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McKinnon v. Grenada Bank

Supreme Court of Mississippi
Feb 20, 1956
85 So. 2d 458 (Miss. 1956)

Opinion

No. 39975.

February 20, 1956.

1. Bills and notes — holder in due course — notice — customs and usages — interpleader suit.

Where automobile which was sold and delivered by dealer to buyer-dealer had, without buyer-dealer's knowledge, been pledged to secure indebtedness to discount corporation, and negotiable instrument given in payment therefor was deposited by payee in bank, and bank immediately credited account of payee and allowed full withdrawal of amount of deposit prior to makers notifying drawee bank to return instrument unpaid, depositor's bank was holder in due course, and absence of attached title papers was not sufficient notice to put bank on inquiry for defects, in view of custom of prior dealings between parties to pay similar instruments without attachment of such papers, and bank could recover amount of instrument from maker as against discount corporation in interpleader suit instituted by maker, wherein discount corporation and bank were defendants, admitting that he owed someone the face amount of negotiable instrument, less certain alleged credit.

2. Automobiles — negotiable instruments — sales — title papers.

Where automobile dealer sold and delivered automobile to another dealer without attaching title papers to negotiable instrument given in payment therefor, sale and delivery carried with it good title and no further title papers were necessary to complete the transaction.

3. Sales — automobiles — negotiable instruments — compromise and settlement — set off.

Where in prior transaction dealer had sold and delivered to buyer-dealer another automobile, which without buyer-dealer's knowledge, had been pledged to same discount corporation, buyer obtained good title to automobile as against discount corporation, and, upon discount corporation's subsequent suit against immediate purchaser of automobile from buyer-dealer to enforce lien on automobile, buyer-dealer, who elected to defend suit, was not required to pay discount corporation amount of its lien, and amount so paid by way of compromise could not be set off by buyer-dealer against buyer's liability to bank under negotiable instrument, given in payment of automobile referred to in Headnote No. 1.

Headnotes as approved by Hall, J.

APPEAL from the Chancery Court of Hinds County; L. ARNOLD PYLE, Chancellor.

Crisler, Crisler Bowling, Jackson, for appellant.

I. The appellee had actual notice of an infirmity in the draft which prevented appellee from being a holder in due course. Secs. 93, 100, Code 1942; 10 C.J.S., Secs. 323, 333-34 pp. 817, 833.

II. The amount of the draft was deposited to appellee's account, and therefore appellee did not take the instrument for value. Colonial Lumber Co. v. Andelusia Natl. Bank, 138 Miss. 566, 103 So. 343.

III. Appellee did not meet the burden of proving it a holder in due course. Cassedy v. Wells, Jones, Wells Lipscomb, 162 Miss. 102, 137 So. 472; Secs. 96, 98, Code 1942.

Livingston Fair, Louisville, for appellee.

I. The instrument here involved and which was called a draft is in fact a check.

II. The appellee is an innocent purchaser of the instrument without notice of any infirmity and for value.

III. The appellee paid value for the draft when it paid checks in the account of Doss Motor Company.

IV. The appellant was under no legal obligation to pay and satisfy any claim Associates Discount Corporation had against the Dodge automobile involved in this suit.

V. Associates Discount Corporation selected Doss Motor Company as its agent, clothed it with authority to sell or trade motor vehicles and convert such vehicles into money to be paid to the Associates Discount Corporation and, therefore, the acts of the agent in selling the Dodge automobile were the acts of Associates Discount Corporation, and the appellant was a volunteer in making any payment of money made on the Dodge.

VI. The same conditions existed as to the Chevrolet automobile insofar as Associates Discount Corporation was involved, and the Lower Court denied any relief to Associates Discount Corporation, and the result thereof is that appellant retained the Chevrolet which he sold at a profit and has paid no one for the same.

VII. The appellant failed to prove any satisfactory reason why the so-called draft was returned to the appellee; but had a valid reason existed, he delayed the return therefor for an unreasonable length of time leaving the appellee without an opportunity to collect its money.

