43 So. 2d 602 | La. | 1949
[1] In this suit the plaintiff seeks to recover from the defendant the sum of $100,000.00, with interest and costs. The plaintiff's demand having been rejected in the lower court, it has appealed.
[2] In the afternoon of June 9, 1939, Dr. James Monroe Smith, President of the Louisiana State University and Agricultural and Mechanical College, came to the City National Bank of Baton Rouge, after banking hours, to consummate a loan which the vice-president of the bank had agreed to make to the University. He informed the cashier of the bank of the agreement. The agreement was confirmed by a telephone communication. Smith presented to the cashier what purported to be a resolution of the Board of Supervisors of the University duly certified in the form usually relied upon when previous loans had been made to the University by the bank. A note calling for $100,000.00, payable on demand and bearing 3 1/2% interest from date was duly executed in the name of the University by Smith. When the cashier attempted to credit the proceeds of the note as a deposit, Smith informed him that the University had obligations to meet in New Orleans and wanted the funds made available to it at the Louisiana Savings Bank Trust Company of that city. He requested the cashier to issue a check covering the entire proceeds of the loan payable to that bank. The cashier, in compliance with Smith's request, executed and delivered to Smith the bank's check for $100,000.00 drawn on the Hibernia National Bank in New Orleans and payable to the Louisiana Savings Bank Trust Company. On the morning of the following day, Saturday the 10th, the check was presented to the Louisiana Savings Bank Trust Company, hereinafter referred to as the defendant bank, by J. M. Brown. The check was endorsed and collected by the defendant bank, the proceeds were credited to the account of Brown, who immediately issued his check to Fenner Bean, a brokerage firm, to whose account they were credited. The entire transaction was completed prior to twelve noon that day. The record does not shown how Brown came into possession of the check or any authority on his part to negotiate it. It appears that the assistant cashier of the defendant bank who handled the transaction did not testify in the case and the record does not disclose what transpired between him and Brown at the time of the transaction. There is evidence that the assistant cashier was absent from the estate at the time the case was tried but was available on two occasions after the suit was filed. Irrespective of whose duty it was to secure his testimony by deposition or otherwise, there is no evidence in the record as to what transpired between him and Brown except a bare statement of a bank official to the effect that he would swear that the assistant cashier made inquiry of Brown at the time. This witness stated in his testimony that he did not know precisely what conversation took place between them because he did not handle the transaction. Brown did not testify in the case and we are not informed of his version of the transaction. It appears that he was going under an assumed name and became involved in questionable transactions. His whereabouts do not appear to be known. From the testimony produced by the defendant it appears that the officials of the bank had confidence in Brown at the time and that he was a depositor in the bank. However, at the time the transaction was consummated his deposit called for a very small amount. An official of the defendant bank testified that Brown was an independent broker and that the nature of his business was not such that required large deposits because his transactions were usually handled by immediate transfers.
[3] The defendant bank had no instructions from the plaintiff as to the disposition of the proceeds of the check. The University has repudiated the entire transaction on the ground that the purported resolution of its board was a forgery and that it has not received any part of the proceeds. As the matter stands the plaintiff's account with the Hibernia Bank has been charged with the amount. The plaintiff is now seeking to recover from the defendant.
[4] The plaintiff contends that the defendant had no authority to pay the proceeds of the check to Brown. It takes the position that it was the duty of the defendant to see that the proceeds were not improperly dispersed and that the funds were illegally paid without any direction from it.
[5] From our review of the jurisprudence of the states, we find that one of the leading cases referred to in many decisions touching the point in controversy is the case of Sims Ex'r, v. United States Trust Company of New York,
[6] "The check, upon its face, imported the ownership of the moneys represented in it by Dr. Sims, and his desire that its custody should be transferred from the People's Bank to the defendant. This certainly did not warrant the defendant in supposing that Dr. Sims thereby intended to pay $5,000 to Crowell, or place him, for any purpose, in possession of the fund. If he had so intended, the check would have been made payable to Crowell's order, and there would have been no need of the agency of the defendant in the transaction. The use of the defendant's name as payee of the check indicated the drawer's intention to lodge the moneys in its custody, and place them under its control, and nothing further than this was inferable from the language of the check. The check, by its terms, authorized the defendant to withdraw from the People's Bank a certain sum, for a purpose not disclosed, but fairly inferable from the nature of the defendant's business."
[7] "The defendant could have refused to receive the deposit, or act as Dr. Sims' agent in transferring the funds from one custodian to another, but, having accepted the office of so doing, it was bound to keep Dr. Sim's moneys until it received his directions to pay them out. The language of the checkmaking the funds payable only upon the order of the defendantimposed upon it the duty of seeing that they were not, throughits agency, improperly disbursed after it had received them. Theycould not safely pay out such funds except under the direction oftheir lawful owner." (Italics ours.)
