Tyler Bank & Trust Co. v. Saunders

• Court: Texas Supreme Court
• Writing for the Court: SMITH
• Citation: Tyler Bank & Trust Co. v. Saunders, 159 Tex. 158, 317 S.W .2d 37 (Tex. 1958)
• Decision Date: 28 May 1958
• Docket Number: No. A-6661,A-6661
• Parties: TYLER BANK & TRUST COMPANY, Petitioner, v. T. B. SAUNDERS, Respondent.

Page 37

317 S.W.2d 37

159 Tex. 158

TYLER BANK & TRUST COMPANY, Petitioner, v. T. B. SAUNDERS, Respondent.

No. A-6661.

Supreme Court of Texas.

May 28, 1958.

Rehearing Denied Nov. 12, 1958.

Reeves & Reeves, Lawrence & Lawrence, Tyler, for petitioner.

Florence, Florence & Garrison, Gilmer, Mack Taylor, Fort Worth, Smith & Smith, Tyler, for respondent.

SMITH, Justice.

Respondent-plaintiff, T. B. Saunders, doing business under the firm name of T. B. Saunders and Company, itstituted this suit against Shaw Packing Company, a corporation, and the petitioner-defendant, Tyler Bank & Trust Company, to recover the sum of $23,808.47 and interest, alleged to be due upon ten certain drafts drawn by respondent-plaintiff allegedly against the Shaw Packing Company and the Tyler Bank & Trust Company. For convenience, the parties shall be hereinafter referred to merely as Saunders, Shaw, and the Tyler Bank, unless otherwise indicated. The drafts involved were forwarded by the Fort Worth National Bank, hereinafter referred to as the Forwarding Bank, to the Tyler Bank. Saunders alleged in an amended pleading that the Shaw Packing Company, after the institution of the suit, ceased to exist and do business as a corporation, and that the controversy was one for debt as between Saunders and the Tyler Bank. Saunders took the position, and still maintains, that each of the ten drafts sued upon were drawn upon Shaw through the Tyler Bank and that the Tyler Bank was the drawee bank, and that the Tyler Bank held each of the drafts for more than twenty-four hours after such draft had been received by it, all in violation of the provisions of Article 342-704, Vernon's Annotated Civil Statutes of Texas, known as the Banking Code. ¹ Saunders pleaded in the alternative negligence on the part of the Tyler Bank. This plea will be discussed later in this opinion. It is undisputed that the drafts were given on dates between September 25, 1951 and October 16, 1951 and were returned unpaid to the Forwarding Bank on November 1, 1951.

It will be noted that the draft ² is signed by T. B. Saunders & Company and payable to the order of T. B. Saunders and Company. All the drafts are signed by Saunders and not by Shaw. The ten drafts were executed and drawn pursuant to an agreement entered into by J. H. Shaw, an officer of Shaw Packing Company, and Saunders. The agreement being that Shaw would buy cattle and hogs from Saunders and Saunders would collect payment for such purchases by drawing drafts upon Shaw Packing Company; that Saunders would hold the drafts and not deposit them in the Forwarding Bank for a period of four of five days in order that Shaw might have an opportunity to process the stock. Mr. Graves, the Manager of T. B. Saunders & Co., testified that the time of four or five days was allowed to intervene before depositing the drafts in order to give Shaw time to slaughter the animals and get the meat in condition for sale. Mr. Graves further testified on corss-examination when each of the drafts were exhibited to him, that the draft was not drawn by the Shaw Packing Company and that it did not bear 'their' signature; that the draft (No. 1) was drawn in the office of T. B. Saunders & Company under the direction of the witness; that the drafts were drawn for an amount sufficient to include the purchase price of the cattle and hogs, plus interest at the rate of 6 per cent per annum upon the amount of the purchase price with the interest computed for the number of days ensuing between the sale of the cattle or hogs to Shaw and the depositing of the drafts. The evidence shows that several persons acted for Saunders as 'clearees' and handled business for Saunders with Shaw, but that all money involved belonged to Saunders. Saunders pleaded that 'T. B. Saunders Commission Company, acting upon the advice and authorization of Shaw Packing Company through its agents, James Shaw and I. R. Smith, drew drafts addressed to the Shaw Packing Company through the Tyler State Bank and Trust Company * * *.' Then follows the list of the drafts involved in this suit.

