State Nat. Bank of Marshall v. Tittle

• Court: Texas Supreme Court
• Writing for the Court: Brewster
• Citation: State Nat. Bank of Marshall v. Tittle, 183 S.W.2d 720, 143 Tex. 235 (Tex. 1944)
• Decision Date: 15 November 1944
• Docket Number: No. A-184.,A-184.
• Parties: STATE NAT. BANK OF MARSHALL v. TITTLE.

Page 720

183 S.W.2d 720

STATE NAT. BANK OF MARSHALL v. TITTLE.

No. A-184.

Supreme Court of Texas.

November 15, 1944.

Rehearing Denied December 20, 1944.

Error to Court of Civil Appeals of Sixth Supreme Judicial District.

Action by the State National Bank of Marshall, a national bank in voluntary liquidation, against W. D. Tittle to recover upon a note. Judgment for plaintiff was reversed by the Court of Civil Appeals and rendered for defendant, 179 S.W.2d 1010, and plaintiff brings error.

Judgment of the Court of Civil Appeals affirmed.

Jones & Jones, of Marshall, for plaintiff in error.

Cary M. Abney, Sam B. Hall, and Frank M. Scott, all of Marshall, for defendant in error.

BREWSTER, Commissioner.

This is a suit on a note brought by the State National Bank of Marshall, petitioner, through its voluntary liquidating committee, against W. D. Tittle, respondent. A trial court judgment on special issues for petitioner was reversed by the Court of Civil Appeals and rendered for Tittle. 179 S.W.2d 1010.

Tittle's defense was that the note was an accommodation note. He alleged that on December 31, 1941, petitioner, a national bank with a capital stock of $100,000 and a surplus of $50,000, was not permitted by law to lend more than $15,000 to any customer; that Waterman Brick & Tile Company, a corporation, was then indebted to petitioner on notes for approximately $15,000 and on overdrafts of approximately $10,000, which was in excess of what the law allowed petitioner to lend it. He alleged that the brick company had a contract with the United States to furnish its products in the construction of an ordnance plant but did not have the funds either to fulfill its contract or to liquidate its overdraft with petitioner; that the government then owed the brick company about $57,000 for materials already delivered but that payment "was being delayed by the usual * * * red tape encountered in dealing with the government"; that petitioner and the brick company, "both acting through W. M. Thomas, who was duly authorized to act for each of them" in securing funds to pay the overdraft and to enable the brick company to continue, approached him and agreed that if he would execute to petitioner his note for $3,000 and allow the proceeds to be used "to take up checks which the Brick Company had drawn on the plaintiff, and which plaintiff had paid and had not charged to the account of the Brick Company because its funds on deposit were insufficient," the first money received for the brick company on its contract would be applied to payment of the note and that he would never be called upon to pay it. He alleged that this note was renewed on April 7, 1942, under Thomas' representations that the money due the brick company had not come in but would be applied to the note when received and that Tittle would never be required to pay the note; that on July 17, 1942, he executed the note sued on in renewal of the balance due on the prior note, Thomas representing that only $1000 had come in for the brick company on the ordnance plant contract and renewing the other representations made when the original note and its first renewal were executed. He alleged reliance upon these representations in each instance and that otherwise he would not have executed the original note or either of its renewals. He alleged that the agreement had with Thomas when he executed the original $3,000 note operated as an assignment of enough of the money to become due on the brick company's contract to liquidate the note, and that when the bank received that money it took the same in trust for his benefit to hold him harmless on the note. He alleged that from January 13, 1942, to March 27, 1942, $36,084.39 was paid "to the Brick Company and to the plaintiff" on the ordnance plant contract, but that, in violation of the agreement with him, these sums were withdrawn by petitioner from the brick company's account and applied to the payment of the overdrafts and other obligations owing it by the brick company.

Petitioner answered that if the agreement was made it presented a scheme by Tittle and Thomas to evade the national banking laws, and "to deceive the stockholders of plaintiff Bank, as well as its creditors and those in public authority"; that thereby Tittle "joined in making a false material statement, or causing the over-valuation of security or assets, which he knew or was charged with knowledge would be reported as a part of the assets of plaintiff Bank"; that the agreement was against public policy because it was an effort to conceal the true condition of petitioner's assets and the brick company's account. Further, petitioner denied that it was accommodated by the transaction, which was for the benefit of either Thomas or the brick company in which Thomas was financially interested; that the proceeds of Tittle's $3,000 note were by him loaned to Thomas in return for the latter's promissory note for that amount; that Thomas' effort to bind it in the matter of the brick company's overdraft was beyond his authority and so foreign to customary banking transactions as to charge Tittle with notice that Thomas could not bind petitioner thereby; and that Thomas was acting either for the brick company or himself in a matter wherein their interest was wholly adverse to petitioner's interest.

Tittle replied that in making the note he was merely lending his credit to petitioner to make a lawful disposition of the brick company's overdraft, already in existence, believing that petitioner would show by its record the conditions under which it was given; and that if petitioner's allegations were true it took his note and made its agreement with him as a part of an "illegal and fraudulent scheme" of which he had no knowledge and with which he had no connection, other than as its innocent victim. He replied, further, that after the agreement had been made Thomas wrote the note, gave a deposit slip, prepared a check of the proceeds from Tittle to himself, and said that he would use the money to liquidate the overdraft of the brick company; that Thomas then voluntarily executed to Tittle his personal note for $3,000 and told Tittle "to keep it for his records and for the personal guaranty of Thomas that the Brick Co. and plaintiff would keep its agreement with defendant."

Petitioner answered that if Tittle was seeking to lend it his credit, he knew or was charged with notice that Thomas had no authority to borrow money in its name except upon express authorization of its directors, which had not been conferred; that Thomas did not conceal...