Worth Co v. Int'l Sugar Feed No. 2 Co

• Decision Date: 01 November 1916
• Docket Number: (No. 286.)
• Citation: 90 S.E. 295
• Court: North Carolina Supreme Court
• Parties: WORTH CO. v. INTERNATIONAL SUGAR FEED NO. 2 CO. (BANK OF COMMERCE & TRUST CO., Intervener).

(172 N.C. 335)

90 S.E. 295

WORTH CO.

v. INTERNATIONAL SUGAR FEED NO. 2 CO.(BANK OF COMMERCE & TRUST CO., Intervener).

(No. 286.)

Supreme Court of North Carolina.

Nov. 1, 1916.

Appeal from Superior Court, New Hanover County; Peebles, Judge.

Action by the Worth Company against the International Sugar Feed No. 2 Company, in which the Bank of Commerce & Trust Company intervened as claimant of the attached property. Judgment, for the plaintiff and directed verdict, and the intervener appeals. Reversed, and new trial granted.

This is an action brought by the plaintiff against the defendant feed company, before George Harriss, justice of the peace, to recover the amount of $106.50, claimed by the plaintiff to be due and owing to it by the defendants for commission on certain goods sold. An attachment was issued against the proceeds of a certain draft in the Murchison National Bank, and the Bank of Commerce & Trust Company of Memphis intervened and claimed ownership of draft. Judgment was rendered in the justice's court against the defendant, and the intervener, the Bank of Commerce & Trust Company, appealed to the superior court. In the superior court, when the case came on for trial, the plaintiff offered evidence as to its debt, and the intervener offered evidence as to the ownership of the" draft. The following issues were submitted to the jury, the first issue being submitted at the request of the plaintiff, and the second at the request of the intervener:

First. What amount, if any, is plaintiff entitled to recover? Answer: $106.50.

Second. Is the Bank of Commerce & Trust Company, the intervener, the owner of the proceeds of the draft attached in the cause, and entitled to possession of the same?

The evidence of the debt was not disputed, and the court directed the jury to answer the first issue, "Yes, $106.50, " if they believed the evidence. There was no exception taken by the defendant, as it did not appear and make a defense, but appearance and defense was made by and for the intervener, Bank of Commerce & Trust Company. The court directed the jury to answer the second issue, "No, " and the intervener, the Bank of Commerce & Trust Company, excepted and appealed to the Supreme Court, only its right being involved in this appeal. The feed company sold a car of feed to J. H. Watters, of Wilmington, N. C, and drew a draft with bill of lading attached for the purchase price. The feed company then indorsed the draft and bill of lading, and delivered the same to the intervener, the Bank of Commerce & Trust Company, and the trust company forwarded the same to the Murchison National Bank, at Wilmington, for collection. The draft was paid, and the plaintiff attached the proceeds in the possession of the Murchison Bank as the property of the feed company. The material part of the testimony offered by the intervener, the Bank of Commerce & Trust Company, was, In substance, as follows:

E. L. Rice, testified:

I live at Memphis, Tenn. Am vice president of the Bank of Commerce & Trust Company. The Bank of Commerce & Trust Company is a corporation engaged in the banking business, and also title and guarantee business. Its main business is banking business. It is located in Memphis, Tenn. It is a large bank as compared with other banks in the city of Memphis. I know of a certain draft that was drawn on Joseph H. Watters, of Wilmington, N. C, by the International Sugar Feed No. 2 Company for the sum of $2S0. That draft was handled by the bank on November 19, 1914. The draft was discounted and passed to the credit of the International Sugar Feed No. 2 Company, and was discounted at the rate of $2.50 a thousand. The date the item actually passed to the credit of the International Sugar Feed Company was November 19, 1914. We purchased the draft, and put it to the credit of the International Sugar Feed Company, at rate of discount. There was no agreement that passed between the Bank of Commerce & Trust Company and the International Sugar Feed Company with reference to charging back against the International Sugar Feed Company the proceeds of this draft which was not paid. We had no conversation with them upon that subject. We had no written agreement of anything of that kind in advance about it. I cannot answer the question as to whether anything was said, as the draft was handled by the teller, but the records show nothing except that it was discounted and put to their credit; that is all.

