which, upon consideration of the case, reversed and remanded the judgment of the trial court in so far as it affected the defendant in error.

The findings of the jury in answer to several special issues submitted to them are as follows: (1) That the plaintiff in error received the draft payable to it as purchaser; (2) that drafts and papers redelivered to Gates by plaintiff in error were not so redelivered as his property; (3) that Robertson (defendant in error's cashier) at the time he accepted from Hurlbut the $3,500 draft, payable to the order of defendant in error, believed that Hurlbut was authorized by Gates and wife to direct the disposition of its proceeds; (4) that Gates, when he delivered to Hurlbut the $3,500 draft, payable to defendant in error, knew that if Hurlbut got possession of the $3,500 note and attached it to said draft he could, by presenting the draft and note to the defendant in error, obtain the money thereon; (5) that defendant in error, in accepting from Hurlbut the draft payable to its order and crediting Hurlbut's account with its amount, acted in accordance with the general custom and usage of banks and bankers in handling such transactions; (6) that Robertson, when he accepted the $3,500 draft from Hurlbut, in good faith believed Hurlbut was its owner; (7) that it was not agreed between plaintiff in error and Gates when the latter was given credit for the three drafts that Gates should not check against the deposit until the drafts were paid; (8) that the defendant in error had knowledge when it gave credit to Hurlbut for the $3,500 that the draft drawn in favor of it for such amount was drawn to get money belonging to Gates from the Bankers' Loan & Securities Company on the note executed by Gates and wife originally attached to the draft drawn in favor of the plaintiff in error for a like amount; (9) that the defendant in error, by the use of reasonable diligence at the time it gave Hurlbut credit for the draft, could have ascertained that the purpose of its being drawn was to get money belonging to Gates from the Bankers' Loan & Securities Company on said note; (10) that said note was delivered by Gates to defendant in error at the time he delivered to the latter the $3,500 draft payable to the plaintiff in error; (11) that at the time of the transaction, Gates knew of the custom mentioned in the answer relating thereto.

The Court of Civil Appeals reversed the judgment of the trial court and remanded the case for another trial on account of the refusal by the...