Southwestern Bell Tel. Co. v. Crown Ins. Co.

• Decision Date: 05 June 1967
• Docket Number: No. 24530,24530
• Citation: 416 S.W.2d 705
• Parties: SOUTHWESTERN BELL TELEPHONE COMPANY, a corporation et al., Plaintiffs, v. CROWN INSURANCE COMPANY, a corporation, Defendant, First National Bank of Clayton, Garnishee, the South East National Bank of Chicago, Illinois, Intervenor, Appellant.
• Court: Missouri Court of Appeals

Page 705

416 S.W.2d 705

SOUTHWESTERN BELL TELEPHONE COMPANY, a corporation et al., Plaintiffs, v. CROWN INSURANCE COMPANY, a corporation, Defendant,

First National Bank of Clayton, Garnishee, the South East

National Bank of Chicago, Illinois, Intervenor, Appellant.

No. 24530.

Kansas City Court of Appeals, Missouri.

June 5, 1967.

William R. Dorsey, Clayton, John L. Hearne (Intervenor), Jefferson City, for appellant.

Charles H. Howard, Hendren & Andrae, Jefferson City, for respondent.

SPERRY, Commissioner.

This case originated upon the filing of a suit by attachment by plaintiffs against Crown Insurance Company, defendant. Plaintiffs garnisheed the First National Bank of Clayton, Mo., hereinafter referred to as garnishee, claiming ownership of a $5,000.00 certificate of deposit together with accrued interest, issued by garnishee to defendant Crown. The South East National Bank of Chicago intervened, claiming the certificate of deposit. Plaintiffs counterclaimed against intervenor claiming damages because of intervenor's wrongful refusal to pay drafts drawn on Crown and payable to plaintiffs. Eventually, the proceeds of the certificate of deposit were paid to the clerk of the circuit court of Cole County, upon order of the circuit court. Crown Insurance Company went into receivership in West Virginia, and failed to plead, and disappeared from the case. The issues presented were tried by the court between plaintiffs and intervenor. Intervenor appealed from a judgment denying its petition and ordering garnishee to pay plaintiffs $5,000.00, the proceeds of the certificate of deposit, plus accrued interest of $200.00, $1200.70 representing other funds held by garnishee on deposit to the credit of defendant, and allowing garnishee $200.00 as attorneys' fees. Plaintiffs' counterclaim was denied and it did not appeal.

Plaintiffs' claim against defendant was based on insurance claims for losses, for which drafts were drawn by defendant and delivered for payment to plaintiffs' by intervenor. These drafts were returned unpaid. Plaintiffs filed suit on March 18, 1964. Garnishee was served on March 19, and answered on April 25, 1964, admitting having in its custody $1200.70, being property of defendant. No mention was made of certificate of deposit 014. In later amended answers, garnishee admitted having in its custody funds represented by certificate of deposit 014, but made no mention of its having been notified of assignment of this certificate to intervenor. In its amended answer, filed October 16, 1964, garnishee stated that it had verbal notice from intervenor, on February 26, 1964, of the assignment, which verbal notice was confirmed by letter on March 23, 1964.

The pertinent provisions of the certificate of deposit 014, on its face, are as follows:

'THE FIRST NATIONAL BANK OF CLAYTON

CLAYTON (St. Louis) MO.

$5,000.00

No. 014

June 7, 1963

Crown Insurance Company

has deposited in this bank 5000 dols 00 cts

Payable to Themselves

or assigns, in current funds on

Return of this Certificate 12 months after date with interest at 4 per cent

per annum, payable semi-annually.

(Signed) John B. Mitchell, V.P.

authorized signature

Additional provisions on reverse side'. On the reverse side appears the following:

'ASSIGNMENT

('Effective only when entered on books of this bank)

FOR VALUE RECEIVED: I/WE HEREBY SELL, ASSIGN AND TRANSFER UNTO CROWN INSURANCE COMPANY

(Signed) William R. Dorsey

Name and Address

Treas.

(Signed) THEO M. EWING

_ _

Pres.

FOR DEPOSIT TO THE SOUTH EAST NATIONAL BANK

CROWN INSURANCE COMPANY

(Signed) THEO M. EWING

Clayton 5, Missouri

(Typed) THEODORE M. EWING,

PRES.'

One of plaintiffs' chief contentions is that garnishee had no notice of intervenor's claim of ownership of the certificate prior to service on it of notice and summons in garnishment, on March 19, 1964. They contend that, by reason thereof, they are entitled to receive the proceeds of the certificate on their garnishment, and that failure to give such notice prior to the filing of this suit is evidence that no assignment to intervenor was made prior thereto.

