Opinion
No. 27038.
September 24, 1928.
1. BANKS AND BANKING. Bank receiving note, draft, or other commercial paper is liable for negligence in failing to handle same in proper manner.
It is the settled law that a bank receiving a note, draft, or other commercial paper is bound to use reasonable diligence and skill in handling the paper, and that it is liable for negligence in failing to handle the the same in the proper manner.
2. BANKS AND BANKING. Plaintiff suing bank for failure to properly handle draft or other commercial paper must aver and prove damages.
The plaintiff, in case of failure of the bank to properly handle the draft or other commercial paper, must aver and prove his damages, and he must be damaged in fact by the transaction; and where he fails to prove damages, although he may prove negligence, he is not entitled to recover.
3. CARRIERS. Drawer of draft attached to bill of lading for sale of cotton after return by bank negligently handling paper may sell property for account of bank; drawer of draft selling property for more than amount of draft has no right of action against bank negligently handling paper.
On receipt of notice that a draft was dishonored, to which draft a bill of lading for the sale of cotton was attached, and where such draft is returned to the drawer, the drawer has the right to sell the property which the bill of lading represents for the account of the bank guilty of such negligence; but where he retains the property and afterwards sells it at a price above the amount of the draft, with interest and expenses, he has no right of action against the bank under such circumstances.
APPEAL from chancery court of Scott county; HON. J.R. ROWZEE, Special Chancellor.
Percy M. Lee, for appellants.
This suit is based upon the alleged carelessness and negligence of the defendants in the failing to give notice of dishonor of the draft in question in a reasonable time, and in accordance with the Negotiable Instruments Statute, in consequence of which carelessness and negligence on the part of the defendants, the complainants suffered loss by reason of a decline in the price of cotton. This draft is a bill of exchange. See Corinth Shilow Savannah Turnpike Co. v. Gooch, 113 Miss. 50, 73 So. 869. The defendants were under the duty to see that this draft was presented to Threefoot Bros. Company in care of W.D. Gillis within a reasonable time after the last negotiation, which occurred according to notice given by the People's Bank of Union to the Bank of Sebastopol on October 6, 1926.
The record shows that this defendant immediately sent the notice to the People's Bank of Union and received a deposit ticket on the sixth of October, just two days after it was drawn. It further appears that the People's Bank of Union accepted this draft for collection, and since this was done, it bound itself to comply with the statute in such cases. It therefore become the duty of the People's Bank of Union to see that this draft was presented to Threefoot Bros. Company, in care of W.D. Gillis within a reasonable time for payment, and that if payment was refused, to see that notice of dishonor was given at once.
Instead of this, the facts show that no notice of dishonor or even a semblance thereof was given to the Bank of Sebastopol until the first, or second of November, which notice at that time was very vague and indefinite. The action of the People's Bank of Union and the Bank of Philadelphia, constitute a flagrant violation of the Negotiable Instruments Statute, and noncompliance with it. Since the law has set up a scheme and course to be followed in matters of this kind, and this course has been wholly ignored by the defendants, then I submit that the damages which have followed as a result of failure to comply with this course are natural and logical sequence of the carelessness, negligence and misconduct of the Banks.
What shall the banks say? That because at the time when this case was actually tried the price of cotton was higher than at the time when the appellants thought they had sold this cotton to W.D. Gillis, will that fact absolve the banks from paying the penalty of the wrongs which they inflicted? The facts show that at the time the appellants received notice of the dishonor of this draft, the price of cotton was lower than at the time of the attempted sale. They thought their cotton had been disposed of. If the banks had complied with the law and given the notice of dishonor as required by law, then the appellants would have been able to protect themselves. When they were not advised that the draft had not been paid, they rightly assumed that the draft had been paid; and the damages which they suffered as a result of this carelessness, I submit are the penalty which the law exacts from the appellees as a punishment for their wrongs. This suit was filed in January, but was not tried at the March term of court, and did not reach a trial on its merits until the September term of court. In the meantime, between the date of the institution of the suit and the trial of the cause, the mighty flood of the "Father of Waters" had broken loose and devastated a large part of the fertile area of cotton lands. Besides, cold weather and other ravages, insects and diseases had combined to curtail the production of cotton to such an extent that the price was higher than when the sale was attempted to be made, and appellees say that this ought to absolve them from any damages. Shall the act of God or other acts wholly disassociated from those of the appellees, absolve them from the wrongs and injustices which they perpetrated on these appellants.
