Rivervalley Co. v. Deposit Guaranty National Bank, GC 70-6-S.
| Decision Date | 30 June 1971 |
| Docket Number | No. GC 70-6-S.,GC 70-6-S. |
| Citation | 331 F. Supp. 698 |
| Parties | The RIVERVALLEY COMPANY, Inc., Plaintiff, v. DEPOSIT GUARANTY NATIONAL BANK et al., Defendants. |
| Court | U.S. District Court — Northern District of Mississippi |
COPYRIGHT MATERIAL OMITTED
John B. Clark, of Daniel, Coker, Horton, Bell & Dukes, Jackson, Miss., for plaintiff.
Milton H. Mitchell, of Carter, Mitchell & Robinson, Jackson, Miss., J. A. Lake, of Lake, Tindall & Hunger, Nathan P. Adams, Jr., of Felts, Russell & Adams, Greenville, Miss., for defendants.
FINDINGS OF FACT AND CONCLUSIONS OF LAW
This action was tried to the court without a jury at the United States Courthouse in Greenville, Mississippi on April 12 and 13, 1971. At the conclusion of the trial the court took the case under advisement for decision at a later date and requested briefs from counsel. Briefs having been received, the action is now ripe for decision.
The court's findings of fact and conclusions of law follow.
Plaintiff, The Rivervalley Company, Inc., (Rivervalley) is an Arkansas corporation. The capital stock of Rivervalley, consisting of 1000 shares, is owned by the family of Dr. A. F. Black. Dr. Black resides in Monticello, Arkansas where the corporation is domiciled. Dr. Black owns 550 shares of the capital stock of the corporation and is the president. Mrs. Black, his wife, owns 150 shares and is the secretary. Dr. Black's two sons, William F. Black and Charles F. Black, each own 150 shares and each is a vice-president of the corporation. The four constitute the board of directors.
Monticello, Arkansas is situated just across the Mississippi river from Greenville, Mississippi. For several years prior to the events leading to this controversy, Rivervalley was engaged in business in Greenville. In the beginning Rivervalley operated a marine type business, dealing principally with motorboats, outboard motors, engine parts, and other items of a marine nature. However, in 1962 Rivervalley decided to enter into the new and used car business in Greenville.
Prior to entering the new and used car business in Greenville Rivervalley adopted a resolution authorizing William F. and Charles F. Black to transact any and all business of the corporation at Greenville. Five days later, however, the board of directors adopted a resolution which revoked the authority previously granted William F. and Charles F. Black. The resolution in addition to withdrawing the authority of the two vice-presidents contained a provision that a contract, deed of trust or mortgage transaction could not be entered into by the corporation unless the transaction be authorized by resolution adopted by the affirmative vote of all directors or stockholders and spread upon the minutes of the corporation. The resolution further provided that any contract, deed of trust, or mortgage so authorized must be signed by three members of the board of directors or stockholders, one of which should be the president of the corporation. The corporate minutes do not reflect any change in the authority granted by the resolution just mentioned.
Rivervalley selected the Commercial National Bank of Greenville as its depository in Mississippi and submitted to the bank a certified copy of a resolution represented to have been adopted by its board of directors on August 30, 1962. The resolution authorized any two of Rivervalley's president, vice-president, secretary or treasurer, "to borrow money for and on behalf, and in the name of, this corporation and sign, execute and deliver the notes of this corporation therefore, * * * to execute deeds of trust on any property belonging to the corporation * * * and generally to do and perform any and all things which may be necessary or required by said bank in effecting loans for the corporation from said bank". The corporate minute book of the corporation does not show that this resolution was actually adopted by the board and spread upon its minutes.
The record also reflects that Rivervalley in December 1965 began doing business with First National Bank of Greenville. Rivervalley delivered to First National a certified copy of a resolution, represented by the certificate executed by the secretary of the corporation to have been adopted by its board of directors on December 9, 1965, extending authority to the president, and Charles F. Black or William F. Black to borrow funds from the bank on behalf and for the use of the corporation and to execute deeds of trust on its property to secure the advances. The terminology of the resolution is similar to that used in the resolution certified to the Commercial National Bank and the Deposit Guaranty National Bank hereinafter mentioned. The resolution does not appear in the minute book of the corporation.
