Gilbert v. Citizens' Nat. Bank of Chickasha

• Decision Date: 17 October 1916
• Docket Number: Case Number: 5363
• Citation: 61 Okla. 112,160 P. 635,1916 OK 880
• Parties: GILBERT v. CITIZENS' NAT. BANK OF CHICKASHA.
• Court: Oklahoma Supreme Court

1916 OK 880

160 P. 635

61 Okla. 112

GILBERT v. CITIZENS' NAT. BANK OF CHICKASHA.

Case Number: 5363

Supreme Court of Oklahoma

Decided: October 17, 1916

Syllabus

¶0 1. Evidence--Parol Evidence Affecting Writings--Ambiguity of Contract.

Where the words employed to express a particular condition in a contract in writing are ambiguous and cannot be satisfactorily explained by reference to other portions thereof, it is not error to admit parol evidence to show the meaning intended by the parties as to the use of the words employed.

2. Banks and Banking--National Banks--Powers and Liabilities.

A plea of ultra vires is available to a national bank in a suit upon, or for the enforcement of, a contract beyond the powers of such bank, under the National Banking Act (Act Cong. June 3, 1864, c. 106, 13 Stat. 99), but if the bank has received the money or property of the plaintiff under an ultra vires contract, not malum in se, and refuses to return the same, he may maintain an action for the recovery of so much of such money or property by which the bank has actually benefited, but in an action of tort, even though an ultra vires contract was an incident leading up to the tort, the plea of ultra vires is not available to such bank.

3. Customs and Usages--Evidence--Admissibility Under Pleading.

A local custom or usage applying to a special or particular class of business may not be proven to explain the ambiguous terms of a contract, unless the existence of such custom or usage is pleaded.

4. Trial--Reception of Evidence--Sufficiency of Objection.

An objection to the introduction of such testimony that the same is "incompetent, irrelevant, and immaterial," is sufficient in the absence of an inquiry by court or counsel as to the specific grounds of the objection.

Error from District Court, Grady County; Frank M. Bailey, Judge.

Action for conversion by N. T. Gilbert, as trustee, against the Citizens' National Bank of Chickasha. Judgment for defendant, and plaintiff brings error. Reversed.

Stevens & Myers and Burwell, Crockett & Johnson, for plaintiff in error.

R. D. Welborne, Stuart, Cruce & Cruce, and S.W. Hays, for defendant in error.

BURFORD, C.

¶1 It appears from the record in this case that during the cotton buying season of 1910-11, L. M. Potts, who resided at Chickasha, Okla., was engaged in the buying and selling of cotton upon a large scale, throughout the country tributary to Chickasha; that in order to finance his operations he made arrangements with various banks, among them the Lawton State Bank of Lawton, Okla. The effect of the arrangement with the Lawton bank was that Potts was to buy cotton at various inland towns surrounding Lawton, and that the purchasers of said cotton would ship the same to Potts, at Chickasha, Altus, and Hobart, but principally to Chickasha, for concentration, compression, and reshipment, there being cotton compresses located at the points named, but none at Lawton. Bills of lading for the cotton were attached to a draft drawn by the shipper against Potts and transmitted to the Lawton State Bank, and were there accepted by Potts or his agent, and paid by the Lawton bank, which bank then took the bills of lading, detached them from the paid drafts, and transmitted them to the Citizens' National Bank of Chickasha. It is agreed that the whole contract between the Lawton bank and the Chickasha bank was contained in the correspondence. After the first three letters transmitting the bills of lading, the form used by the Lawton bank was the same, except for the names and amounts therein contained, and was as follows:

"Citizens National Bank, Chickasha, Okla.

"Gentlemen: We beg to inclose you herein shipper's order bill of lading, No. D-9, covering twenty-five bales of cotton shipped from Snyder, Oklahoma, and signed by J. A. Kreuger, as shipper, and consigned to the order of M. L. Potts, Chickasha, Oklahoma.

"Please hold same in trust for us, notifying Mr. Potts and receipting to us.

"Very truly yours,

Cashier."

¶2 The Chickasha bank acknowledged receipt of these bills of lading upon a form which stated:

"We hold in trust for your account with L. M. Potts, bills of lading or compress ticket for bales of cotton."

