First Nat. Bank v. Neel

• Court: Texas Court of Appeals
• Writing for the Court: Hall
• Citation: First Nat. Bank v. Neel, 10 S.W.2d 408 (Tex. App. 1928)
• Decision Date: 17 October 1928
• Docket Number: (No. 3061.)
• Parties: FIRST NAT. BANK OF LITTLEFIELD et al. v. NEEL.

10 S.W.2d 408

FIRST NAT. BANK OF LITTLEFIELD et al. v. NEEL.

(No. 3061.)

Court of Civil Appeals of Texas. Amarillo.

October 17, 1928.

Appeal from District Court, Crosby County; Homer L. Pharr, Judge.

Action by Royal W. Neel against the First National Bank of Littlefield and others. Judgment for plaintiff, and defendants appeal. Affirmed.

E. A. Bills and E. S. Rowe, both of Littlefield, for appellants.

Bledsoe & Crenshaw, of Lubbock, for appellee.

HALL, C. J.

The appellee filed this suit to recover the value of certain bales of cotton, which he sold to W. B. Dillard, a cotton buyer, and for which he was paid by a draft drawn on the Littlefield State Bank. The plaintiff and Dillard resided in Crosby county, where the sale was made. The Littlefield State Bank had its domicile in Lamb county. J. Kahn & Co. a corporation was made a party by the original petition.

The case was tried upon the third amended original petition. In the first amended original petition, appellee discontinued his suit as to J. Kahn & Co., and complained only of W. B. Dillard and the Littlefield State Bank. In the second amended original petition, filed on May 10, 1927, the First National Bank of Littlefield was, for the first time, made a party to the suit. In the third amended original petition, appellee alleged:

That he was a resident of Crosby county, Texas; that W. B. Dillard was a resident of Crosby county, Texas, and that both the Littlefield State Bank and the First National Bank of Littlefield were banking corporations and residents of Lamb county, Texas; that on or about December 9, 1925, plaintiff was the owner of and had in his possession a certain lot of 45 bales of cotton at Lorenzo, in Crosby county, Texas, and that the defendant Dillard offered to purchase the cotton from appellee and pay for same in cash; that appellee agreed to sell the cotton for cash, and Dillard, in payment for the cotton, gave him a check or draft on the Littlefield State Bank for the purchase price of the cotton in the sum of $2,916.70; that the cotton was delivered by appellee to Dillard with the understanding that the check or draft would be paid by the Littlefield State Bank on presentation thereof, but that said check or draft, though presented with promptness, was turned down and payment refused by the Littlefield Bank; that, at the time the draft was presented to the state bank, Dillard had on deposit with said bank sufficient funds to pay said check or draft.

That Dillard disposed of said 45 bales of cotton and deposited the proceeds thereof, an amount exceeding that of the check or draft given to appellee, in the Littlefield State Bank, with the avowed purpose of taking care of appellee's check or draft on presentation, and that said deposit was dedicated to the specific purpose of paying appellee's draft; that the state bank knew, or should have known from the facts in its possession, that said deposit had been dedicated to the specific purpose of paying for the cotton, the proceeds of which were represented by the deposit; that, notwithstanding such facts, the state bank converted said special deposit to its own use and benefit; that Dillard was a dealer in cotton, and the state bank was financing his operations, and knew that he would buy cotton and then sell the same, using the proceeds from the sale to pay for the cotton which he bought, and knew that the deposit in question represented the proceeds of the particular cotton bought from appellee; that it was understood between Dillard and the state bank that a particular form of draft, such as was drawn in this case, should be given by Dillard to the seller of the cotton, and that same would be paid by the bank on presentation, and that if, in the meantime, the cotton was not sold, so that the proceeds would take care of same, the bank would hold the cotton as security, and that the giving of the draft in this case, and the refusal of the bank to pay the draft, while using the proceeds of the cotton, constituted a fraud upon the plaintiff on the part of the said Dillard and the said state bank.

