Martin v. First State Bank, Memphis

• Court: Texas Civil Court of Appeals
• Writing for the Court: ELLIS
• Citation: Martin v. First State Bank, Memphis, 490 S.W.2d 208 (Tex. Ct. App. 1973)
• Decision Date: 22 January 1973
• Docket Number: No. 8307,8307
• Parties: L. C. MARTIN, Appellant, v. FIRST STATE BANK, MEMPHIS, Texas, Appellee.

Page 208

490 S.W.2d 208

L. C. MARTIN, Appellant, v. FIRST STATE BANK, MEMPHIS, Texas, Appellee.

No. 8307.

Court of Civil Appeals of Texas Amarillo.

Jan. 22, 1973.

Richard D. Bird, Childress, for appellant .

T. D. Smith, Houston, for appellee.

ELLIS, Chief Justice.

This is an appeal from a judgment granting a summary judgment in favor of a bank, defendant-appellee herein, in an action brought by a plaintiff seeking recovery of sums allegedly due upon Certificates of Deposit purchased by him and deposited with the bank. The defendant's motion for summary judgment sustained by the court was based upon the bank's asserted right to offset the entire amount of such Certificates of Deposit against outstanding loans owing by third parties to the bank which the plaintiff had become obligated to pay. The plaintiff challenged the court's action in granting the summary judgment, asserting that special agreements as to the application of the Certificates of Deposit precluded the allowance of the bank's claimed offsets, and that the bank had failed to establish that no genuine issues of material fact had been raised regarding the bank's asserted right of offset. Reversed and remanded.

According to the pleadings and summary judgment proof, this litigation arose out of transactions involving the provisions of a written agreement dated February 27, 1969, whereunder L. C. Martin, plaintiff-appellant herein, agreed to sell Vincent D. Kickerillo 5,100 shares of voting stock in the First State Bank of Memphis, Texas. Among other obligations undertaken by Martin under the original agreement are the following:

'2. I (Martin) agree to purchase approximately Fifty Thousand ($50,000.00) Dollars of loans from the First State Bank of Memphis for Ten ($10.00) Dollars, such loans to be excrowed (sic) with the First State Bank of Memphis and when and if collected, the proceeds of such collections will be distributed as follows:

a. $0.60 (60%) of each dollar collected will be distributed to L. C. Martin, and

b. $0.40 (40%) of each dollar collected will be distributed to the First State Bank of Memphis.

'3. I agree to place a Certificate of Deposit in the amount of One Hundred Thousand ($100,000.00) Dollars bearing interest at the rate of six and one-quarter (6 1/4) per cent per annum with the First State Bank of Memphis, endorsing and pledging same to secure all loans classified by banking examiners as of today as (a) 60 days and over (a list of which are attached), and (b) doubtful (a list of which are attached), said Certificate of Deposit and guarantee to be for a period of two (2) years from date.

'4. I further agree to guarantee by endorsement personally, the following lines of credit:

a. Lyles Construction Company and/or Euman Lyles

b. J. D. Evans

c. Alex Saied and Gibson Products Company, Inc. and Saied's Inc.--up to a total of $34,000.00 to be applied to any of the aforementioned lines

d. Jack Kinard.'

The original agreement between Martin and Kickerillo was amended by a letter agreement dated March 3, 1969, which eliminated paragraph 3 thereof (above quoted) and substituted therefor the following:

"Paragraph 3--I agree to purchase the collateral on the attached listed loans (Exhibit A), (said Exhibit A is herewith incorporated by reference) upon request by the President of the First State Bank of Memphis."

On the same date, March 3, 1969, Martin wrote a letter to John Deaver and Henry C. King, Jr., named as payees and trustees in the Certificates of Deposit in question, stating:

'I am today placing a certificate of Deposit in the amount of $54,476.52 with the First State Bank of Memphis, Memphis, Texas, said funds to be used upon request of the President of the First State Bank of Memphis, Memphis, Texas, to purchase the collateral of any loans in default listed in Exhibit A that is attached herewith and incorporated by reference.