¶3 It was undisputed at the trial that the cotton bought by Potts at the various inland towns was of widely varying kinds and grades, and that in the cotton business when cotton was resold to Eastern buyers or to exporters, it was not only usual, but absolutely necessary, in order to make a sale, to reclassify the cotton, inasmuch as the purchasers would buy so many bales of cotton of approximately the same grade and class. In order that this might be done the Chickasha bank turned over to Potts the various bills of lading sent it by the Lawton bank. Potts paid the freight upon the bills of lading, had the cotton transferred to the compress, there compressed and reclassified, receiving from the compress company what were known as cotton tickets, one representing each bale of cotton sold and delivered, and identified by a number, and that after he had reclassified and sold the cotton he made up a new bill of lading which was attached to the draft against the purchaser for the amount of the cotton so sold, and that these drafts were regarded as cash. Necessarily in the prosecution of such a business the cotton paid for by the Lawton bank was not, and could not, be sold in lots which contained only cotton paid for by that bank, but the natural and necessary result of the business was that each draft upon the exporter was for cotton which was paid for not only by the Lawton bank, but by the Chickasha bank, which was also advancing Potts' money, and by various other banks throughout Texas and Oklahoma, which banks were advancing him funds in the same manner as the Lawton bank.

¶4 Payments were made from time to time to the creditors of Potts by means of these different drafts, and at the close of the season there was unpaid to the Lawton bank the proceeds of 536 bales of cotton, and Potts was indebted to said bank in excess of $ 24,000. It was agreed that the value of the 536 bales of cotton not accounted for was much in excess of the amount owed by Potts.

¶5 Under this state of affairs N. T. Gilbert, as trustee of the Lawton bank, which had meanwhile gone into voluntary liquidation in order to reorganize as a National Bank, brought this action against the Chickasha bank, alleging the delivery of the bills of lading under the contract as aforesaid, and that the Chickasha bank had converted the proceeds of the 536 bales of cotton to its own account and had applied the proceeds of the same to the payment and discharge of the obligations of Potts to the Chickasha bank, with knowledge of the source from which the same was derived. The Chickasha bank alleged various defenses, of which the principal ones urged at the trial were that if its conduct in turning the bills of lading over to Potts were in violation of the contract, the Lawton bank knew of the way the drafts were being handled and had received the proceeds of drafts, which included the proceeds not only cotton paid for by it, but cotton paid for by the various other banks, and had thus acquiesced in the actions of the Chickasha bank; further, that the contract made with the Lawton bank was ultra vires and void, and also denying generally the allegations of the plaintiff's petition.

¶6 Upon the issues thus formed a trial was had to a jury who returned a verdict for the defendant. From the judgment on such verdict, a motion for new trial having been overruled, the plaintiff prosecutes error to this court.

¶7 The question to be first determined is whether or not the trial court erred in admitting testimony tending to explain the contract made between the two banks. After a careful examination of the whole record we are satisfied that in so doing the trial court did not commit any error. It is true, as contended by the plaintiff, that in some cases the words "hold in trust" might have a definite, legal meaning, and that parol evidence to attempt to vary or explain such meaning would not be competent, but in construing any contract the necessary facts and surrounding circumstances which must have been and were known by the parties, must be taken into consideration. Here it must have been known to any man of ordinary business intelligence that the cotton represented by the bills of lading sent to the Chickasha bank was on the cars; that actual possession of it could not be obtained without the surrender of the bills of lading, which it is to be here noted were what is known as "shipper's order" bills of lading, and that the freight must be paid; that if these things were not done the cotton was subject to heavy demurrage charges, and ultimately, if not taken up, would be sold by the railroad company for the payment of its freight. It must have been known to the Chickasha bank that the Lawton bank had some special interest in these bills of lading, very probably as creditors of Potts. Under these circumstances, we think, it cannot be said that the Chickasha bank was bound to look only at the ordinary meaning of the words "hold in trust," and to simply take and keep the bills of lading until such time as the Lawton bank should demand their return. Especially is this true in view of the words contained in the letter, to the effect that the Chickasha bank was to notify Potts. If the Chickasha bank was simply to act as trustee for the Lawton bank, why notify Potts? In what way would he be concerned in such transactions? Clearly it was implied from the fact of the letters themselves that Potts had something to do with the transaction. Clearly from the nature of the business which must have been and was known to both banks, the interest of Potts in the bills of lading, which called for notification to him, must have something to do with his making or assisting in making some disposition of the cotton represented by the bills of lading. What...