Great Southern Nat. Bank v. Minter

• Decision Date: 20 November 1991
• Docket Number: No. 90-CA-116,90-CA-116
• Citation: 590 So.2d 129
• Parties: GREAT SOUTHERN NATIONAL BANK and Bank of Hattiesburg v. Sue Lewis MINTER, Conservator of the Estate of Sylvia Slade Lewis.
• Court: Mississippi Supreme Court

Page 129

590 So.2d 129

GREAT SOUTHERN NATIONAL BANK and Bank of Hattiesburg v. Sue Lewis MINTER, Conservator of the Estate of Sylvia Slade Lewis.

No. 90-CA-116.

Supreme Court of Mississippi.

Nov. 20, 1991.

S. Robert Hammond, Jr., Nancy E. Steen, Bryant Colingo Williams Clark Ramsay & Hammond, Hattiesburg, for appellant.

Shirley Payne, Dennis L. Horn, Horn & Payne, Jackson, for appellee.

En Banc.

BANKS, Justice, for the Court:

I

This case presents the question of whether a bank is liable where it accepts for deposit to an attorney's trust account, on the attorney's endorsement, checks made payable to an estate, in care of, or "c/o", the attorney where the attorney is in fact the conservator of the estate and where the attorney subsequently misappropriates proceeds from the account including the proceeds of the checks in question. We hold that, without more, the answer is no. We therefore reverse the order of the trial court granting summary judgment against the bank and remand this matter for further proceedings.

II

Sue Lewis Minter, Conservator of the Estate of Sylvia Slade Lewis, (hereinafter "Minter") filed a complaint against Great Southern National Bank and Bank of Hattiesburg ¹ (hereinafter "the Bank") alleging that pursuant to a settlement of a claim in the Circuit Court of Forrest County, Liberty Life Assurance Company of Boston, Massachusetts issued the following:

(1) A $125,000 check dated December 1, 1981, made payable to CONSERVATORSHIP OF SYLVIA SLADE LEWIS, which check was negotiated by Robert F. Drake completely without authority and due to the negligence or other wrongdoing of the Bank said Conservatorship never received any of the proceeds;

(2) A $17,500 check dated December 1, 1982, made payable to CONSERVATORSHIP OF SYLVIA SLADE LEWIS, which check was negotiated in such a manner that due to the negligence or other wrongdoing of the Bank said Conservatorship never received any of the proceeds;

(3) A $17,500 check dated December 1, 1983, made payable to CONSERVATORSHIP OF SYLVIA SLADE LEWIS, which check was negotiated in such a manner that due to the negligence or other wrongdoing of the Bank said Conservatorship never received any of the proceeds;

(4) A $17,500 check dated November 30, 1984, made payable to CONSERVATORSHIP OF SYLVIA SLADE LEWIS, which check was negotiated in such a manner that due to the negligence or other wrongdoing of the Bank said Conservatorship never received any of the proceeds;

(5) A $17,500 check dated November 27, 1985, made payable to CONSERVATORSHIP OF SYLVIA SLADE LEWIS, which check was negotiated in such a manner that due to the negligence or other wrongdoing of the Bank said Conservatorship never received any of the proceeds.

As a result of an automobile accident, Sylvia Slade Lewis suffered permanent brain damage and needed constant care and supervision. A suit filed on behalf of Lewis as a result of the accident produced the settlement proceeds here in question.

The Bank answered by attaching as Exhibit "A" a court order filed November 23, 1981, designating Robert D. Drake, attorney at law, as the Conservator of the Estate of Sylvia Slade Lewis, with Minter remaining as the conservator of the person of Sylvia Slade Lewis.

Minter moved for summary judgment above on September 6, 1989, and the Bank moved for the same October 23, 1989. The court granted summary judgment on December 8, 1989, and entered a $52,500 judgment plus prejudgment interest for Minter. ² 2] The bank's motion for summary judgment was denied. The findings, in pertinent part, are as follows:

2. That there were three checks issued from Liberty National Assurance Company of Boston and drawn on the Shawmut Bank of Boston all made payable to the "Conservatorship of Sylvia Slade Lewis, c/o Robert F. Drake, Esquire," which clearly showed that they were intended for the conservatorship estate and were only being sent to Drake in his capacity as attorney and not as conservator or as payee thereof.

3. Two of said checks were endorsed by Drake alone as an individual and a third was endorsed by Drake as an individual and by the "Conservatorship of Silvia (sic) Slade Lewis" without any designation of any person or entity who was purporting to be endorsing it in the official capacity of the "Conservator" of the estate and all three checks were subsequently deposited to the personal account of Robert Drake.

4. That such endorsement of said checks constituted "unauthorized endorsements", as defined by the UCC, which were or should have been apparent to the Bank on the face thereof; and its acceptance thereof made the Bank liable to the Plaintiff, Payee herein.