[8] It is stated in Vol. 9, Corpus Juris Secundum, page 682, § 340 — Verbo, Banks Banking, as follows: "Checks payable to bank. Where a check is drawn to the order of a bank to which the drawer is not indebted, the bank is authorized to pay the proceeds only to persons specified by the drawer; it takes the risk in treating such a check as payable to bearer and is placed on inquiry as to the authority of the drawer's agent to receive payment." Citing Paine v. Sheridan Trust Savings Bank,
[9] In the Matteawan case, supra, two checks were converted. The diversion of the proceeds resulted from the act of a thief who was an employee of a firm of stockbrokers. The first check was drawn on one bank to the order of another bank by the plaintiff. The thief presented the check to the defendant and instead of depositing it to the plaintiff's account filled out a deposit slip to the credit of Midnight Mission, which also had an account there. The thief drew out the amount signing the check as an officer of Mission. The plaintiff recovered judgment for the amount against the defendant payee bank. In the course of the opinion the court stated: "A check drawn to the order of the Chemical Bank on itself conveys nothing to it as payee as to the disposition of the funds, and inquiry must be made elsewhere. This inquiry, of course, must take the form of securing instructions from plaintiff's duly authorized agents. No inquiry was made in this case. Whether the Chemical Bank was warranted in acting on the instructions of the deposit slip of the Mission which, of course, was not the payee of the check, can admit of but one answer, namely, that no such reliance was justified." The court cited the Sims case, discussed heretofore.
[10] The court further stated,
[11] In American Jurisprudence, Vol. 7, page 378 — Verbo, Banks, the following is set forth: "It is also generally held that a check or draft drawn to the order of a bank precludes the diversion of the proceeds of the check or draft to a use other than that of the drawer, and that such diversion can be justified only by proof of authority from the drawer." The cases of Bristol Knife Co. v. First Nat. Bank,
[12]
[13]
[14] In Bristol Knife Co. v. First Nat. Bank, 1874,
[15] In Main Belting Co. v. Corn Exchange Nat. Bank Trust Co.,
[16] Although in this case the words "Draft Hiller" or words of similar import were on the checks, there had been previous dealings between the parties. The court said: "The contract between the bank and the plaintiff required the bank to pay plaintiff's check to the payee designated by the plaintiff and to no one else, save on the order of the payee. United Security Life Insurance Trust Co. v. Central National Bank,
[17] In defense, the bank alleged that it was and is usual and customary to draw checks, the payment of which in cash is desired by the drawer, to the order of the bank upon which such checks are drawn. The court noted that this would apply only to the checks drawn on plaintiff's account with defendant and not to those drawn on the account in the Integrity Trust Co.
[18] The court said: "The same general rule of construction applies to this contract that is applied to others; the court must find what the parties meant by the words used to express their intention in the light of the surrounding circumstances. There is no averment that plaintiff had notice, prior to Smith's embezzlement, of the alleged usage or custom, or that it was operative in conditions in which plaintiff should have known of it. If plaintiff's checks should be considered subject to it, the usage or custom is unreasonable and must be condemned. Compare Dempsey v. Dobson,
[19] Defendant contended that the transactions came within Sections 5 and 8 of the Uniform Fiduciaries Act, 20 P.S. Pa. §§ 3371, 3392; that there was no evidence of bad faith. The court in refuting these contentions said: "Defendant had agreed to disburse plaintiff's funds `upon and according to the check' of the plaintiff; the obligation is clear; the defendant has not performed; it is immaterial that it did not know and had no reason to suspect that Smith was an embezzler; if it had paid `according to the check,' Smith could not have received the money from the teller on these checks. That checks are made payable to a bank when it is desired to transfer funds to it from another bank, or to purchase a draft or pay a debt due the bank, is perhaps common enough, but if a bank with the limitedauthority shown in this record treats such a check as payable tobearer, it takes the risk. As to the checks drawn on plaintiff's account in the Integrity Trust Company to the defendant's order, defendant was in fact a mere agent to collect for plaintiff and hold the proceeds for plaintiff's account. Not having account to plaintiff, it is answerable in this suit." (Italics ours.)
[20] In Deposit Guaranty Bank Trust Co. v. Luke,
[21] The Sims case has been followed consistently. It is quoted and relied upon in New Jersey National Bank Trust Co. v. Sachs, 3 Cir., 1937,
[22] None of the cases cited by the defendant involves similar factual situations as the one presented herein. In all of the cited cases we find circumstances and previous dealings that bring them out of the general rule. In Armstrong v. American Exch. Nat. Bank, 1884,
[23] From a review of the jurisprudence of this state it appears that the articles of the Civil Code dealing with deposit have often been applied in controversies over money deposited in banks. These articles of the Civil Code are in accord with a general rule laid down in other states, heretofore stated, except the articles of the Code relating to the return of the specific thing deposited. In some of the decisions the deposit of money in a bank where it is to be intermingled is referred to as irregular deposits. In other and more recent decisions the deposit of money in a bank to be intermingled with the general funds is held to create the relationship of creditor and debtor. Since the articles of the Code dealing with deposits are based on contract it would appear that the parties could modify their contract by not requiring the return of the specific thing. It being the custom of banks to mingle the deposited money with their general funds and remit by means of checks, etc., a depositor without instructions to the contrary impliedly agrees that the specific thing is not to be returned but an equal value thereof. Since the plea of prescription raises the question of whether a contractual relationship existed, we will refer to the decisions bearing out this conclusion in passing on the plea of prescription in order to avoid repetition.