The only notice given to garnishee of intervenor's claimed ownership of the certificate, prior to March 19, 1964, was in a verbal conversation had between Mr. Wahala, for intervenor, and Mr. Mitchell, vice-president of garnishee. Plaintiffs say that testimony may not be considered.

Under the facts in this case we think it is immaterial to any issue herein as to whether or not garnishee was notified of intervenor's claim of ownership of the certificate of deposit 014, before March 19, 1964. The documentary evidence in this case is overwhelmingly to the effect that defendant sold and transferred certificate 014 to intervenor on December 31, 1963, for a valuable consideration; and it was not contradicted by any substantial evidence, that this certificate of deposit, together with other securities, was pledged to intervenor by defendant, June 13, 1963, to secure a large loan the proceeds of which it received and used. It also appears that, in order to secure the loan, this certificate of deposit and other securities were assigned to intervenor long prior to the institution of this lawsuit, and that the proceeds were used to repay the loan heretofore mentioned. This certificate of deposit was eventually transferred to intervenor's portfolio of owned investments. This evidence was not contradicted by any substantial evidence in the record.

In Cusick v. Cusick, Mo.App., 201 S.W.2d 437, 440, we said that the liability of a garnishee to a plaintiff is measured by its liability to the defendant.

In 10 Am.Jur.2d, Banks, Sec. 457, p. 427, appears the following:

'NATURE OF CERTIFICATE; NEGOTIABILITY, ASSIGNABILITY, and CONSTRUCTION. While a certificate of deposit may, under special circumstances, be considered nothing more than a mere receipt, in its usual and ordinary form it contains the elements of a promissory note, rather than of a mere receipt, and in general has that legal effect. The essential element of a promissory note, namely, an unconditional promise to pay a certain sum of money absolutely, is present, and the instrument is in general governed by the same rules that control instruments of that character. Properly indorsed, it is widely regarded as a negotiable instrument transferable in the same manner and with the same results as other negotiable paper. More definitely, certificates of deposit issued by bankers are without doubt negotiable in the sense that they may be transferred by indorsement so as to authorize a transferee to maintain an action thereon in his own name, and the prevailing view is that a certificate of deposit written in full and regular form, is a promissory note with all of the incidents of negotiability, and as such negotiable. Such a certificate is deemed to be a negotiable instrument within the purview of the Negotiable Instruments Law and the Uniform Commercial Code. Consequently, a bona fide purchaser for value, before maturity, and without notice of equities, is protected to the same extent as an innocent holder of other negotiable paper would be. Furthermore, even though the language of a particular certificate of deposit renders it non-negotiable, it may nevertheless be assignable so as to confer the rights of the payee upon the assignee.' (Emphasis ours.)

In 6 Am.Jur.2d Attachment and Garnishment, sec. 460, pp. 881-882, it is said:

'GENERALLY. The general rule is that an attachment or garnishment is binding upon the attached or garnished property to the extent of the defendant's interest therein, but not to any greater extent. It is accordingly said that the attaching or garnishing creditor stands in the shoes of the defendant and is in no better position with regard to the attached or garnished property or debt than the defendant. * * *'.

In Hendrickson v. Trenton National Bank, 81 Mo.App. 332, 335, the court said:

'1. On the merits of this case the sole question is, who had the better title to the money which Collier, treasurer of the Odd Fellows' lodge, owed McDaniels. Plaintiff's right is based on the garnishment process sued out from his judgment against McDaniels, while the Trenton Bank rests its claim upon the order or assignment made to it before service of the writ of garnishment. The trial court held the superior right to belong to the bank, and in our opinion this decision was clearly right. The claim or account which the debtor McDaniels had against Collier, the lodge treasurer, was a mere chose in action and which he had a right to, and in fact did assign to the bank as payment or security of the claim it held. This assignment was made prior to the garnishment and must therefore be treated as carrying a superior right to the assignee. By virtue of the garnishment the plaintiff has no better right than McDaniels had--he stands in McDaniels' shoes. And since the assignment was good as to McDaniels it is likewise as to the plaintiff. There was no need of notice even to Collier as to the assignment--though it was given, and that, too, before service of garnishment. Smith v. Sterritt, 24 Mo. 260; Knapp, Stout & Co. v. Standley, 45 Mo.App. 264.

'In the first cited case it was held, that an assignee of an account, assigned for value previous to a garnishment by virtue of an execution against assignor, has a superior right to the...