Collation of authorities: Hull v. First Natl. Bank, 123 U.S. 105, 31 L.Ed. 97, 8 S.Ct. 62; Exchange Bank v. Sutton Bank, 78 Md. 577, 28 A. 563, 23 L.R.A. 173; Industrial Bank v. Bowes, 165 Ill. 70, 46 N.E. 10, 56 Am. St. 228; Byrd Printing Co. v. Whitaker Paper Co., 135 Ga. 865, 70 S.E. 798, Ann. Cas. 1912A, 182; Mt. Vernon Natl. Bank v. Canby State Bank, 129 Oregon 36, 276 P. 262, 63 A.L.R. 1133; Camas Prairie State Bank v. Newman, 15 Idaho 719, 99 P. 833, 21 L.R.A. (N.S.) 703, 128 Am. St. 81; Currie-McGraw Co. v. Friedman, 195 Miss. 701, 100 So. 273; Hancock v. State Natl. Bank of Texarkana, Arkansas, 213 Miss. 295, 56 So.2d 819; Bank of Gulfport v. Smith, 132 Miss. 63, 95 So. 785; Branham v. Drew Groc. Co., 145 Miss. 627, 111 So. 155; Old Natl. Bank v. Gibson, 6 A.L.R. 247; Love, Supt. of Banks v. Kraft-Phenix Cheese Corp., 162 Miss. 460, 139 So. 398; Glass v. Continental Guaranty Co., 88 So. 876; Weil Bros. v. Keenan, 180 Miss. 697, 178 So. 90; Jones v. First Natl. Bank of West Point, 170 Miss. 857, 155 So. 173; Columbus Buggy Co. v. Turley, 73 Miss. 529, 19 So. 232; Wilder v. Wilson, 16 La. 548; Manufacturing Co. v. Carman, 109 Ind. 31; Ludden v. Hansen, 31 Barb. 650; Merchants Farmers Bank v. Schaaf, 108 Miss. 121, 66 So. 402; Citizens Saving Investment Co. v. Hunt's Garage, 128 Miss. 535, 91 So. 133; Simmons v. State, 160 Miss. 582, 135 So. 196; Britton v. Criswell, 63 Miss. 394; Andrews v. Partee, 79 Miss. 80, 20 So. 788; Parry Mfg. Co. v. Lowenberg, 88 Miss. 532, 41 So. 65; Garrett v. Hunter (Miss.), 48 So.2d 871; General Finance Corp. v. Krause Motor Sales, 302 Ill. App.? 210, 23 N.E.2d 781; Owen v. Miller, 190 Okla. 205, 122 P.2d 140; Letchefeld v. Marglous (Mo. App.), 176 S.W.2d 674; Peoples Finance Thrift Co. v. Bowman, 58 Cal.App.2d 729, 137 P.2d 729; Helms v. American Security Co., 216 Ind. 22; Commercial Natl. Bank v. Canal-Louisiana Bank Trust Co., 239 U.S. 520, 60 L.Ed. 417, 36 S.Ct. 194, Ann. Cas. 1917E, 25; Associated Discount Corp. v. C.E. Fay Co., 307 Mass. 577, 30 N.E.2d 876, 132 A.L.R. 519; Manufacturers Discount Co. v. American Security Co., 87 Ind. App. 446, 161 N.E. 660; General Motors Acceptance Corp. v. Hahn (La.), 190 So. 869; Farmers Natl. Bank v. Universal Credit Co., 259 App. Div. 955, 20 N.Y.S.2d 100; Motor Contract Co. v. Citizens S. Natl. Bank, 66 Ga. App. 78, 17 S.E.2d 195; Commercial Discount Co. v. Mehre, 42 Cal.App.2d 220, 108 P.2d 735; Premium Commercial Corp. v. Kasprzycki (Conn.), 29 A.2d 610; Jordan v. Federal Trust Co. (D.C.), 296 Fed. 739; Arena v. Bank of Italy, 194 Cal. 195, 228 P. 441; Commerce-Guardian Trust Savings Bank v. Devlin, 6 F.2d 518; Mohn v. First National Bank, 69 Cal.App. 232; General Motors Acceptance Corp. v. Boddeker (Tex.), 274 S.W. 1016; Texas Bank Trust Co. v. Teich (Tex.), 283 S.W. 552; Smith v. Commercial Credit Corp. (N.J.), 165 A. 637; Secs. 42, 57, 67, 71, 72, 93, 100-01, 106 Code 1942; Sec. 5080-90, Laws 1950; 7 Am. Jur., Secs. 6, 8 pp. 790, 793; 23 Am. Jur. 1010.


