Lutz v. Williams
| Decision Date | 13 February 1917 |
| Docket Number | 3064. |
| Citation | 91 S.E. 460,79 W.Va. 609 |
| Parties | LUTZ v. WILLIAMS ET AL. |
| Court | West Virginia Supreme Court |
Submitted February 6, 1917.
Syllabus by the Court.
An agent of a disclosed and known principal, conducting a checking account in a bank, in his own name, creating an overdraft therein, and executing his own checks on another bank to make the overdraft good, makes himself individually liable to the bank.
In such case, the doctrine of discharge of the agent by election to hold the principal for the debt does not apply, and subsequent acceptance by the bank of notes of the principal for the debt and collateral security therefor does not release the agent.
A contract between the principal and the bank, to which the agent is not a party, reciting acceptance of the notes and securities, the agency and the indebtedness of the principal but not releasing the agent nor, in terms or by implication making the notes payment of the debt, does not effect a novation of the debt.
The contracts being separate in such case, there is no suretyship relation between the principal and agent, imposing duty upon the bank in its transactions with them.
A bank to which a depositor owes a matured debt may appropriate a general deposit of the debtor to payment of the debt; but it has no right so to appropriate or apply a deposit made by the debtor for a known special purpose, or under a special agreement that it may be checked out or withdrawn for specific purposes.
A special deposit in a bank is subject to garnishment.
The statutory right of set-off may be waived or relinquished by an agreement founded upon a valuable consideration, and such an agreement may be implied as well as express.
By its acceptance of a special deposit, a bank impliedly binds itself not to set off against it a debt due it from the depositor.
In a proceeding by suggestion, no formal pleadings are required. The broad issue is whether the garnishee owes the judgment debtor anything or has in his possession any property belonging to him.
Error to Circuit Court, Randolph County.
Action by D. E. Lutz against J. E. Williams and others. There was judgment for defendants, and plaintiff brings error. Reversed and remanded.
Samuel T. Spears, of Elkins, A. M. Cunningham, of Parsons, and Neil Cunningham, of Elkins, for plaintiff in error.
Arnold & Arnold and W. B. Maxwell, all of Elkins, for defendants in error.
The substantial parties to this action are the plaintiff, Lutz and the People's National Bank of Elkins, a garnishee claiming the fund in controversy. On the issue duly made between them, there was a verdict in favor of the garnishee, rendered under an instruction from the court, and judgment was entered accordingly. Having a judgment against J. E. Williams for the sum of $591.66 and believing the bank to be indebted to him in the sum of about $1,500 for money deposited with it, the plaintiff proceeded against the bank by a suggestion based upon his execution. The bank founded its defense upon a claim of right to apply the deposit upon an alleged indebtedness from Williams to it, and this defense was resisted upon the ground that the indebtedness due the bank was not that of Williams, the depositor, but of one Edwin Kelton for whom Williams acted as agent at the time of the making of that indebtedness, and, as he claimed, in the making thereof, and also upon the ground of estoppel. At the conclusion of the evidence, the court refused several instructions requested by the plaintiff and gave one peremptorily requiring the jury to find for the bank.
The indebtedness for which the bank claims the deposit was incurred in November, 1909, and the deposit itself, the fund in controversy, was made in August, 1912. The latter sum represents the purchase money of certain timber severally sold by the plaintiff and six other persons to Williams and resold by him to the Virginia Timber Company. He bought without money, in his own right or as agent for the Virginia Timber Company, expecting to pay the purchase money out of the funds to be paid to him by the timber company, when the timber should be inspected and taken up. Early in August, 1912, Williams received a draft from the timber company on some bank in Boston, for the sum of $1,247.06, which he deposited with the People's National Bank, taking a deposit slip therefor, in the form of a receipt, with the verbal understanding, however, he claims, that he should not check out the money it represented until after payment of the draft. From August 5, to August 12, 1912, he drew ten checks against this deposit and a small amount of other money he had in the bank, only two of which, amounting to about $175, were paid. The draft seems to have been paid August 9th, and on August 12th Williams was notified by a letter from the bank that the deposit had been credited upon his alleged indebtedness to the bank, created in 1909. Claiming to have acted, in the receipt of this money and the deposit of the draft, as the agent of the Virginia Timber Company, Williams, together with the payees of the checks, or some of them, brought a chancery suit against the bank to compel payment out of the fund. Finding the timber company unwilling to acquiesce in this theory of the case, the chancery suit was dismissed. Then Williams confessed judgment in favor of the payees. This proceeding on Lutz's judgment is conducted under an agreement that the result thereof shall be binding upon the other six claimants of interests in the fund.
