Roswell State Bank v. Lawrence Walker Cotton Co.

• Decision Date: 14 February 1952
• Docket Number: No. 5369,5369
• Citation: 56 N.M. 107,1952 NMSC 20,240 P.2d 1143
• Parties: ROSWELL STATE BANK v. LAWRENCE WALKER COTTON CO., Inc.
• Court: New Mexico Supreme Court

Page 1143

240 P.2d 1143

56 N.M. 107

ROSWELL STATE BANK v. LAWRENCE WALKER COTTON CO., Inc.

No. 5369.

Supreme Court of New Mexico.

Feb. 14, 1952.

Garland & Sanders, Las Cruces, for appellant.

A. B. Carpenter, Roswell, for appellee.

ROGERS, District Judge.

This is an appeal from a judgment of the District Court of Chaves County, New Mexico, entered upon a verdict directed in favor of the plaintiff-appellee.

Appellee is a banking corporation, with its office and principal place of business in Roswell, New Mexico, engaged in the general banking business.

The appellant is a domestic corporation organized under the laws of the State of New Mexico, with its principal place of business in Las Cruces, New Mexico, and engaged in buying and selling cotton. In this connection it employs a number of agents as cotton purchasers, delegating these agents with authority to issue and accept drafts and bills of exchange in the purchase of cotton, on its 'Cotton Acceptance Account', and furnishing these agents with a pad of such bills of exchange, each one bearing a serial number.

The appellant carried on its banking business with the State National Bank of El Paso, Texas, maintaining several accounts therein, one being labeled 'Cotton Acceptance Account', whereby money was borrowed from time to time by appellant cotton company from the State National Bank of El Paso, Texas, to honor drafts and bills of exchange drawn upon this account.

Cotton purchasing agents engaged by appellant were authorized to accept cotton acceptances when drawn by the producer, who was required to sign the acceptances or the drafts.

It is deemed advisable to set forth, at this time, the terminology of the exact cotton acceptance bill of exchange, which is the subject matter of this suit, inasmuch as repeated reference will be made to same throughout this opinion. It is as follows:

'Suspense Purchase

'Lawrence Walker Cotton Co., Inc.

No. 4688

'Las Cruces, N. M.

12-7 1949

'Pay to the Order of Herbert A. Luttrell

$10,285.21

'Ten thousand two hundred eighty five & 21/100 Dollars

'The obligation of the Acceptor arises out of the purchase from the Drawer

of 87 B/C. The Acceptor acknowledge that he holds _____ bale tickets in trust for the bank and agrees that the bank shall hold title to said cotton until the amount of the draft is repaid.

'Value Received and Charge to Account of

'Lawrence Walker Cotton Co., Inc.

'Las Cruces, New Mexico

'State National Bank, El Paso, Texas.

'I hereby certify the cotton herein sold is free from liens and encumbrances.

'Herbert A. Luttrell, Seller

'Accepted 12-7-1949

'Lawrence Walker Cotton Co., Inc.

'By Herbert A. Luttrell

'For Purchase 87 bales cotton.

'Endorsed:--Herbert A. Luttrell. Pay to the Order of any Bank, Banker or Trust Co. All prior endorsements guaranteed.

'8 Roswell State Bank Roswell, New Mexico.'

Appellant engaged one Herbert A. Luttrell as one of its cotton purchasing agents, on or about the 1st of December, 1949. It furnished him with the above-mentioned pad of cotton acceptance bills of exchange. Luttrell was to work in the Roswell area, purchasing cotton there. He was known to various members of appellee bank prior to this time. Luttrell had not executed any of these cotton acceptances until December 7, 1949, when he executed the above set forth instrument. He extracted the blank instrument from the middle of the pad, the first number of the drafts in the pad bearing serial number 4676. The draft in question was payable to the order of Herbert A. Luttrell, in the sum of $10,285.21 on the cotton account of appellant, for the stated purpose of purchasing 87 bales of cotton. Luttrell certified, as provided in the draft, that the cotton sold was free from liens and encumbrances, and he signed the draft as Herbert A. Luttrell, Seller. The draft was endorsed: 'Lawrence Walker Cotton Company, Inc., by Herbert A. Luttrell'.

On the following day, December 8th, Luttrell endorsed the draft and presented it to the appellee bank for deposit. The draft was accepted by the bank, and Luttrell was permitted by the cashier to draw a check against the deposit in the amount of $500. From the record it appears that this was the limit of the personal credit of Luttrell with the bank, and this advance was made on the same theory that a loan would be made to him had he applied for one.

