Labor Bank & Trust Co. v. Adams

• Decision Date: 09 January 1930
• Docket Number: (No. 885.)
• Citation: Labor Bank & Trust Co. v. Adams, 23 S.W.2d 814 (Tex. App. 1930)
• Parties: LABOR BANK & TRUST CO. v. ADAMS et al.
• Court: Texas Court of Appeals

Page 814

23 S.W.2d 814

LABOR BANK & TRUST CO. v.ADAMS et al.

(No. 885.)

Court of Civil Appeals of Texas. Waco.

January 9, 1930.

Error from District Court, McLennan County; Giles P. Lester, Judge.

Suit by Lynn Adams against the Labor Bank & Trust Company, and the Citizens' National Bank of Waco, in which last-named defendant filed a cross-action against the defendant first named.Judgment was entered adverse to the first-named defendant, and it brings error.Reformed and affirmed.

King, Wood & Morrow, of Houston, for plaintiff in error.

Neff, Hale & Neff and Trippett, Richey & Sheehy, all of Waco, for defendants in error.

BARCUS, J.

Defendant in error Lynn Adams, hereinafter designated as Adams, filed this suit against defendant in error Citizens' National Bank of Waco, hereinafter designated Citizens' Bank, and against plaintiff in error Labor Bank & Trust Company of Houston, hereinafter designated Labor Bank, to recover $550.44.The Citizens' Bank filed a cross-action against the Labor Bank, asking for judgment over against said bank for any amount that Adams might recover against it.The Labor Bank as well as the Citizens' Bank were each banking corporations.The Labor Bank filed its pleas of privilege to the cause of action as alleged by Adams and as to the cross-action alleged against it by the Citizens' Bank.The pleas of privilege, as well as the cause on its merits, were tried at the same term of court.The trial court overruled both of the pleas of privilege and rendered judgment in favor of Adams against the two banks, jointly and severally, and in favor of the Citizens' Bank against the Labor Bank on its cross-action for the amount that the Citizens' Bank was required to pay.The Labor Bank alone presents this appeal.

The material facts are undisputed.It appears that Adams is the state distributor for Quaker State Motor oil, with separate offices in Waco, Austin, and Houston.He personally has his residence in Waco.His brother, J. D. Adams, was in charge of the Houston office.On August 9, 1928, Adams drew a check against the Citizens' Bank of Waco for $550.44, payable to his brother, J. D. Adams, which, together with a letter, was sent via mail to J. D. Adams at Houston.In some way not revealed by the record, the check was intercepted and was presented to the Labor Bank at Houston for payment and indorsed by a person who claimed to be J. D. Adams, but who admittedly was not the J. D. Adams named as payee in the check.The Labor Bank, without indorsing said check, sent same direct to the Citizens' Bank for payment, and same was promptly paid by the Citizens' Bank and charged against the account of Lynn Adams, and the Labor Bank in turn paid to the party who cashed same a part of said money.The check was paid by the Citizens' Bank on August 13, 1928, four days after it was issued.A few days thereafter Adams learned through a telephone conversation with his brother in Houston that the check had not been received by him, and he immediately took the matter up with the Citizens' Bank and learned that the check had been paid.The Labor Bank was immediately communicated with and told that J. D. Adams' name had been forged.At said time the Labor Bank refused to reveal the amount of money in its possession that it had received from the Citizens' Bank on said forged indorsement.Adams then sent to his brother, J. D. Adams, another check for the same amount.Said money originally was intended to be and was finally used by J. D. Adams to pay the expenses incident to running the office of his brother, Lynn Adams, in Houston.Lynn Adams then filed this suit to recover the amount that the Citizens' Bank had paid to the Labor Bank on said check that had been paid on the forged indorsement of the payee, J. D. Adams.

The trial court filed findings of fact and conclusions of law.

The Labor Bank, by several propositions, contends that the trial court committed error in overruling his pleas of privilege, both as to Adams' alleged cause of action and as to the Citizens' Bank's alleged cause of action, claiming that Adams had no cause of action against it, and that the Citizens' Bank could not by cross-action hold it in the suit which Adams had brought against the Citizens' Bank in McLennan county.Under section 23, art. 5932, of the Revised Statutes, known as the Negotiable Instruments Act, it is provided, in effect, that a party who obtains possession of a check through a forged indorsement obtains no rights thereunder, and that said forged indorsement is wholly inoperative.The overwhelming weight of authority is that, where a collecting bank pays money on a forged indorsement and the check is thereafter forwarded to the bank against which same is drawn and same is paid, that the collecting bank holds said funds for and on behalf of the owner of the check, and that its payment of the funds to the party who committed the forgery, or to any other person, does not discharge its obligation, and that the owner of the check has a right to bring a suit direct against the collecting bank that has collected the funds on the forged indorsement, whether it has paid same out or not, and recover the amount thereof.Brannon's Negotiable Instruments Law (4th Ed.)p. 193;Merchants' Bank v....