Paul Dees, for appellee, Bank of Philadelphia.
It is most earnestly insisted by this appellee that before appellant could recover anything against any party to this suit, that it would be necessary for appellant to show by proof:
1st. That one, or all of the appellees had violated some duty they owed to appellant. 2nd. That appellant suffered a loss, or sustained damages directly or indirectly on account of the failure of appellees to perform their duty.
It is further most earnestly insisted that the appellant here made an absolute sale of the draft in question to the appellee, the Bank of Sebastopol, when it received from the Bank of Sebastopol the amount of cash mentioned, the draft drawn by the appellant, and made payable to the Bank of Sebastopol and surrendered to the said bank the said draft, together with the eighty bales of cotton. It is further insisted by this appellee that there is nothing in the testimony to show that the draft in question in this case was ever even sent to this appellee, the Bank of Philadelphia. That there is no intimation in the testimony that this appellee failed to report to the People's Bank of Union the exact status at all times of the draft here in question. Alexander Co. National Bank v. Conner, 110 Miss. 653, 70 So. 827; First National Bank v. Tchula Commercial Co., 132 Miss. 58, 95 So. 742; The Citizens Bank Trust Co. v. Haspeth National Bank, 120 Miss. 505, 82 So. 329.
We know of no authority, and after a diligent search, have been unable to find any law that will authorize a person to collect damages where no damages have been sustained, and in this case the complainants admit that after this draft was returned, they sold the cotton here in question for about one thousand dollars more than they agreed to sell it for when draft here under consideration was drawn.
J.D. Carr, for appellee, People's Bank of Union.
We admit had appellants sold the cotton immediately on the return of the draft there would have been a loss. But had there been a loss, could appellants recover when it is admitted that the Bank of Sebastopol knew all the time that the draft had not been paid? The Peoples Bank of Union owed only the duty to notify the forwarder, the Bank of Sebastopol, of the condition of the draft (only such notice as it received from the Bank of Philadelphia), and the fact that the Bank of Sebastopol had this information dispensed with the necessity of further notice. The testimony further shows that the People's Bank performed fully the duty it owed in the matter. Tinnon v. Commercial Bank of Natchez, 7 How. 648; Third Nat'l Bank v. Vicksburg Bank, 61 Miss. 122.
But appellants sustained no loss whatever by this transaction. On the other hand they profited by it. In other words they sold the identical eighty bales of cotton in May, 1927, for several hundred dollars more than they would have received for it had Gillis promptly paid the draft — and this is true when all proper allowances are made for interest, labor, etc. The rule on this point, and followed by the courts, is tersely stated in 8 R.C.L. 434.
Argued orally by Percy M. Lee, for appellant.
Anthony Bros., a partnership, doing business at Sebastopol, Miss., filed their bill in the chancery court against the Bank of Sebastopol, the People's Bank of Union, and the Bank of Philadelphia, alleging that they are merchants engaged in a mercantile business and in the buying of cotton, and that on the fourth day of October, 1926, they had on hand a large amount of cotton, which they undertook to dispose of by oral agreement with one W.D. Gillis, an agent of Threefoot Bros. Co., at Philadelphia, Miss.; and that in consequence of the conversation with said Gillis they were instructed to draw a draft on the Threefoot Bros. Co., Philadelphia, Miss., for eighty bales of cotton, with bill of lading and numbers, pieces, and weights of the cotton attached thereto; that they accordingly drew the said draft for four thousand eight hundred eighty-four dollars and sixty-nine cents on said date, which they deposited with the Bank of Sebastopol, receiving credit for the full amount on their account at said bank, which bank forwarded the draft with bill of lading attached to its correspondent, the People's Bank of Union, at Union, Miss., and the latter bank, in turn, forwarded it to the Bank of Philadelphia, Philadelphia, Miss., for presentation and payment.