After opening its account with Commercial National Bank, Rivervalley opened an account with defendant Deposit Guaranty National Bank, at its Greenville, Mississippi office. In connection with its account with the bank Rivervalley delivered to the bank a certified copy of a resolution said to have been adopted by its board of directors on January 28, 1965. This resolution contained language similar to that contained in the resolutions submitted to the Commercial National Bank and First National Bank and authorized any two of its president and vice-presidents to borrow funds for the corporation, to execute notes as evidence of such advances, and to execute for and on behalf of the corporation deeds of trust on its property to secure the debt. At the same time signature cards were furnished Deposit Guaranty containing the names of A. F. Black, President, Charles F. Black, Vice-President, and William F. Black, Vice-President. Though the certificate attached to the copy of the resolution certified that the resolution was adopted by Rivervalley's board of directors on January 28, 1965 the minutes of the corporation do not reflect that such a resolution was adopted at that time.
Rivervalley borrowed money from the Washington County Savings and Loan Association on July 29, 1965 and executed a deed of trust on certain portions of its real property situated in Greenville to secure the debt thus created. The deed of trust was signed by A. F. Black, President, and Mrs. A. F. Black, Secretary, for and on behalf of Rivervalley. The certificate of the Notary Public, before whom the deed of trust was acknowledged, recites that Dr. and Mrs. Black represented to the Notary Public that they were duly authorized by Rivervalley to execute the deed of trust. The deed of trust was recorded in the Land Records of Washington County, where the City of Greenville is situated, on July 29, 1965. Such recordation constitutes a public record and serves to give notice of its existence to the public generally.
At the inception of its business connection with Deposit Guaranty, Rivervalley applied for a line of credit. Deposit Guaranty agreed to lend Rivervalley $6,000, provided Dr. Black would personally endorse the note evidencing the loan. The loan was consummated on this basis. Financial statements were secured by the bank from both Rivervalley and Dr. Black.
Sometime after opening its account with Deposit Guaranty Rivervalley discussed with Mr. Thomas H. Coppage (Coppage), a lending officer of the bank who was in charge of Rivervalley's account, the need of the corporation from time to time for quick funds. Coppage agreed to permit Rivervalley to deposit drafts in reasonable and limited amounts for which Rivervalley would take immediate credit and against the proceeds of which immediate withdrawals could be made. The drafts were to be drawn on Dr. Black, through his banking connection in Monticello. Rivervalley agreed that Dr. Black would promptly pay the drafts when presented for payment. Initially, Deposit Guaranty sent the drafts for collection through regular channels. However, on or about February 3, 1967, Coppage learned that large amounts of money were involved in this draft arrangement. Realizing that the credit extended by virtue of the drafts to Rivervalley was greatly in excess of Rivervalley's authorized line, Coppage directed that the drafts be sent direct to Dr. Black's bank in Monticello. Beginning with February 3, 1967, the clearance time on the drafts deposited by Rivervalley with Deposit Guaranty ranged from four to twelve days.
On Monday, February 27, 1967, Coppage discovered that outstanding and unpaid drafts aggregating the sum of $18,300, drawn by Rivervalley on Dr. Black, remained unpaid at the Monticello Bank. Some of these drafts had been in Monticello awaiting payment for several days. Accordingly, Coppage sent a letter to Rivervalley, addressed to "Messrs. Blacks" calling attention to the unpaid drafts and advised that Deposit Guaranty would not permit the continuance of such an arrangement. Coppage also advised the Blacks that he had tried to call them over the telephone to discuss the matter, but had been advised by the manager in charge of the business in Greenville that they were in Monticello. Coppage requested them to call at the bank to discuss the matter on Tuesday or Wednesday, February 28, or March 1. The drafts were not paid and Coppage, on March 2 or 3, by long distance, instructed the Monticello Bank to return the drafts. At the time Coppage requested the return of the drafts there were being held for payment drafts as follows:
Date of Draft Amount
Feb. 16, 1967 $ 3,500.00
Feb. 20, 1967 3,500.00
Feb. 21, 1967 1,800.00
Feb. 21, 1967 2,000.00
Feb. 22, 1967 2,500.00
Feb. 23, 1967 2,500.00
Feb. 24, 1967 2,500.00
__________
Total $18,300.00
On March 3, 1967 the Monticello Bank returned the drafts above described, except the one dated February 16, 1967, for $3,500, which was paid on February 27, 1967. The aggregate amount of the drafts returned by the Monticello Bank...
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