Security Bank & Trust Co. v. Geren

• Citation: 288 F. 317
• Decision Date: 20 March 1923
• Docket Number: 3900.
• Parties: SECURITY BANK & TRUST CO. v. GEREN et al.
• Court: United States Courts of Appeals. United States Court of Appeals (5th Circuit)

288 F. 317

SECURITY BANK & TRUST CO. v. GEREN et al.

No. 3900.

United States Court of Appeals, Fifth Circuit.

March 20, 1923

Ballinger Mills, of Galveston, Tex., G. G. Kelley and E. Hawes, both of Wharton, Tex., and E. D. Cavin, of Galveston, Tex., for appellant.

John Neethe and F. A. Williams, both of Galveston, Tex., for appellees.

Before WALKER, BRYAN, and KING, Circuit Judges.

WALKER Circuit Judge.

In the year 1918, Alexander, Geren, Payne & Ingram, a partnership having its principal place of business at Ft. Smith, Ark was engaged in growing potatoes in the vicinity of Wharton Tex. It made an arrangement with Jesse M. Martin, who was engaged at Wharton in buying and selling for himself and as broker for others, to sell its 1918 crop of potatoes. Under that arrangement Martin was to be paid $15 a car for his services, was to collect the prices of potatoes sold, and deposit the same, less his commissions, in the Wharton Bank &amp Trust Company, a bank at Wharton, to the credit of Alexander Geren, Payne & Ingram. Without the knowledge or consent of said firm, the proceeds of the sale in May and June, 1918, of a large part of its potatoes, were deposited by Martin to his own credit in the Security Bank & Trust Company, the appellant, a bank at Wharton, and were used in paying his individual obligations to appellant and other parties. After Ingram had withdrawn from said firm and transferred to his copartners all interest in the assets thereof, including the claim asserted in this suit, such co-partners, the appellees, brought this suit, in which the appellant was charged with liability for the amount of the proceeds of the sales of such potatoes, which was applied to the payment of obligations of Martin to the appellant. The bill alleged that, at all times from the receipt to the final appropriation of such proceeds of sales of appellees' potatoes, appellant knew that such proceeds belonged to Alexander, Geren, Payne & Ingram, and that Martin had no right or authority to use them as his own. The suit resulted in a decree in favor of the appellees.

The opinion rendered by the District Judge shows that he found that appellant, when it received from Martin for deposit to his own credit drafts for the price of appellees' potatoes, and when it accepted and charged against Martin's account checks given by him to itself for past-due amounts owing by him, knew that Martin was using the money of the appellees to pay his own debts. The evidence on that issue was in sharp conflict. Uncontroverted evidence showed the following:

For several years prior to the transactions in question Martin had had dealings with the appellant, having a deposit and checking account with it. His capital was small. About 90 per cent. of the potatoes he sold and shipped during the 1918 potato marketing season belonged to other parties, for whom he acted as broker. Both the appellant and Martin had their respective places of business in the same small town. It was customary, when Martin presented a draft drawn by him with an attached bill of lading for produce, for the appellant to give him credit on his account for the amount of the draft less a discount, with the understanding that Martin would take up drafts which were not paid, and pay to the appellant the amount thereof which had been credited on his account. The appellant had some security to protect it from loss by reason of drafts so discounted for Martin not being paid, but that security was inadequate under the circumstances existing in April, 1918. At that time, by reason of the fact that a number of such drafts which had been discounted some time before had not been paid, Martin was liable to the appellant therefor to the extent of about $15,000. Those unpaid drafts were for corn which turned out to be defective, with the result that the consignees would not pay the drafts. For some time prior to the deposit by Martin of drafts to which were attached bills of lading for potatoes owned by appellees and sold by Martin, appellant's cashier was calling on Martin to pay the amounts of previously issued drafts which had not been paid. Martin did not have means of his own with which to comply with those...