State Nat. Bank of Houston v. Woodfin

• Decision Date: 05 December 1940
• Docket Number: No. 11087.,11087.
• Citation: 146 S.W.2d 284
• Parties: STATE NAT. BANK OF HOUSTON v. WOODFIN.
• Court: Texas Court of Appeals

Page 284

146 S.W.2d 284

STATE NAT. BANK OF HOUSTON v. WOODFIN.

No. 11087.

Court of Civil Appeals of Texas. Galveston.

December 5, 1940.

Rehearing Denied January 9, 1941.

Appeal from District Court, Harris County; Ewing Boyd, Judge.

Action by E. D. Woodfin against the State National Bank of Houston, for the market value of certain shares of stock alleged to have been converted by defendant and for the cancellation and return of a certain note. From a judgment for the plaintiff, defendant appeals.

Affirmed.

Fulbright, Crooker, Freeman & Bates, of Houston (Paul Strong, of Houston, of counsel), for appellant.

Fowler & Conn, of Houston (Ralph L. Fowler, of Houston, of counsel), for appellee.

MONTEITH, Chief Justice.

E. D. Woodfin, appellee herein, brought this action against appellant, the State National Bank of Houston, for the recovery of the market value of 31 shares of stock of the Humble Oil & Refining Company, alleged to have been converted by appellant, and for the cancellation and return of a note for the sum of $815 executed by appellee in its favor.

Appellee alleged that in October, 1937, he had arranged with appellant for a loan for the purpose of purchasing certain, shares of stock of the Kirby Petroleum Company, such loan to be represented by a note to be collaterally secured by both 31 shares of stock of the Humble Oil & Refining Company and the Kirby Petroleum Company stock to be purchased; that it was understood and agreed that the proceeds of said loan were to be paid by appellant bank for appellee to the brokerage firm through which said stock was to be purchased, only upon the actual physical delivery of said stock to appellant; that in furtherance of said agreement, appellee executed and delivered to appellant a collateral note in blank and a collateral assignment of both the Humble and Kirby stock with the express understanding that said note was not to be effective until said Kirby stock was delivered to appellant. Appellee alleged that appellant had paid the proceeds of said loan to said brokers without receiving said Kirby stock and had converted his Humble stock by refusing to return it to him, and that on April 4, 1938, it had sold 17 shares of said Humble stock.

Appellant answered by general denial and general demurrer. It alleged that, acting under appellee's instructions, it had advanced to his brokers the sum of $815 for the purchase of 200 shares of Kirby Petroleum Company stock for which appellee had executed his note and deposited as collateral 31 shares of Humble Oil & Refining Company stock. It specially pled a custom to collect the full purchase price for stock purchased prior to its transfer and delivery where money was advanced for its outright purchase in a customer's name. It alleged that appellee had declined to pay said note at maturity and that 17 of said 31 shares of Humble Oil & Refining Company stock, which had been pledged as security therefor, had been sold under a collateral pledge agreement. The remaining 14 shares of Humble stock were tendered to appellee.

In answer to special issues submitted, the jury found that the agreement between appellant and appellee was that the bank would pay them money only upon delivery to the bank of the Kirby stock; that the directions given to appellant by appellee concerning the delivery and payment for the Kirby stock were not that appellee would go over to Sterling & Baker and put in an order for said Kirby stock and that they would deliver the stock to appellant and pick up the check; that appellant did not in good faith and in the exercise of ordinary care interpret appellee's directions to mean that delivery of the Kirby stock was not required before making payment for it, and that appellant did not honestly believe that it was following appellee's directions when it allowed the money to be paid to Sterling & Baker.

Based on the jury's findings, judgment was rendered in appellee's favor for the sum of $1,043.04. He was awarded the title and possession of the 14 shares of Humble stock tendered him by appellant and said note for the sum of $815 was cancelled and annulled.

The record shows that Sterling & Baker, the brokers through whom appellee ordered the Kirby stock in question, notified appellant that said 200 shares of stock had been purchased for appellee by their brokers in New York and that the certificate therefor was being sent to Houston to be re-issued in appellee's name. On October 21, 1937 appellant delivered its check for the sum of $815 to a representative of Sterling & Baker and received from him a receipt therefor obligating Sterling & Baker to deliver said 200 shares of Kirby Petroleum Company stock to appellant. On November 2, 1937, Sterling & Baker were adjudged bankrupt and were placed in the hands of a receiver. Said 200 shares of Kirby Petroleum Company stock were never delivered to either appellant or appellee.

Appellant sets up as a defense to appellee's cause of action a custom, alleged to have existed in Houston and elsewhere in the buying and selling of stocks, that where money was advanced for the purchase of stock in a purchaser's name, it was customary to collect the full purchase price therefor prior to its transfer and delivery, and contends that said custom must be read into appellee's alleged agreement with appellant and that, therefore, appellant was not obligated thereunder to withhold the payment of the purchase price of said stock from appellee's brokers until said stock was delivered to it.

It has been uniformly held in this State that a custom, in order to constitute an element of contract, must be either shown to have been known personally to the parties to the contract, or to have been so general and universal that the parties are charged with knowledge of its existence to such an extent as to raise a presumption that they dealt with reference to it.

While the record in the instant case shows said custom to have been recognized in brokerage and banking circles, there is neither pleading that appellee was familiar with the custom relied on, or that it was so general and universal as to charge appellee with knowledge of it, nor is there evidence or circumstances which would charge him therewith. The record shows that he had been employed by an oil company for many years. He testified that he had never bought stocks through a broker prior to the purchase of the Kirby Petroleum Company stock involved herein, and that he did not know anything about any custom of stock brokers. Anderson v. Caulk, Tex.Civ.App., 5 S.W.2d 816; McNabb v. Woolfolk, Tex.Civ.App., 240 S.W. 1043.

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