Peavy-Moore Lumber Co. v. First Nat. Bank

• Decision Date: 07 June 1939
• Docket Number: No. 1775-7272.,1775-7272.
• Citation: 128 S.W.2d 1158
• Parties: PEAVY-MOORE LUMBER CO., Inc., v. FIRST NAT. BANK OF BEAUMONT.
• Court: Texas Supreme Court

Page 1158

128 S.W.2d 1158

PEAVY-MOORE LUMBER CO., Inc., v. FIRST NAT. BANK OF BEAUMONT.

No. 1775-7272.

Commission of Appeals of Texas, Section B.

June 7, 1939.

Certified Questions from Court of Civil Appeals of Ninth Supreme Judicial District.

Suit by Peavy-Moore Lumber Co., Inc., against the First National Bank of Beaumont. From a judgment for defendant, the plaintiff appealed to the Court of Civil Appeals for the Ninth Supreme Judicial District, which reversed the judgment and rendered judgment in favor of appellant, and subsequently, pending decision of motion for rehearing, certified five questions to the Commission of Appeals.

Questions answered.

John H. Benckenstein and A. M. Huffman, both of Beaumont, for appellant.

Smith, Smith & Boyd and Victor Ippolito, all of Beaumont, for appellee.

SMEDLEY, Commissioner.

The Court of Civil Appeals for the Ninth Supreme Judicial District has certified five questions to this court, pending decision of motion for rehearing filed in that court after its reversal of the district court's judgment and rendition of judgment in favor of appellant.

The facts set out in the certificate are in substance as follows: On August 3, 1935, Long Island Machinery & Equipment Company, Inc., of New York City, New York, hereinafter referred to as Long Island Company, was indebted to appellant, Peavy-Moore Lumber Company, Inc., hereinafter referred to as Peavy-Moore, in the sum of $1,894.95. The Long Island Company was engaged in interstate commerce, and Jack Garson, brother of its president, Frank Garson, represented it as a buying and selling agent in southeastern Texas and western Louisiana; his agency was limited to the extent that his dealings with his principal's customers were subject to ratification by his principal. On the 3rd day of August, 1935, Jack Garson drew and delivered to a teller of The First National Bank of Beaumont (hereinafter referred to as the bank) for collection the following described draft: drawn on a form of customer's draft used by the said bank, dated at Beaumont, Texas, August 3, 1935, payable to the order of The First National Bank of Beaumont, Texas, for the sum of $1,000, drawn on Long Island Machinery & Equipment Company, Inc., 25 West 43rd St., New York, New York, signed "Jack Garson". On the face of the draft immediately after the words "One Thousand Dollars", the amount of the draft, and above the name of the drawee and the signature of the drawer, appear in parenthesis the following words typed in capital letters: "For account Peavy-Moore Lbr. Co.". The words last quoted are followed by another phrase in parenthesis but not in capital letters: "to apply on account loading rails at Starks, La. and Lunita, La.". This draft was forwarded by the bank in due course, was presented to the Long Island Company and duly paid by it, and the proceeds were remitted to the bank. Instead of crediting the proceeds of the draft to Peavy-Moore the bank paid the proceeds to Jack Garson under the following collection receipt given by him to the teller at the time the draft was presented for collection:

                           "First National Bank
                        "Beaumont, Texas     8/3/35
                          "Entered for Collection
                "By Jack Garson
                  % Hotel Bmt
                "Item Draft dated 8/3 Due S    $1,000.00
                Payer
                Maker Self on Long Island Mach. & Equip
                   Co., N. Y
                Remarks: . . . . . . . . . . . . 
                Apply Proceeds . . . . . . . C. C. Hold
                                 "Signature of Customer
                                     "Jack Garson"
                