On December 9th Luttrell returned to the bank, stating that he desired to withdraw all of the remaining amount of the check, advising the bank that it was necessary to have the money immediately to pay for the cotton which Luttrell had purchased. The teller of the appellee bank then stated that the draft had not as yet cleared and that payment, accordingly, could not be made. Luttrell insisted that the teller contact the drawee, the bank, State National Bank of El Paso, Texas, to verify the genuineness and validity of the draft. This was thereupon done and, after a detailed explanation of the item had been given to the State National Bank of El Paso by appellee teller, the latter was advised by the El Paso Bank that the item was good and, if the identity of Luttrell was not in question, the item should be paid. The item was paid and the balance of the draft, which had been entered in a personal account of Luttrell, was delivered to him in cash, less the expenses of the telephone call from appellee to the State National Bank of El Paso. The item in question reached payee bank on December 10, 1949. The latter immediately called Lawrence Walker, president of appellant company, inquiring whether or not the bank should pay the item and, upon instructions of the appellant and its officers, refused the same, after which complaint was filed.

As may have been gathered from the above recital of facts, the said Luttrell had, in fact, not purchased any cotton from a producer, but executed the above instrument as a means of obtaining the face value thereof by false pretenses. Luttrell immediately resigned from his position as a cotton purchasing agent and precipitously fled this jurisdiction, being thereafter apprehended in New York City by agents of the F. B. I. At the time of his arrest he had on his person $1,980, presumably the remnants of his ill-gotten gain from the above transaction. This sum was thereafter deposited in the registry of the trial court for proper application following adjudication of the rights of the parties hereto. Luttrell is now serving a prison sentence for his actions herein.

At the end of appellee's case, appellant moved for a directed verdict. This was overruled. At the end of appellant's case, appellant renewed its motion, which was likewise overruled. Appellee thereupon moved for a directed verdict in its favor. This motion is as follows: 'Mr. Carpenter: Comes now the plaintiff and after the defendant rested its case and announced it has rested and moves the Court to take the cause from the jury and direct a verdict in favor of, or moves the Court to direct a verdict of the jury and take the cause and all issues from the jury other than to return a verdict for the plaintiff, for the reason that there is no issue to be submitted to the jury, there is no dispute as to the amount involved, no controversy on it, no dispute as to agency, and the only other issue that is in the case is did the bank act honestly and in good faith, and the burden of proof according to law is upon the defendant to show bad faith on the part of the plaintiff. No proof has been offered of any kind on which any inference might be based which would establish malfides or bad faith. For the reasons stated plaintiff is entitled to judgment and is entitled to an instructed verdict.'

It would be noted that thereupon the court stated as follows:

'Is it agreed there is no other issue except bad faith on the part of the plaintiff bank?

'Mr. Garland: Yes sir.

'Mr. Carpenter: Yes sir.'

On the following morning the court stated that if counsel for plaintiff desired to renew his motion the court would direct a verdict in favor of the plaintiff. Appellee having renewed its motion, same was sustained.

While seven assignments of error appear in appellant's brief, only two need be considered on appeal. The first is the question of whether or not the court erred in applying the Fiduciaries Act of New Mexico, Article I, Chapter 36, N.M.S.A., 1941; and, second, whether the court erred in allowing appellee interest on the amount of the judgment from the time the same was paid to agent Luttrell. These points will be discussed in the order mentioned.

A review of the testimony discloses no evidence of bad faith, either actual or implied, upon any of the officers or agents of the appellee bank. The instrument itself reflects that it was commercial paper, executed for a purpose of acquiring 87 bales of cotton. Luttrell was known, not only to the teller, James Lusk, but also to Kenneth O. Wilbank, cashier of appellee bank. No evidence appears of any defalcations or frauds being accomplished by Luttrell to the knowledge of either of said individuals. Luttrell had sufficient standing with appellee bank to warrant a $500 advance on the proceeds of the large deposit.

Appellee bank, through its teller James Lusk, informed Luttrell it would take five or six days for that particular item to clear the State National Bank at El Paso, Texas. Luttrell stated that that was all right, but since he had purchased the 87 bales mentioned in the instrument, he would need $500 of the amount of the draft immediately, if possible. The teller and the cashier conferred briefly and decided that the small advance would be in order. On the following day, when Luttrell requested the balance of the draft money, a proper refusal was made by the bank. At the insistence of Luttrell, a telephone call was made to the State National Bank of El Paso, as above stated, and the information given the El Paso bank by appellee's teller, the instructions of the drawee bank to honor the...