Appellant further alleges that, relying upon the provision of law relative to instruments of this kind, and having no notice that the draft was unpaid, and believing that it had been promptly paid, used the proceeds of same in paying their creditors, and were not apprised of any default on the part of Gillis in accepting and paying the draft until about the 1st day of November, 1926, when they were informed by the Bank of Sebastopol that a letter had been received from the People's Bank of Union to the effect that Gillis would be slow in taking care of the draft, and that it should be charged back to the complainants; that upon receipt of such notice they exercised the highest degree of care in endeavoring to clear the matter up; that the said draft was, in fact, not returned to them until about the 13th day of November, 1926, when it was delivered, and they repaid the Bank of Sebastopol the amount of the said draft.
Appellant further alleges that the draft contained no waiver of protest or notice, and relied upon prompt notice of its dishonor or nonpayment, which was not given, and that the price of cotton on the date of sale was higher than on the 1st day of November, the difference in prices on the lot of cotton amounting to one thousand three hundred dollars.
The banks severally answered the bill, from which answers and proof in the case it appears that the draft and bill of lading were forwarded to the Bank of Union by the Bank of Sebastopol, and that bank, in turn, forwarded it to the Bank of Philadelphia. Threefoot Bros. Co. neither accepted nor paid the draft.
It appears from the answer of the Bank of Philadelphia that it notified the Bank of Union promptly of the nonpayment of the draft, and it was instructed to forward it for collection. It further appears from the evidence that Anthony Bros. retained the cotton, and did not sell it until the following May, when cotton prices had advanced, and it was sold for a higher price at that time than cotton was selling for when the draft and bill of lading were originally made out on the 4th day of October, and that, in fact, no loss accrued to Anthony Bros. in the sale of the cotton. Suit, however, was filed in January prior to the sale of the cotton in May, and the suit proceeded upon the theory that the complainant had the right to recover the difference in the price of cotton on the 4th day of October and the 1st day of November, at which time they first had notice of the failure of Threefoot Bros. Co. to accept the draft and pay for the cotton.
It appears that after receiving this notice, Anthony Bros. went to Philadelphia, Miss., several times, seeking to adjust the matter with Threefoot Bros. Co., and incurred some expense in reference thereto. It also appears that they were somewhat embarrassed in taking care of the draft when it was charged back to them, to the extent that they had some difficulty in meeting their other bills payable. It does not appear that there was any agreement between the Bank of Sebastopol and Anthony Bros. that the latter would take the cotton at its then market value; but, on the contrary, Anthony Bros. paid the Bank of Sebastopol the full amount of the original draft, and retained the cotton, without making any attempt to sell the same at that time.
It is settled law that a bank receiving a note, draft, or other commercial paper is bound to use reasonable diligence and skill in handling the paper, and that it is liable for negligence in failing to handle the same in a proper manner. Agricultural Bank v. Commercial Bank, 7 Smedes M. 592; Commercial Railroad Bank v. Hamer, 7 How. 448, 4 Am. Dec. 80; Bank of Shaw v. Ransom, 112 Miss. 440, 73 So. 280. But it is also settled that the plaintiff must aver and prove his damages, and that he must be damaged in fact, by the transaction. 7 C.J., section 297, and cases cited in note 51; see especially Jefferson County Sav. Bank v. Hendrix, 147 Ala. 670, 39 So. 295, 1 L.R.A. (N.S.) 246 and case note; Hendricks v. Jefferson County Sav. Bank, 153 Ala. 636, 45 So. 136, 14 L.R.A. (N.S.) 686.
On receipt of the notice that the draft was dishonored, appellant had the right to sell the cotton for the account of the bank, and to hold the bank for its negligence, for the difference in value of cotton on the date that the notice should have been received by the exercise of due diligence, and the price on the date of such notice. But it did not have a right, in the absence of agreement to that effect, to take the cotton, hold it as their own, and treat the market price at which it could have been sold as though it had actually been sold, and afterwards sell it at a profit and keep the profit, and, in addition thereto, recover the difference in the market price on the said two dates.
On the facts in this record the appellant has suffered no loss by reason of the transaction, and the chancellor was correct in dismissing the bill.
Affirmed.