[24] The defendant's plea of prescription is based on the ground that the plaintiff's action is one in tort and since more than one year has elapsed that the right of action has prescribed.
[25] From a mere reading of the plaintiff's petition, it is apparent that it seeks to recover under contract. In the case of Has et al. v. Opelousas-St. Landry Bank Trust Company, 9 La.App. 166, 119 So. 372, 373, certiorari denied by this Court,
[26] "The implied agreement between a bank and its depositors, in our opinion, is not prompted altogether by altruistic motives on either side. The depositor is relieved of the burden of holding his funds to insure their safe-keeping, and he enjoys at the same time the convenience of drawing upon the same in such amounts and at such times as he may wish, and in some instances by special agreement he additionally receives interest on his daily balances. The bank or depositary, on the other hand, uses these funds, and it derives revenue therefrom in making loans and discounts. The benefits, therefore, in the implied agreement between the depositor and depositary, may be said to be mutual.
[27] "It was held in Clason Co. v. New Orleans, 46 La.Ann. 1, 14 So. 306, where the sole question related to taxation, that the relation between the depositor and the bank is that of creditor and debtor. But that must be taken in the sense that every depositor is the creditor of the depositary to the extent that the latter owes the former the duty of returning the thing deposited, or its equivalent. The Civil Code provides that the depositary is bound to use the same diligence in preserving the deposit that he uses in preserving his own property. It mustalso be observed that, although the depositary does not becomethe owner of the thing deposited, it is equally true that a bankreceiving money on deposit is entitled to use that money undersuch restrictions as are provided for in the banking laws of thecountry, or else it could not earn revenue sufficient to maintainits existence." (Italics ours.)
[28] Young v. Teutonia Bank Trust Co.,
[29] In the case of Hibernia Nat. Bank in New Orleans v. National Bank of Commerce in New Orleans,
[30] In the case of Kramer v. Freeman,
[31] In the Kramer case the plaintiff specifically prayed for the return of the specific property or in the alternative the value thereof. The plea of prescription is not well founded and must be denied.
[32] The defendant contends that where one or two innocent parties must suffer loss through the fraud of another that the burden of the loss should be imposed on him who most contributed to it. The position is taken that the plaintiff by issuing the check payable to the bank instead of the University made it possible for the funds to be converted and that the plaintiff should thereby bear the burden of the loss. It appears from the testimony that the University carried a large account with the plaintiff bank and had secured many loans from the plaintiff previous to this transaction. It also appears that the only one authorized to draw checks against the funds of the University was C. M. Johnson, the auditor of the University at that time and now Secretary of the Louisiana Tax Commission. It appears that at no time were any of the funds withdrawn by Smith. These facts are established by the testimony of the officials of the bank and C. M. Johnson. There is nothing in the record to contradict their testimony in this respect. At the time that the check was issued the plaintiff had a small deposit account with the defendant bank. If the funds had been deposited to the plaintiff's account, they could not have been withdrawn by Smith or anyone else without authority from the plaintiff. In light of the numerous decisions quoted above, the plaintiff bank amply protected itself by making the check payable to the defendant bank who could not disperse the funds without instructions or authority from the plaintiff. The funds could not have been converted if the defendant bank had not turned them over to Brown without authority.
[33] The defendant contends that banks receiving checks payable to themselves, do not, customarily, inquire of the drawer what the purpose or intention is as to the disposition of the funds represented by such checks. The defendant attempted to prove that it was customary for banks receiving checks payable to themselves to dispose of the proceeds on the direction of the person presenting the check. The evidence is very indefinite and unsatisfactory. On analysis, it appears that sufficient information as to ownership of the funds was present in each transaction and in no instance was the funds dispersed to the wrong person. No attempt was made to prove that Brown owned the check or was entitled to the proceeds of it. There is no evidence to show that Brown made any claim of title to the check or any representation to that effect. Be that as it may, if such a custom prevailed it would have to be condemned and could not supplant the universal rule of law governing transactions of this nature recognized by many of the courts throughout the states, some of which have been referred to in this opinion.
[34] The defendant contends that the check is payable to a fictitious payee and was intended to be a check payable to bearer. He cites a number of authorities to support his contention. We have examined all the authorities and find that they are not applicable. They are all based on the proposition that the drawee was not intended by the maker to have any interest in or entitled to the proceeds of the check. There is no evidence in this record to support any such conclusion and the defendant did not treat it as such because the defendant bank indorsed the check and collected the money from the Hibernia Bank.
[35] The plaintiff is only entitled to interest from the date of demand. It appears that the first demand was made by the filing of the suit. Article
[36] For the reasons assigned, the judgment of the lower court is reversed and set aside. It is now ordered that there be judgment in favor of the plaintiff City National Bank of Baton Rouge, and against the defendant, Louisiana Savings Bank Trust Co., in the sum of $100,000.00, with legal interest from April 24, 1943 until paid. All costs to be paid by the defendant.