The appellant for several years has been engaged in the business of buying and selling automobiles in the City of Jackson. On January 4, 1954, appellant purchased from Doss Motor Company at Louisville, Mississippi, a 1952 model Chevrolet automobile for the price of $1,075 and on that date executed and delivered to Doss Motor Company, which is a corporation, a certain instrument in writing as payment for said automobile, which is in the following form:

"Title papers must be attached

BOB McKINNON MOTORS

Co-owner and Manager, Red Farmer's Auto Auction

Phone 3-7963 Res. Phone 6-4606 Jackson, Miss. 1-4 1954

PAY TO THE ORDER OF Doss Motor Co. $1075.00 One Thousand Seventy Five No/100 Dollars

To BOB McKINNON MOTORS

Payable Through

DEPOSIT GUARANTY BANK TRUST CO.

85-543 653

S. State Street Branch R.J. McKinnon JACKSON, MISS. Reverse side must be filled in"

On the reverse side the instrument was endorsed in blank by the payee with a personal guarantee of title.

Doss Motor Company was a regular retail dealer in automobiles and on many occasions in the previous two years appellant had purchased automobiles from Doss Motor Company and had given similar instruments in payment thereof. It will be noted that at the top of the instrument it recites "Title papers must be attached." All of the instruments prior to the one in question were paid by the appellant without the attachment of any title papers. Appellant took possession of the Chevrolet automobile on the night of January 4, 1954, and drove it to Jackson, Mississippi, and put it in his stock in trade and in a short time sold it for $1,200. On the 5th day of January Doss Motor Company deposited said instrument in the Bank of Louisville, which is a branch of and is owned by appellee Grenada Bank and was issued a deposit slip whereby the full amount of $1,075 was credited to the account of Doss Motor Company. The instrument in question was forwarded through banking channels to Deposit Guaranty Bank Trust Company at Jackson and was received by it on January 8, 1954. Mr. Dan W. Doss, who was the president and principal stockholder of Doss Motor Company, died on January 8, 1954. The appellant on January 27th, without looking at the instrument to determine whether any title papers were attached had the Deposit Guaranty Bank and Trust Company return the instrument unpaid through banking channels on January 27th, and to this date the appellant has never paid anything on his obligation evidenced by said paper.

(Hn 1) There is a great deal of argument in the briefs as to whether or not this instrument is a draft or a check. For the appellee it is pointed out that the instrument is drawn by McKinnon on himself and does not provide any deferment of time in which it should be paid. Clearly it is a negotiable instrument and in our view it is unnecessary for us to determine whether the instrument is a draft or check for the reason that the appellee credited Doss Motor Company with full value for said instrument and on January 25, 1954, the appellee had already honored checks drawn by Doss Motor Company on its account to the extent that there remained only $12.02 on deposit to its credit. In the meantime Doss Motor Company had gone in bankruptcy and the appellee had no opportunity to charge the said instrument back to the account of Doss Motor Company. In short, the appellee lost $1,075 through this transaction and it is without dispute that the appellee is the holder for value in due course of said instrument without notice of any defect therein. Appellant contends that since no title papers were attached to the draft, this was sufficient to put the appellee on notice. The custom established between these parties in the payment of similar instruments during the previous two years without title papers being attached to any of them negatives the idea that there was any notice sufficient to put the bank on inquiry for defects.

