El Paso Nat. Bank v. Southwest Numismatic Inv. Group, Ltd.

• Decision Date: 09 March 1977
• Docket Number: No. 6556,6556
• Citation: 548 S.W.2d 942
• Parties: EL PASO NATIONAL BANK, Appellant, v. SOUTHWEST NUMISMATIC INVESTMENT GROUP, LTD., Appellee.
• Court: Texas Court of Appeals

Page 942

548 S.W.2d 942

EL PASO NATIONAL BANK, Appellant, v. SOUTHWEST NUMISMATIC INVESTMENT GROUP, LTD., Appellee.

No. 6556.

Court of Civil Appeals of Texas, El Paso.

March 9, 1977.

Rehearing Denied April 13, 1977.

Grambling, Mounce, Deffebach, Sims, Hardie & Galatzan, J. Malcolm Harris, W. Dean Hester, El Paso, for appellant.

Mayfield, Broaddus & Perrenot, Francis C. Broaddus, Jr., El Paso, for appellee.

OPINION

OSBORN, Justice.

This case arises from a suit brought by a bank against a depositor to recover the amount by which its checking account had become overdrawn. Although the depositor admitted liability on the check which caused the account to be overdrawn, it urged certain defenses which the trial Court, based on jury findings, concluded barred recovery by the Bank. The Bank appeals from a take nothing judgment. The depositor filed a cross-action seeking affirmative relief for its losses in transactions in which the Bank was involved, but, based on jury findings, it was denied any recovery. It makes no appeal.

This litigation arises from transactions involving El Paso Coin Company, Inc. (hereinafter called "Coin Company"), Southwest Numismatic Investment Group, Ltd. (hereinafter called "Southwest"), and El Paso National Bank (hereinafter called "Bank"). The Coin Company is a corporation with a paid-in capital of $6,727.50, and whose principal stockholder is Renato Ruiz. Dealing primarily in gold bullion coins, at the time of its collapse in September, 1974, the Company's volume of sales was $8,000,000.00 per month. It is now bankrupt. Southwest is a limited partnership composed of 86 partners and having a paid-in capital of $764,000.00. Renato Ruiz was a general partner although William P. Hooten served as managing partner since early 1973.

Both parties had accounts at the Bank and maintained offices in the Bank building. The parties' accounts were supervised by Harold Browning, a Senior Vice President for the Bank. In 1974, the Bank received and paid more than 2,000 insufficient funds checks drawn on the Coin Company account. Of course, deposits were being made continually to cover such checks and during the last three months of operation the account was actually overdrawn only 3 days in July, 4 days in August, and 10 days in September when the Company collapsed and business terminated. On September 19th, the account had a balance of $11,538.97, but by September 25th it was overdrawn by $644,552.34. Ultimately, the overdrafts went to $1,224,767.64. Its Statement of Account on September 30th shows a $700,000.00 credit for inventory received by the Bank, leaving the account overdrawn in the amount of $524,767.74.

A substantial portion of the business of Southwest was with the Coin Company. Because of the rising market in gold coins, those who were dealing in the coin business often would never receive delivery of their coins before they would be resold. For some time prior to the Coin Company's collapse, bulk purchases of bullion were handled by bank-to-bank shipments, so that coins were delivered to the Bank's collection department and held by it until they were redeemed by payment therefor by the Coin Company to the Bank. When Southwest purchased coins from the Coin Company, it was necessary for Southwest to pay for the coins in advance, then the funds were deposited to the Coin Company's account, after which the redeemed coins were delivered to Southwest. Because of the requirement of payment in advance and the in-bank delay in delivery, Southwest and the Coin Company agreed that if coins were not delivered within two or three days after a sale, this delay in delivery would constitute a "repurchase" by the Coin Company of the coins for which Southwest had made payment. It was also agreed that such repurchase would result in repayment to Southwest of the amount which it had paid plus a profit to Southwest. This buy-back arrangement had been accomplished between Southwest and the Coin Company on several occasions.

