Life & Casualty Ins. Co. v. First Nat. Bank of Oxford

• Decision Date: 12 January 1931
• Docket Number: 29106
• Parties: LIFE & CASUALTY INS. Co. v. FIRST NAT. BANK OF OXFORD
• Court: Mississippi Supreme Court

131 So. 809

159 Miss. 313

LIFE & CASUALTY INS. Co. v. FIRST NAT. BANK OF OXFORD

No. 29106

Supreme Court of Mississippi

January 12, 1931

Division B

APPEAL from circuit court of Lafayette county, HON. T. E. PEGRAM Judge.

Action by the First National Bank of Oxford against the Life &amp Casualty Insurance Company. From the judgment, defendant appeals and plaintiff cross-appeals. Affirmed.

Affirmed.

P. M. Estes, of Nashville, Tenn., and Jas. Stone & Sons, of Oxford, for appellant.

The payment of checks when there are no funds of the drawer in the bank constitute a loan, and an agent, without authority, cannot borrow on his principal's credit.

Merchant's National Bank v. Nichols & Shepard Co., 223 Ill. 41, 79 N.E. 38, 7 L. R. A. (N. S.) 752.

A bank which permits an unauthorized agent to overdraw his account cannot recover the amount of the overdraft from the principal upon the mere showing that the principal received the proceeds of the overdraft, where, when demand for restitution is made, the principal cannot be placed in statu quo.

Arkansas Valley Bank v. Kelly (1928), 176 Ark. 387, 3 S.W.2d 53, 58 A. L. R. 808; Central Nat. Bank of Baltimore v. Royal Ins. Co., 103 U.S. 78, 26 L.Ed. 459; Case v. Hammond Packing Co., 105 Mo.App. 168, 79 S.W. 732; First Nat. Bank v. Sidebottom, 147 Ky. 690, 145 S.W. 404; Sanborn v. First Nat. Bank, 115 Mo.App. 50, 90 S.W. 1033.

Where a bank on presentation of a check of the depositor pays to the depositor in full the amount deposited for collection, the bank thereby becomes a holder for value of the check and such action constitutes an unconditional sale of the check.

Bank of Gulfport v. Smith, 132 Miss. 63, 95 So. 785; Jefferson Bank v. Merchant's Refrigeration Co., 236 Mo. 407, 139 S.W. 545; National Bank v. Gibson, 105 Wash. 578, 179 P. 117, 6 A. L. R. 247; Taft v. Quinsigamond Nat. Bank., 172 Mass. 563, 52 N.E. 387; Wasson v. Lamb, 120 Ind. 514, 22 N.E. 729; First Nat. Bank of Cincinnati v. Burkhardt, 100 U.S. 686, 25 L.Ed. 766; Nat. Bank of N. J. v. Berrall, 70 N.J.L. 757, 58 A. 1026, 66 L. R. A. 599; Spokane Trust Co. v. Huff, 63 Wash. 225, 115 P. 80, 33 L. R. A. (N. S.) 1023; Burton v. U.S. 49 L.Ed. 482; Old Nat. Bank v. Gibson, 105 Wash. 758, 179 P. 117, 6 A. L. R. 247; Fourth Nat. Bank of Montgomery v. Bragg (1920), 102 S.E. 649, 11 A. L. R. 1034; Alexander v. Birmingham Trust & Savings Bank, 89 So. 66, 16 A. L. R. 1079; Weed v. Boston & Maine Railroad Co., 124 Me. 336, 128 A. 696, 42 A. L. R. 487; Bromfield v. Cochran, 86 Colo. 486, 283 P. 45, 68 A. L. R. 722.

The proof shows that the insurance company received nothing out of this account except what was rightfully due it. The mere fact that the insurance company received what was due it does not make it liable, especially when this money was used to replace funds previously misappropriated by Johnson.

Merchant's Nat. Bank v. Nichols & Shepard Co., 223 Ill. 41, 79 N.E. 38, 7 L. R. A. (N. S.) 752, 756; Ark. Valley Bank v. Kelley, 176 Ark. 387, 3 S.W.2d 53, 58 A. L. R. 808.