Attached to each draft was a letter of instruction to the Tyler Bank. This letter was prepared and sent out by the Transit Department of the Forwarding Bank. It stated that the draft was enclosed for collection and remittance or credit only when paid. Mr. R. L. Cotton, Manager of the Transit Department, testified that 'We usually waited about six days before sending out tracers (inquiries); that a tracer was sent out to ascertain if the draft had been received or the present status of the item.' One of the tracers sent by the Forwarding Bank is copied below in Footnote 3. ³

Tyler Bank pleaded several defenses to the suit, but under our view of the case, we need only discuss the issue of whether the Tyler Bank was a 'drawee bank' as presented by the pleadings and evidence of Saunders. The solution of such issue necessarily requires this Court to determine whether under the record in this case the Tyler Bank is a drawee bank within the meaning of Article 342-704, supra. If it is, then without question under the facts in this case, it is liable. See Carder v. Tyler Bank & Trust Co., D.C., 132 F.Supp. 495, affirmed 5 Cir., 224 F.2d 687, certiorari denied 350 U.S. 913, 76 S.Ct. 197, 100 L.Ed. 801. At the close of the evidence offered by both parties, Saunders filed a motion for instructed verdict and as grounds therefor alleged that each draft had been sent to the bank in due course, and that when the Tyler Bank failed to deposit each draft in the mail to be returned to the Forwarding Bank within twenty four hours after each draft has been received, or when the Tyler Bank refused to honor each draft within twenty four hours, such failure or refusal constituted an acceptance of the drafts by the Tyler Bank, and by virtue of such acceptance the Tyler Bank became absolutely liable for the amount thereof.

The position of the Tyler Bank on this question is clearly stated in its motion for instructed verdict. The motion was filed at the close of Saunders' evidence and before the Tyler Bank introduced any evidence. The relevant portions of the motion were as follows:

'I.

'That the Plaintiffs have wholly failed to show any liability of Tyler Bank & Trust Company to said Plaintiffs.

'II.

'That the only pleadings of the Plaintiffs and the only evidence introduced in the case as the basis of any claimed liability of the Tyler Bank & Trust Company to the Plaintiffs is upon and by virtue of ten certain drafts and the failure of the Tyler Bank & Trust Company to return said drafts within twenty four hours after its receipt thereof in alleged violation of the provisions of Article 342-704, and said drafts do not come within the terms of such statute in that the drafts in question here were drawn upon Shaw Packing Company and not upon Tyler Bank & Trust Company and the Tyler Bank & Trust Company was not a drawee bank in fact and within the contemplation of such statute and the provisions of such Article apply only to items handled by a drawee bank.'

The trial court overruled this motion but granted the motion filed by Saunders. This action resulted in a judgment by the trial court in favor of Saunders against the Tyler Bank allowing a recovery upon each of the ten drafts sued upon. The Court of Civil Appeals affirmed the judgment as to the first draft and reversed and remanded the cause for retrial on the other nine drafts, with one of the Justices dissenting. 308 S.W.2d 90, 93.

Saunders and the Tyler Bank each filed an application for writ of error. The Tyler Bank's application was granted on points 1 and 6 ⁴ and the Saunders application was granted because of the granting of the Tyler Bank's application.

The Court of Civil Appeals has held that the Tyler Bank is a 'Drawee Bank', and that the drafts were 'directed 'to' Shaw Packing Company and 'to' Tyler State Bank & Trust Company.' The Court then concludes that 'it seems clear that Tyler State Bank and Trust Company is a 'bank against which an item is drawn * * *". The words 'bank against which an item is drawn' were taken from the definition of a 'Drawee Bank' as defined in Article 342-701, Vernon's Annotated Civil Statutes. The Articles defines a 'Drawee Bank' as follows:

'(b) The term 'drawee bank' means the bank against which an item is drawn and by which an item (draft) is payable, including banks issuing cashiers' checks, or accepting drafts.'

We cannot agree with the holding of the Court of Civil Appeals. Considering the form of the drafts, together with all the facts and circumstances in evidence in this case, we cannot say that the drafts were drawn against the Tyler Bank or that the bank became an acceptor as contemplated by the statute. The trial court and the Court of Civil Appeals have held the conclusion that the Tyler Bank in the present case is a 'Drawee Bank' is supported by the Carder case, supra, and City State Bank in Wellington v. National Bank of Commerce of Altus, Oklahoma, Tex.Civ.App., 261 S.W.2d 749 (venue case), and College Station State Bank v. Fulcher, Tex.Civ.App., 296 S.W.2d 953, no writ history. An analysis of the Carder case supra, will suffice to demonstrate that these cases are not controlling and do not compel a holding that the Tyler Bank in our case is a 'Drawee Bank'. In the Carder case, supra, it was admitted that the bank involved was the 'Drawee Bank'. The court in that case decided the real issue which was whether drawee bank by virtue of the provisions of the statute, supra, accepted the drafts and became liable for the amounts thereof. The opinion quotes from the City State Bank in Wellington case, supra (261 S.W.2d 754), wherein it held in part:

"The proper construction of Art. 342-704, Vernon's Ann.Civ.St., seems to be that in order to escape liability for the amount of an item presented to a drawee bank by mail, and the drawee bank determines that it is not obligated at the time of presentment...