5. That the form of the checks was sufficient to put the Bank on notice that Drake had no authority to endorse them in his own name; and that the Bank had, or should have had, knowledge that Drake was negotiating them as a fiduciary and should not have allowed him to deposit them to his own personal account.

(R. at 82-83).

The Bank appealed citing the following issues: (1) the lower court erred in entering summary judgment for the plaintiff based upon its determination that the Bank of Hattiesburg negotiated certain checks bearing an unauthorized endorsement; (2) the Bank was entitled to summary judgment based upon the undisputed facts which demonstrate that the Bank negotiated the checks in accordance with commercially reasonable standards; and (3) the award of pre-judgment interest on a tort claim for unliquidated damages was an abuse of the trial court's discretion.

III

The bank first argues that Robert Drake, as conservator of the estate, was the proper payee of the checks and the lower court erred in its determination that the Bank of Hattiesburg negotiated the checks under an unauthorized endorsement. The court designated Robert Drake Conservator of the estate of Sylvia Slade Lewis on November 23, 1981, and his duties included:

[D]isbursement and receipt of funds belonging to the Conservatorship ... to include but not limited to the receipt of any and all funds from Liberty Mutual Insurance Company, such authority to continue until further order of this Court.

The three checks in question were endorsed and negotiated during Drake's tenure as conservator. At issue here is whether or not Drake's endorsement was authorized under the Uniform Commercial Code as set forth in Miss.Code Ann. Secs. 75-3-101 to 805 (1972).

The checks are commercial paper under Miss.Code Ann. Sec. 75-3-104 (1972) which reads as follows:

(1) Any writing to be a negotiable instrument within this chapter must

(a) be signed by the maker or drawer; and

(b) contain an unconditional promise or order to pay a sum certain in money and no other promise, order, obligation or power given by the maker or drawer except as authorized by this chapter; and

(c) be payable on demand or at a definite time; and

(d) be payable to order or to bearer.

(2) A writing which complies with the requirements of this section is

. . . . .

(b) a "check" if it is a draft drawn on a bank and payable on demand.

Id. (emphasis added).

Additionally, Miss.Code Ann. Sec. 75-3-110(1)(e) (1972) provides:

(1) An instrument is payable to order when by its terms it is payable to the order or assigns of any person therein specified with reasonable certainty.... It may be payable to the order of

(e) an estate, trust or fund, in which case it is payable to the order of the representative of such estate, trust or fund or his successors.

Id. (emphasis added).

Appellee Minter argues that the check proceeds belonged to Sylvia Slade Lewis and because her endorsement did not appear on any of them, then the Bank is liable. This argument is clearly without merit. The checks were not payable to Ms. Lewis but to her conservatorship. Any endorsement by Ms. Lewis would be wholly without effect. Ms. Lewis had been judicially declared incapable of handling her own affairs, hence the conservatorship.

Minter cites Berkheimers, Inc. v. Citizens Valley Bank, 270 Or. 807, 529 P.2d 903 (1974), as authority for the proposition that the Bank is liable where the absence of a payee's endorsement could have been readily detected by an examination of the check. Berkheimers is readily distinquishable. There involved was a check payable to joint payees, Berkheimers and Bauer & Bronec, which Citizens Valley Bank negotiated under Bauer & Bronec's sole endorsement. The court held the Bank liable for conversion under the following rationale:

Since the check could be negotiated only upon the proper endorsement of both payees, defendant's conduct in paying the entire proceeds to B & B alone without the endorsement of and to the exclusion of plaintiff, was an intentional exercise of dominion or control over the check which seriously interfered with plaintiff's right to proceeds of the check.

. . . . .

The absence of plaintiff's endorsement could be readily detected by an examination of the instrument. For these reasons we do not believe defendant acted in a commercially reasonable manner even though it may have acted in good faith.

Berkheimers, 529 P.2d at 905.

Minter also argues that the words following the comma in the checks made payable to the "Conservatorship of Sylvia Slade Lewis, c/o Robert F. Drake, Esq." were descriptive and of no legal effect citing Swiss Baco Skyline Logging, Inc. v. Haliewicz, 18 Wash.App. 21, 567 P.2d 1141 (1977). At issue in Swiss Baco was the language "Emil Haliewicz, Swiss Baco Skyline Logging, Inc." which the plaintiff argued constituted joint payee language. Swiss Baco, 567 P.2d at 1147. The court held that the comma introduced a patent ambiguity and concluded that the drafter intended that the instrument was payable to Haliewicz unconditionally. Id.

Here there may have been a material ambiguity had Drake not been the conservator designated to receive the funds. He was the conservator, however, and as such he had the right to negotiate the checks, even if his name had not appeared in any...