On September 6, 1974, Southwest purchased from the Coin Company 1,000 Mexican 50-peso gold pieces at $209.00 each, and paid the Coin Company by its check for $209,000.00, which was then deposited to the Coin Company's account at the Bank. When the coins were not delivered in accordance with the parties' agreement, the transaction was treated as a repurchase by the Coin Company. On September 19th, Mr. Ruiz agreed that the Coin Company had repurchased the 1,000 pesos and delivered to Southwest the Coin Company's check for $209,000.00. No profit was realized on this particular repurchase, but the Coin Company took a loss of $20,000.00 because of the decreasing price of gold. At the same time, Hooten agreed to make a purchase of 1,300 Austrian 100-corona pieces for $207,350.00, and he gave Mr. Ruiz Southwest's check for that amount. At the same time, it was agreed that Mr. Hooten would not deposit the Coin Company's check for $209,000.00 until the next business day so that, with the deposit of Southwest's check, the Coin Company could redeem coins from the Bank for delivery. At the time the two checks were exchanged, Southwest had a balance in its account at the Bank of $50,922.16.

On some eleven prior occasions when a Southwest check had been presented for payment for an amount in excess of its current account, Mr. Browning had checked with Mr. Hooten concerning deposits to be made which would cover the outstanding check. In each instance when Mr. Hooten had given him an assurance that he had a Coin Company check to deposit, the Southwest check in excess of the current account was paid, rather than being returned because of insufficient funds. When Southwest's check for $207,350.00 was deposited by the Coin Company on September 19, 1974, it was delivered to Mr. Browning in the Bank because the account was insufficient to make payment. On this occasion, Mr. Browning did not check with Mr. Hooten concerning whether or not he was about to make a deposit which would cover this particular check, but, instead, he relied upon a representation from Mr. Ruiz that Southwest did have a Coin Company check for deposit the following day, which would be sufficient with funds then in the account to pay Southwest's check. Mr. Browning then approved the check for payment, resulting in Southwest's account being overdrawn in the amount of $153,276.76. The next day, Mr. Ruiz placed a stop payment order against the Coin Company's $209,000.00 check, and when that check was deposited on September 20th, it could not be paid and Southwest's account was insufficient by the amount for which the Bank brought this suit.

The evidence reflected that on other occasions when the Bank had received a stop payment order, it customarily notified a customer or correspondent bank, either by telephone or wire, as a courtesy to protect against a loss. On this occasion, the Bank did not call Southwest to advise of the stop payment order, but, instead, returned the check with the stop payment order by depositing the same in the mail on the next business day, Monday, September 23rd. Such notice was delivered to Southwest on September 25th, the same day the Coin Company collapsed and the Bank took over all of its accounts and inventory. Thus, Southwest was left with its check for $207,350.00 being charged to its account, and the Austrian coins were never delivered. The Bank having taken over the Coin Company's inventory, delivery could not be made. In addition, Southwest lost the $50,922.16 in its account on September 19th which was used in part to pay for the check it gave to the Coin Company.

While Southwest admits its liability on its check to the Coin Company and recognizes its responsibility to the Bank for the amount in which its account was overdrawn, it asserts that there is no liability to the Bank by reason of its defenses under the doctrines of waiver and estoppel. It asserts that even though the Bank had an absolute right to return its September 19th check to the Coin Company, that the Bank, acting through Mr. Browning, had waived such right and had established a procedure whereby no checks which would normally be insufficient for payment would be returned without Mr. Browning having first determined that Southwest had other checks to deposit which would make its account sufficient to pay any outstanding check which had already been presented for payment, and that when Mr. Browning failed to check with Mr. Hooten on September 19th about a pending deposit and, instead, okayed the check for payment, he did not comply with existing Bank customs under which it had previously waived its right to return insufficient funds checks.

In addition, Southwest asserted that the Bank's prior conduct had induced a reasonable belief in Hooten's mind that the Bank would not declare an overdraft without giving notice to Southwest of such an occurrence, and that by reason of such conduct, the Bank is now estopped to assert an overdraft on this particular check. Southwest asserts that its contentions were sustained in the jury findings in answer to Questions Nos. 3 through 7, which were as follows:

"QUESTION NO. 3

"Do you find from a preponderance of the evidence that the El Paso National Bank established a policy or procedure of authorizing outstanding checks of the Group to be charged against its account, even though thus creating an overdraft, in reliance on obtaining an assurance from William P. Hooten that he then held a check of the Coin Company for deposit to the Group's account in a sufficient amount to cover such outstanding checks?

"Answer 'El Paso National Bank did' or 'El Paso National Bank did not'

"Answer: 'El Paso National Bank did'

"If you have answered the preceding question 'El Paso National Bank did,' then, but not otherwise, answer the following question:

"QUESTION NO. 4

"Do you find from a preponderance of the evidence that on September 20, 1974, in authorizing the $207,350 check which the Group had...