'These funds to purchase collateral above mentioned are to be used until exhausted, in which case additional funds will be contributed until all collateral on any bad loans listed above have been purchased or at the end of two years from date hereof, any proceeds remaining are to be returned to me.'

The Exhibit 'A' above mentioned consisted of three (3) lists designated as follows: 'PAST DUE INSTALLMENT NOTES (60 days or over) 2--27--69 Indirect Paper' in the total sum of $6,176.26; 'COMMERCIAL PAST DUE FEB. 27, 1969 SECURED,' in the total sum of $159,262.72; and 'PAST DUE INSTALLMENT NOTES (60 Days or over) 2--27--69 Direct Paper,' in the total sum of $56,602.52. Each list contains separate columns showing each separate loan, balances and collateral securing the same.

Eleven (11) Certificates of Deposit, ten (10) of which were in the sum of $5,000 each, and one (1) in the sum of $4,476.52, in the total amount of $54,476.52, payable to order of Henry C. King, Jr., Trustee, and John Deaver, Trustee, bearing interest at the rate of 5 per cent per annum, maturing on March 4, 1971, were purchased by L. C. Martin and deposited with the bank. In response to interrogatories, the bank furnished copies of the eleven (11) Certificates of Deposit together with a copy of the letter addressed to the above named trustees, indicating that the bank was advised of the conditions with respect to the particular purpose and use of the Certificates of Deposit so deposited with it.

On March 2, 1971, Kickerillo assigned to the bank all of his right, title and interest in and to the agreements pertaining to the purchase of the stock from Martin.

On March 17, 1971, L. C. Martin instituted suit against the First State Bank of Memphis, Texas, seeking recovery upon the Certificates of Deposit in the total sum of $54,476.52, plus accrued interest and attorney's fees. The bank answered by general denial and pleaded defensively that Martin was obligated to it in excess of the amount of the Certificates of Deposit and that any sum due and owing to Martin had been offset against outstanding loans of third parties which he was obligated to pay to the bank. The bank further alleged that it had the right of offset on the grounds that the indebtedness for which Martin had become obligated was matured and unpaid and that it believes Martin to be insolvent and incapable of paying such obligations.

On April 20, 1972, the trial court sustained the bank's motion for summary judgment and decreed that Martin recover nothing in his suit against the bank. From this judgment Martin has brought his appeal predicated upon three assignments of error by which he contends that the trial court erred in sustaining appellee's motion for summary judgment because (1) the pleadings, interrogatories and admissions show that appellant had a cause of action against the appellee; (2) there was a genuine fact issue as to the amount of offset, if any, to which appellee was entitled; and (3) pursuant to the terms and conditions of the trust agreement, the appellant was entitled to receive the proceeds of the Certificates of Deposit upon their maturity.

The primary question for our consideration in disposing of this appeal is whether or not the deposit of the certificates is to be regarded as a general or a special deposit with the bank. When money or its equivalent is deposited in a bank without any special agreement, the law implies that it is to be mingled with the other funds of the bank, the relation of debtor and creditor is created between the bank and the depositor, and the deposit is recognized as a General deposit. McBride v. American Ry. & Lighting Co., 60 Tex.Civ.App. 226, 127 S.W . 229 (1910, no writ); First National Bank of Ranger v. Price, 262 S .W. 797 (Tex.Civ.App.--El Paso 1924, no writ). It is recognized that it is permissible for a bank to set off in equity a debt owed to it by a depositor against a General deposit. Goldstein v. Union National Bank, 109 Tex. 555, 213 S.W. 584 (1919). On the other hand a deposit made for some special application or disposition is a Special deposit and when a bank knowingly accepts a deposit for a specific purpose, it cannot thereafter divert it for its own benefit or otherwise act to defeat the purpose for which the deposit...