If this account was the account of the insurance company then the bank violated its deposit contract with the insurance company, by allowing the proceeds of the individual checks of Johnson previously credited to this account, to be drawn out before they were collected in violation of the alleged conditional credit contract of the deposit slip.

Old Nat. Bank v. Gibson, 105 Wash. 758, 179 P. 117, 6 A. L. R. 247; Bank of Gulfport v. Smith, 132 Miss. 63, 95 So. 785.

If this account was the account of the insurance company then the bank violated the deposit contract with the insurance company by applying funds of the insurance company to the individual debt of Johnson to the bank.

Allen v. Puritan Co., 211 Mass. 409, 97 N.E. 916, L. R. A. 1915C, 518; Note to 13 A. L. R. 324, 334; Armour Cudahy Packing Co. v. First National Bank (1892), 69 Miss. 700, 11 So. 28.

If this account was the account of the insurance company then the insurance company is not liable to the bank because the bank waived the conditional credit contract of the deposit slip and accepted the individual checks of Johnson as cash.

Old Nat. Bank v. Gibson, 105 Wash. 758, 179 P. 117, 6 A. L. R. 247; Bank of Gulfport v. Smith, 132 Miss. 63, 95 So. 785.

Creekmore & Creekmore, of Jackson, and J. W. T. Falkner, of Oxford, for appellee.

The mere fact that the collecting bank credited depositor with the check as cash did not alter that relation (the agency of the bank for collection). This is the almost universal usage to credit such collections as cash, unless the customer making such deposit is in weak credit. If the check is unpaid, it is charged off again, and the unpaid check returned to the depositor.

Winchester Milling Co. v. Bank of Winchester, 18 L. R. A. (N. S.) 451.

After the deposit of a check and the giving to the depositor of conditional credit therefor, the depositor, by presenting his own check for the amount of his balance, including such conditional credit, thus established beyond argument his desire and request that the theretofore existing condition in the credit be waived or modified. Upon the presentation by a depositor of a check against such conditional credit, the bank may do any one of a number of things: (1) It may refuse to pay the depositor's check until assured that the conditional credit shown in the account of the depositor has become absolute by the payment of the deposited check at the bank on which it is drawn. Such a course would be a refusal to waive or contract away the previously agreed upon condition involved in the depositor's credit. (2) The bank may cash the depositor's check solely upon his individual credit, looking to him solely to pay the overdraft if one shall result, which would constitute a new contract independent of and distinct from the previous conditional credit contract, and the bank could sue its depositor thereon. (3) The bank might, under the situation which we are now considering, waive the condition created for its own protection, make the conditional credit absolute, and pay the depositor's check upon the credit of the check theretofore deposited by him, but not yet collected. This would constitute an acceptance of the depositor's offer made by presenting his check, and would create a new contract wholly superseding the previous conditional credit contract. (4) Or the bank may, without inconsistency, combine the last two courses suggested, and pay the depositor's check on the combined credit of the depositor and of the deposited check; just as in making a loan to a customer upon a note secured by collateral, the bank would grant the credit upon the combined worth of the borrower and of the collateral pledged. This also would be an acceptance of the depositor's offer to supersede the contract for conditional credit.

Bank of Gulfport v. Smith, 132 Miss. 63, 95 So. 785.

Argued orally by Phil Stone and P. M. Estes, for appellant, and by H. H. Creekmore, for appellee.

OPINION

Ethridge, P. J.

The First National Bank of Oxford, Mississippi, brought suit against the appellant, insurance company, alleging that the insurance company was licensed to do business in the state of Mississippi, and that in the conduct of its business the defendant had as its superintendent, or district manager in the state of Mississippi, one T. E. Johnson, who had been such district manager since June, 1921; that since June 1921, the defendant had continuously kept and maintained an account with the plaintiff; that all of the deposits to the credit of the said account were made by its district manager, Johnson; and all checks against said account were signed in the name of the defendant...