Smalley v. Queen City Bank, 5683.

• Decision Date: 20 May 1936
• Docket Number: No. 5683.,5683.
• Parties: SMALLEY v. QUEEN CITY BANK et al.
• Court: Missouri Court of Appeals

94 S.W.2d 954

SMALLEY v. QUEEN CITY BANK et al.

No. 5683.

Springfield Court of Appeals. Missouri.

May 20, 1936.

Appeal from Circuit Court, Greene County; John Schmook, Judge.

"Not to be published in State Reports."

Action by H. A. Smalley against the Queen City Bank and another. From a judgment for the defendants, plaintiff appeals.

Affirmed.

John P. Moberly, of Houston, and A. P. Stone, Jr., of Springfield, for appellant.

Haymes & Dickey, of Springfield, for respondents.

ALLEN, Presiding Justice.

This action was filed in the circuit court of Greene county, on the 29th day of May, 1934, and is based upon a claim for preference by appellant, H. A. Smalley, against the Queen City Bank and O. H. Moberly, finance commissioner of the state of Missouri.

Appellant's claim is founded upon cashier's check No. 4221, issued by said bank, on August 1, 1927, in the sum of $725.67, payable to the order of H. A. Smalley, and signed by James E. Sparkman, cashier of said bank. Said check was attached to appellant's proof of claim and claim for preference, and filed with the commissioner of finance, and was identified and introduced in evidence at the trial of this cause.

At the outset of the trial in the circuit court, it was stipulated between counsel that: "The Queen City Bank on the 19th day of April, 1933, had on hand cash in the amount of approximately $2,900.00 and on the 20th day of April, 1933, cash on hand in the amount of approximately $3,100.00; that said Queen City Bank was placed in the hands of the state finance commissioner for the purpose of liquidation on or about the 3rd day of February, 1934, at which time said bank had assets in an amount more than sufficient to pay the preferred claim herein requested and such other preferred claims as had been allowed or may be allowed."

Plaintiff testified that he had lived in Van Buren, Mo., for more than 30 years; and identified the cashier's check in question. That he presented the check for payment about the 19th or 20th of April, 1933, but no part of it was paid at that time. He said he never was a customer of the bank. Never had any money on deposit there, never had a checking account in that bank, and never borrowed any money there. He claimed the delay in presenting the check for payment was occasioned by his having lost or misplaced it. That Nevatt, who lived in Springfield, bought the cashier's check on August 1, 1927, and sent it to him to pay for the real property he had purchased from him (plaintiff). That the check was lost by plaintiff, who said he found it later in a bundle of papers that had been lost in his office. That he never stopped payment on the check during the time it was lost. That he found the check in April, 1933. That for about six years this check was lost, and during that time he had not discussed it with the bank. That soon after the bank moratorium was declared he found the check and took it to a Poplar Bluff Bank for collection.

Charles Nevatt said that he had lived in Springfield, Mo., for about 10 years. That he bought the property from plaintiff, Smalley, and was indebted to Smalley on August 1, 1927, in the sum of $725.67. That he paid his money to the Queen City Bank and instructed the bank to send the money to Mr. Smalley. That he bought a cashier's check and thought Mr. Nicholson, then president of the bank, sent it to Mr. Smalley.

Upon cross-examination Nevatt said he owed Smalley $725.67, which was all he owed him. That he had an account in the bank and had part of the money, but borrowed a part of it from the bank. That he bought the cashier's check and asked Nicholson to send it to Smalley. That the check was dated the same day that he gave the bank a check on his account for the same sum. That he did not know anything about the cashier's check after that time. That Smalley did not write him thereafter, and never said anything to him about the balance due for the house he had purchased. That he heard nothing about it until plaintiff came there with the cashier's check in April, 1933, and asked about it. Upon redirect examination, Nevatt said that he borrowed $300 from the bank, and with that and his balance in the bank, paid the $725.67. That he carried a checking account with the bank for 20 years. That he did not remember whether he specified a cashier's check or just directed the bank to pay Smalley.