The words "apply proceeds . . . C. C. Hold" meant for the bank to convert the proceeds into a cashier's check payable to Jack Garson to be held and delivered to him. Payment was made to Garson in that manner. Garson cashed the cashier's check, and was given part of its proceeds in cash and the balance in a second cashier's check payable to his order. Peavy-Moore was not a customer of the bank and carried no account with it. The bank knew nothing of the business relations between Peavy-Moore and the Long Island Company, nor that the Long Island Company was indebted to Peavy-Moore, except as advised of that fact by the wording of the draft copied above. On this point, in accepting the draft, the teller read all the language of the draft and, on the trial of this case, had an independent recollection of the contents of the draft. After the bank paid the amount of the draft to Jack Garson, Peavy-Moore received from the Long Island Company a check for $894.90, endorsed in full settlement of its account, which Peavy-Moore refused to accept. In the negotiations relating to this check Peavy-Moore learned for the first time that Jack Garson had drawn the draft and had converted the proceeds to his own use. When advised of these facts, at first Peavy-Moore refused to recognize that the payment was made for its benefit, but later it took the position that the Long Island Company had paid the bank the amount of the draft for its account, and that the bank had its money. Thereupon on the 6th day of December, 1935, Peavy-Moore filed this suit against the bank on the theory that the draft was drawn for its account, that the bank so accepted the draft and thereby became bound to collect it and to hold the proceeds subject to its order; that the proceeds constituted a trust fund for its benefit and, by paying the money to Jack Garson, the bank breached its trust and became liable to pay it the sum of $1,000, with interest at 6% per annum from the 3rd day of August, 1935, for all of which it prayed judgment. The bank answered by demurrers, general denial, and special pleas to the effect that the language of the draft "(For Account Peavy Moore Lbr Co) (to apply on account loading rails at Starks, La., and Lunita, La.)" was "merely a memorandum for the convenience of parties other than the bank", and not an instruction to the bank directing that the funds be paid to Peavy-Moore, and further that "the bank was required as a matter of law to obey the instructions of the drawer of said draft as to disposition of the proceeds", referring to the collection receipt, the written memorandum copied above. On trial before the court without a jury judgment was entered in favor of the bank, supported by conclusions of fact and law, which were duly excepted to by Peavy-Moore.

The following questions are certified:

"Question No. 1. In accepting the draft for collection in the form drawn, did The First National Bank make itself a trustee to hold the funds when collected for the account of Peavy-Moore Lumber Company?

"Question No. 2. When the draft in issue was presented for collection to Long Island Machinery & Equipment Company, Inc., at its office at 25 West 43rd Street, New York, N. Y., and there paid, and when the proceeds of the collection were returned to The First National Bank of Beaumont, at Beaumont, Texas, did it hold the proceeds of the collection as trustee to pay the funds to the Peavy-Moore Lumber Company?

"Question No. 3. Did the language `(For Account Peavy-Moore Lbr Co) (to apply on account loading rails at Starks, La., and Lunita, La.)', appearing as and where it did on the draft, amount only to a `memorandum' for the benefit of Long Island Machinery & Equipment Company, Inc., and its agent Jack Garson, or did it constitute a direction to The First National Bank for application of the funds when collected?

"Question No. 4. If you should answer that the language of the draft certified by Question No. 3 amounted merely to `a memorandum', then, on the peculiar facts of this case, was The First National Bank liable to Peavy-Moore for the $1,000.00, as held in the majority opinion?

"Question No. 5. After Jack Garson wrote the draft in issue and delivered it to The First National Bank for collection, or in connection with the delivery of the draft, he executed and filed with the bank the following written instructions:

                          "`First National Bank
                           "`Beaumont, Texas        8/3/35
                         "`Entered for Collection
                "`By Jack Garson
                   c/o Hotel Bmt
                Item Draft dated 8/3 Due S       $1,000.00
                Payer
                Maker Self on Long Island Mach. & Equip.
                 Co., N. Y.
                Remarks: ......
                Apply Proceeds......    C. C. Hold
                                "`Signature of Customer
                                      "`Jack Garson';
                

having accepted this written instrument, was The First National Bank bound to pay, or did it have the legal right to pay the proceeds of the draft when collected to Jack Garson, as it in fact did pay such proceeds to him, notwithstanding the language of the draft certified by Question No. 3?"

The certificate contains the statement that all of the facts brought forward in the statement of facts are certified. However, since the jurisdiction of the Supreme Court does not extend to questions of fact, the answers to the certified questions must be based upon the facts as found and certified by the Court of Civil Appeals, and which have been set out above, and not upon facts which might be gathered from the statement of facts. Anderson, Clayton & Co. v. State of Texas, 122 Tex. 530, 62 S.W.2d 107; Employers' Liability Assurance Corporation v. Young County Lumber Co., 122 Tex. 647, 64 S.W.2d 339; Ramin v. Cosio, 124 Tex. 471, 79 S.W.2d 617.

As is apparent from the contents of the certificate from the Court of Civil Appeals, it is necessary first to determine whether the words appearing on the face of the draft in parenthesis, and particularly the words "For account Peavy-Moore Lbr. Co.", constitute a part of the instrument itself or merely a memorandum written thereon as such for the convenience of one or more of the parties. The general rule, supported by many authorities, is that marginal notations or memoranda placed on a note or bill at the time of its execution, with the intention of making them a part of the contract, become part of the instrument and are to be given the same effect as if they were inserted in its body. Bryson v. Oliver Farm Equipment Sales Co., Tex.Civ.App., 61 S.W.2d 147; Meade v....