(Hn 2) On January 4, 1954, Doss Motor Company, under a trust receipt contract pledged the said Chevrolet automobile to Associates Discount Corporation to secure a loan thereon of $900 and this loan was never repaid. Doss Motor Company was a dealer in automobiles and the mere fact of sale and delivery of the Chevrolet automobile carried with it a good title and no further title papers were necessary to complete the transaction. Columbus Buggy Company v. Turley, 73 Miss. 529, 19 So. 232; Merchants Farmers Bank v. Schaaf, 108 Miss. 121, 66 So. 402; Garrett v. Hunter, 48 So.2d 871, not reported in the State Reports; Commercial Credit Corporation v. General Contract Corporation, 79 So.2d 257, not yet reported in the State Reports.

(Hn 3) On December 15, 1953, appellant bought from Doss Motor Company a Dodge automobile, along with five other cars, for the total price of $5,000 and gave an instrument for that amount in favor of Doss Motor Company, which was promptly paid without the attachment of any title papers. Appellant sold this Dodge automobile to a motor firm in Baton Rouge, Louisiana, which afterwards sold it to one of its retail customers. It later developed that this car was also pledged to Associates Discount Corporation for an indebtedness of about $1,800. After the transaction hereinabove related as to the Chevrolet car, Associates Discount Corporation filed a suit in Louisiana for recovery of or to enforce its alleged lien against the Dodge automobile. The appellant herein assumed the defense of said suit and on March 31, 1954, paid by way of compromise to Associates Discount Corporation the sum of $750, and also paid a fee of $62.50 to a Louisiana attorney for his services in connection with the suit. Under the authorities which we have cited above, the appellant had a good title to the Dodge car and it was wholly unnecessary for him to pay anything in settlement of said suit. It seems that Louisiana has the same rule as our Mississippi authorities hold. General Motors Acceptance Corporation v. Hahn, 190 So. 869 (La.)

On April 28, 1954, appellant filed a bill of interpleader in the Chancery Court of Hinds County against the Associates Discount Corporation and Grenada Bank and admitted that he owed someone the $1,075 but claimed that he was entitled to a credit against the same for the $812.50 which he had expended in defending and settling the Louisiana suit. He tendered the difference into court in satisfaction of his $1,075 obligation. There were other defendants named in the bill who filed disclaimers and they were dismissed from the suit. Grenada Bank filed a cross bill for recovery of the full sum of $1,075 from the appellant and Associates Discount Corporation answered and filed a cross bill and the case proceeded to trial between appellant and the two defendants who remained in the suit.

After a lengthy hearing the chancellor found against Associates Discount Corporation and it does not appeal from the final decree. The court further found in favor of Grenada Bank against the appellant in the full amount of $1,075 and found that appellant is not entitled to a setoff of $812.50 as claimed by him. Out of the money tendered into court the chancellor directed the clerk to pay all of the court costs and to pay the balance, if any, to Grenada Bank to apply as a credit on the judgment for $1,075 against the appellant. From that decree the appellant prosecutes this appeal.

There was practically no conflict in the evidence and it abundantly supports the chancellor's findings and decree. Consequently the decree appealed from will be affirmed.

Affirmed.

Roberds, P.J., and Arrington, Ethridge and Gillespie, JJ., concur.


Summaries of

McKinnon v. Grenada Bank

Supreme Court of Mississippi
Feb 20, 1956
85 So. 2d 458 (Miss. 1956)
Case details for

McKinnon v. Grenada Bank

Case Details

Full title:McKINNON v. GRENADA BANK

Court:Supreme Court of Mississippi

Date published: Feb 20, 1956

Citations

85 So. 2d 458 (Miss. 1956)
85 So. 2d 458