James E. Sparkman testified that for about two years prior to the liquidation of the bank, he was its cashier. Prior to that he had been assistant cashier for about 12 or 13 years. That the bank did not keep a separate cashier's check account in August, 1927. That they had a cashier's check register and issued cashier's checks. That their general daily statement carried so much on hand, cashier's checks outstanding and "different money," but all cash was carried in one account. That they kept no separate fund for the payment of cashier's checks. That a cashier's check is a bank's check, written on itself; is issued by a bank against itself, just as you would issue your own check on your own account. That it was an evidence of indebtedness of the bank to the party to whom the check is written. That as to the difference between a check and a draft, they carried a deposit in correspondent banks, just as you carry an account in your bank. That if they wrote a draft on their account in the First National Bank of St. Louis, it would be just like writing a check on your bank. A draft on their account in another bank would be handled exactly the same as a cashier's check, except the draft would be drawn on their account in another bank, whereas the cashier's check was drawn on their own bank, and would be paid out of any funds they had in their bank. That personally he did not remember anything about the Smalley transaction. That it would be necessary for him to refer to records to know anything about it.

On cross-examination he stated that there should be a record of Nevatt's account in the bank, of August 1, 1927. That Nevatt had an account in the bank on that date, and had an account much longer than that. That he had turned over all the bank records to the commissioner of finance, who was then in possession of them. That Nicholson was cashier of the bank in August, 1927, at the time the draft in question was purchased, and that Nevatt borrowed approximately $300 of the bank's money, for which he gave a note and later paid the note. That the $300 was not put in a separate account but with other funds, and the assets of the bank were not increased by the transaction.

On recross-examination witness stated: That if plaintiff took $300 out of the bank, and gave them his note, they traded the money for the note. That when the note was paid they just traded back again. That their assets were just the same as they were in the beginning. That one time they have the note; the other time they have the cash. That the bank got the $300. That they gave him his note for the money, which did not increase the bank's assets. That they carried them in one form or another; that none of these transactions made any difference in the assets.

Upon examination by the court, witness said: That if he remembered correctly, the capital of the bank became impaired and some adjustments were made about 1931. The bank was examined regularly by the state banking examiners from 1926 until the banking moratorium. In 1931 some capital adjustments were required on account of bad notes, but the finance department allowed them to continue banking to the moratorium in March, 1933.

Richard Johnson, for defendants, stated that he was a special finance commissioner in charge of the Queen City Bank. That he had looked for the ledger sheet showing the account of Charles Nevatt, in 1927, but had been unable to find it. That the bank was only required to keep such ledger sheets for four or five years. That he was requested by plaintiff's attorneys to find the record of the transaction concerning Nevatt's account on August 1, 1927, but was unable to do so.

The court found that the plaintiff was not entitled to a preference, under the law, and allowed the claim as a general unsecured claim.

Plaintiff's motion for new trial alleged that the court erred in ruling that the plaintiff's claim was not entitled to be classed as a preferred claim, and erred in refusing to allow the same as a preferred claim, for the reason that the undisputed evidence showed that said bank did not go into the hands of the finance commissioner for the purpose of liquidation until February 4, 1934; that on the 19th or 20th day of April, 1933, said bank had in its hands money belonging to plaintiff in sufficient amount to pay said claim, and due demand therefor was made, but payment refused by said bank without legal justification or excuse for failure to pay.

Plaintiff's motion for new trial was overruled, and the case comes to this court on appeal by plaintiff.

Appellant's assignments of error were, in substance, as follows:

(1) That the court erred in finding that appellant was not entitled to have his claim allowed as a preferred claim, in the sum of $725.67, and in finding and ruling that said claim should be allowed only as a general unsecured claim against said bank.

(2) That the court erred in ruling that appellant was not entitled to have his claim allowed as a preferred claim to the extent of $300, the amount borrowed by Nevatt, and later repaid to the bank.

(3) That the court erred in failing and refusing to allow said claim as a preferred claim, alleging that the funds held by the bank were augmented on the 1st day of August, 1927, in said sum of $725.67.

(4) That the court erred in refusing to allow said claim as a preferred claim and in holding that said claim should be allowed only as a general unsecured claim, for the reason that the undisputed evidence shows that when plaintiff presented said cashier's check to the Queen City Bank for payment on April 19 or...