In the making of the debt of 1909, amounting to $5,562.12, three parties besides the bank were concerned: Edwin Kelton, located at Columbus, Ohio, and professing to do a timber business for himself and for his wife, as her agent; J. E. Williams, located at Elkins, W. Va., and claiming to be a purchasing agent for Kelton; and one S. S. Leak, whose location, business, and place of residence are not disclosed by the record. Kelton seems to have done business in his own name, in a Columbus bank and in a bank at Roanoke, Va. Another account was carried in the name of Williams, in the People's National Bank of Elkins. The account in the last-named bank seems to have commenced in 1909 and to have run until November, 1909, when a large overdraft occurred. From October 28, 1909, until November 9, 1909, Williams drew seven checks against his account in favor of Kelton, ranging from $486.32 to $615.32, in amount, and aggregating $3,694.61, and three in favor of S. S. Leak, aggregating about $2,200, all of which were paid by the bank. From November 5, 1909, until November 10, 1909, Williams deposited checks amounting to $7,335.42, all of which except three, amounting to about $1,750, were drawn by Kelton, and those so drawn were protested and never paid. On November 8th, Williams drew his own check on the First National Bank of Roanoke, for the sum of $2,700, payable to J. T. Lingamfelter, cashier of the People's National Bank of Elkins, and on November 9, 1909, one of like character for $1,485, both of which were also protested and never paid. These operations resulted in an indebtedness of $5,562.12 to the People's National Bank of Elkins, in the name of Williams.
Williams denies any fraud or bad faith in these transactions, insisting that Kelton was doing a timber merchandising business in good faith and that he represented him as agent therein, with the knowledge of the officers of the bank. They, the cashier and assistant cashier, do not deny that he represented himself to them as being such an agent, but the former strenuously denies that the bank dealt with him in his alleged representative capacity. Williams insists that the checks out of which the overdraft arose were drawn in the regular and usual course of the business, as conducted through the banks, and that the nonpayment of Kelton's checks deposited by him, to cover his own, was due to Kelton's failure in business, and that the two large checks drawn by him failed of payment for the like reason; the Roanoke bank refusing to furnish money on Kelton's notes to provide for them agreeably to its former practice.
On December 3, 1909, a contract was entered into between Edwin Kelton and Laura B. Kelton, his wife, and Edwin Kelton agent, parties of the first part, and the People's National Bank of Elkins, party of the second part, reciting indebtedness of Kelton to the bank, in his own right and as agent, in the sum of $5,562.12; the desire of the parties of the first part to secure the payment thereof, and of the parties of the second part, upon being made secure in the payment thereof, to grant the first parties reasonable indulgence; the delivery to the bank of certificates of stock in a mining corporation for stock of the par value of $6,000, by Laura B. Kelton, in consideration of the premises, and delivery of stock of the same company of the par value of $4,000 and stock in the Great American Life Insurance Company of the par value of $500, by J. E. Williams, described as agent of said Edwin Kelton, "for the purpose of assisting" him, all of which stock was to be held as collateral security; the conveyance of a tract of land to Richard Chaffey, the president of the bank and trustee, by the Keltons, as further security; and the execution of their six joint and several promissory notes to the bank, four of which were for $695.26 each, and the other two for $1,309.52 each, by Edwin Kelton and Edwin Kelton, agent. Williams is not described in the contract as a party to it and did not sign it. Though an officer of the bank says his signature thereto was requested, he denies the...
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