I do not remember the amount of this draft in question. I have a record of it, and that shows $2S0, less 70 cents discount. That is the usual discount, because the draft is drawn with exchange. I think the draft was drawn at sight. I would not say positively. That is what it would cost a person going into our bank to cash a draft drawn on Wilmington for that amount with the bill of lading attached. The records show that the bill of lading was attached to this draft, but I do not know what it covered. The bill of lading was sent with the draft to Wilmington, and it was afterwards paid. It is not customary for us to charge drafts back when we handle them with bill of lading attached when the draft is dishonored and sent back. It is customary for us to get a check for them. We will get a check for them. They have never refused to give us a check, but in the event they refused to give us a check, we would charge it back to their account. When a draft is dishonored andcomes back, either the customer or the indorser for whom it is cashed covers the dishonored draft with a check. Our bank, so far as I know, had no agreement with the International Sugar Feed Company No. 2, by which the bank should lose the proceeds of this draft if it was not paid. On the contrary, my assumption is that the agreement was that if the draft was not paid the International Sugar Feed No. 2 Company would cover it, and if they were not willing to cover it voluntarily and it came to a question of who should lose the draft, we would arbitrarily charge it back to their account. I have an idea of what the average balance of the International Sugar Feed Company was for the last two years. It was a good balance. They usually kept a good, large balance, and since November 19, 1914, that balance has run largely in excess of $280; I think it has. This was not a collection draft; we didn't handle it as a collection draft. It was handled as a cash item, and all drafts are handled with the idea that if the draft is not paid, the International Sugar Feed Company would, of course indemnify us against loss. There was no agreement with Mr. Hall, representing the International Sugar Feed Company, about this specific draft; that this item would be discounted with the understanding that if it was not paid by the drawee, that he would not permit us to lose anything on it. The draft was deposited in the Bank of Commerce & Trust Company, and the proceeds went to the credit of the Sugar Feed Company. We had no agreement about this specific draft whatever. It was put to their credit and we sent it to the party on whom it was drawn. Of course we expected to get our money from the party on whom it was drawn originally. If we could not get the money from him, we would naturally go back on Mr. Hall. We had a custom of discounting Mr. Hall's drafts. That is, drafts of the International Sugar Feed Company, as they were presented to the teller. We handled them every day. The teller did not make any agreement with him. He took off the discount that it was customary to take off of drafts. The teller didn't agree on it. The teller only had instructions to obey these rules, which are laid down by some officer of the bank. He was acting under orders of the bank, and there was no rule made to the teller that if a draft was not paid that the customer should cover it. That is the custom. The general rule is that if the draft is dishonored by the party on whom it is drawn, then it is covered by the party who draws the draft, or the indorser who cashes it. It is a fact that Mr. Hall is advised of this situation, and he understands that if we have to pay on the bond, that he will protect us and indemnify us. The bank doesn't lose anything no matter which way the litigation goes. The amount of the draft discounted for the International Sugar Feed Company was passed to its credit, and it was subject to their check. That is different from a draft taken for collection. When a draft is taken by the Bank of Commerce & Trust Company, simply for collection, it is not passed to the credit of the party who delivers it to the bank until it is finally paid. We consider that a party who makes a draft is legally bound to pay that draft, and we also consider that he is not only morally and legally bound, but that he is financially able to pay a draft if it is dishonored by the drawee. Our expectation to collect from the International Sugar Feed No. 2 Company in this case was not at all different from our expectation to collect from any person who indorses any paper, which is discounted or purchased by the bank and indorsed for.

Since the foregoing, I have been authorized by Mr. Hall to answer the question relative to the balance to the credit of the International Sugar Feed No. 2 Company, at the close of the business on November 19, 1914, and at the close of business on March 15. 1916, and upon examination of the books I find the balances to be as fol lows: Balance November 19th. 1914, $17,128.88. Balance March 15th, 1916, $16,926.44.

Will A. Hall testified:

I am connected with the International Sugar Feed No. 2 Company, as resident manager, at Memphis, Tenn. This is a suit in regard to a certain draft drawn on Joseph H. Watters, of Wilmington, by the International Sugar Feed No. 2 Company. The bill of lading covering a carload of feed was attached to the draft. The draft, after it was drawn with bill of lading attached, was sold and discounted at the rate of $2.50 per $1,000, on November 19, 1914, the number of the draft...