That after the institution of this suit, and after the defendant the Littlefield State Bank had appeared and answered herein, the Littlefield State Bank transferred and assigned to the First National Bank of Littlefield all of the valuable assets of the Littlefield State Bank, the exact amount in value of which assets were wholly within the knowledge of the Littlefield State Bank and the First National Bank of Littlefield, but appellee averred on information and belief that the amount in value of the assets largely exceeded the amount of plaintiff's claim herein; that the First National Bank of Littlefield received all of said assets of the Littlefield State Bank in consideration of the assumption by said National Bank of all the debts and obligations of the state bank; that, if the national bank did not expressly assume said debt, it nevertheless received all or the major portion of the assets of the state bank, treated the same as its own, and commingled them with its own assets, and paid no consideration for such assets, except its express or implied assumption of the debts of the Littlefield State Bank; that, at the time such transfer was made by the state bank to the national bank, the state bank was insolvent, and immediately after the transfer of such assets the state bank ceased to carry on the banking business, and had, to all intents and purposes, ceased to exist and function as a corporate entity; that the act of the Littlefield State Bank, in transferring to the national bank all or the major portion of its assets, constituted in effect an attempted general assignment by said state bank, in violation of the statutes of this state; that at the time of such assignment the national bank was well aware of and acquainted with the failing and insolvent condition of the state bank, and the amount in value of its assets, and knew that it was receiving all or the major portion of its valuable assets, leaving practically no assets of any value with which to satisfy the creditors of the Littlefield State Bank; that by reason of such facts the national bank took the assets of the state bank subject to and impressed with the trust in favor of the creditors of the state bank, such as this plaintiff; and that, having commingled such assets with its own, so that they could not be separated and distinguished, it had become bound and obligated to the appellee to pay the debt and obligation owing to appellee by the Littlefield State Bank.

Upon these allegations, appellee prayed judgment against W. B. Dillard, the Littlefield State Bank, and the First National Bank of Littlefield, Tex. Both banks filed their pleas of privilege to be sued in Lamb county, and also filed pleas in abatement, all of which were overruled.

On September 29, 1927, the state bank filed its second amended original answer, consisting of a general demurrer, several special exceptions, and a general denial. It specially denied that the deposit was made by Dillard as a special deposit, for the special purpose of paying the check which Dillard gave to the plaintiff, alleging that the deposit was made in the regular course of business, and at that time the defendant Dillard was greatly indebted to said state bank by reason of certain overdrafts which were covered by said deposit.

On May 30, 1927, the defendant national bank answered by general demurrer, several special exceptions, and a general denial. It further alleged that the deposit with its predecessor, the state bank, was not a special deposit for the purpose of paying Dillard's draft or check to plaintiff, and denied that the Littlefield State Bank was reincorporated as a national bank. By amendment it further denied that the national bank took over all the assets of the state bank, and alleged that it paid a full and fair consideration for the assets which it took over from the state bank.

Dillard answered by general demurrer and general denial.

The issues were submitted to a jury, which, with their answers, are in effect, as follows:

No. 1. Dillard was a resident citizen of Crosby county on January 15, 1926.

No. 2. He was also a resident of Crosby county on May 10, 1927.

No. 3. That, at the time the Littlefield State Bank accepted the Kahn draft for deposit, it had notice that the draft represented the proceeds of the sale of Neel's cotton.

No. 4. That the Littlefield State Bank was in an insolvent condition on the 27th day of December, 1926.

Judgment was entered for plaintiff against all defendants for $2,916.

It will not be necessary for us to discuss the numerous propositions urged, challenging the court's action in overruling the pleas of privilege filed by the banks. The facts show, and the jury found, that the plaintiff, Neel, and the defendant Dillard both resided in Crosby county, where the action was filed. The cotton was sold by Neel to Dillard, and delivered in that county, and the draft given in payment therefor by Dillard, drawn upon himself, with the Littlefield State Bank as payee, was delivered to Neel in that county, and placed in the Lorenzo Bank, in that county, for collection by Neel. Under these facts, Neel had the right to sue Dillard in that county. Berlowitz v. Standley (Tex. Sup.) 5 S.W.(2d) 963. Dillard, as the drawee of the draft, had accepted it, and by express provisions of Revised Statutes, art. 1986, Dillard and the payee bank, which is alleged to have converted the fund, could be joined in the same suit. Milmo National Bank v. Cobbs, 53 Tex. Civ. App. 1, 115 S. W. 345. The draft in question is as follows:

                 "Littlefield, Texas, Dec. 9, 1925
                  "Pay to the order of Littlefield State Bank
                $2,916.70 twenty-nine hundred sixteen 70/100 dollars
                with exchange, account of 45 B. C., this
                day sold to W. B. Dillard, which cotton he holds
                for account Littlefield State Bank, Littlefield
                Texas, and subject to their

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