Opinion
No. 29583.
January 25, 1932.
BANKS AND BANKING. Drawers held entitled to preference claims against collecting bank, charging drafts to account of drawee having overdraft secured by bills of lading covering cotton shipped by drawers, but closing before drafts were paid.
The drafts with bills of lading covering cotton attached were deposited in bank which forwarded them through another bank to collecting bank. The latter charged drafts to drawee's account, thereby increasing amount of his overdraft and credited amounts to bill of lading account. Collecting bank then issued draft on F. bank for part of proceeds, but draft was not paid because collecting bank closed for liquidation, and for balance of draft no remittance was made. Drawee subsequently paid amount of overdraft to creditor of closed bank and received warehouse receipts covering cotton he bought from drawers of drafts and which collecting bank had pledged as security for its note.
APPEAL from chancery court of Alcorn county. HON. JAS. A. FINLEY, Chancellor.
Flowers, Brown Hester, of Jackson, for appellant.
A correspondent of a bank, whose claim it has collected, and failed to pay over, does not have an equitable lien on all the assets of the bank, securing precedence over all other creditors of the bank. It is enough to allow the correspondent who sends his claim to a bank `for collection' to pursue and reclaim his own, without depriving others of their rights. There is no such magic in the word `trust' as to convert all the assets of a bank into a fund to secure one who deals with it for convenience of collecting claims, in preference to others who trust it and deal with it.
Billingsby v. Pollock, 69 Miss. 759, 13 So. 828; Alexander County Nat'l Bank v. Conner, 110 Miss. 653, 70 So. 827; Love, Supt. of Banks et al. v. Fed. Land Bank of New Orleans et al., 127 So. 720; Hecker-Jones-Jewell Milling Company v. Cosmopolitan Trust Company et al., 242 Mass. 181, 136 N.E. 333, 24 A.L.R. 1148.
Immediately after Corinth Bank Trust Company made the collection from Carothers the relation of principle and agent ceased and the relation of debtor and creditor arose between the bank and appellees and this was the relation existing when the Corinth Bank Trust closed, and this relation has continued to the present time, and appellees now are entitled to general claims against the Corinth Bank Trust Company, in liquidation, just like the claims of depositors and other creditors of the bank, and nothing more.
Citizens Bank v. Bank of Greenville, 71 Miss. 271, 14 So. 456.
No creditor is entitled to a preference claim, that is, impress a trust on the assets of a failed bank — unless such claimant is either given the preference by statute or because of the contract covering the dealings between such claimant and the failed bank out of which his claim grows.
Potter v. Fidelity Deposit Co., 101 Miss. 823, 58 So. 712.
The bank to which a check is sent for collection is the agent of the holder thereof for the purpose of making the collection, and payment of the check to such bank absolves the drawer from further liability thereon. This result follows, notwithstanding such bank may fail to pay over the money to the person from whom the check was received for collection.
Planters Merc. Co. v. Armour Packing Co., 69 So. 293; Bank of Shaw v. Ransom, 112 Miss. 440, 73 So. 280; Marine Bank Trust Co. v. Triplett, 149 Miss. 274, 115 So. 202.
J.M. and F.G. Thomas, both of Tupelo, for appellees.
Drawers of draft are entitled to impress a trust on funds of collecting bank, where drafts had been charged to account of drawee and funds are held under ninety-six hour statute or collecting banks draft had been paid when the collection is closed.
Ryan Sons v. Paine, Receiver, 66 Miss. 678, 6 So. 320; Kinney Co. v. Paine, Receiver, 68 Miss. 258, 8 So. 747.
It is the duty of a collecting bank entrusted with the collection of commercial paper to collect in money.
Bank of Shaw v. Ransom, 73 So. 280.
Geo. T. and Chas. S. Mitchell, of Tupelo, for appellees.
Where a collecting bank closed after charging drafts to account but prior to its payment of sum collected from drawee, drawer is entitled to preference over general creditors of the closed collecting bank.
Kinney Company v. Paine, 68 Miss. 258; Ryan Sons v. Paine, 66 Miss. 678.
Argued orally by Clyde Hester, for appellant, and by J.M. Thomas, for appellee.
During the year 1930, V.M. Carothers of Booneville, Mississippi, was engaged in the business of buying and selling cotton, and he had arranged with the Corinth Bank Trust Company to finance this business during the cotton season of 1930 by permitting him to overdraw his account with that bank to the extent of the purchase price of the cotton bought by him during the season; this overdraft to be secured by bills of lading covering cotton shipments, or by warehouse receipts covering cotton stored in warehouses.
J.W. Jones Son and Burrow Co., appellees herein, were engaged in buying and selling cotton at Saltillo, Mississippi, and during the 1930 cotton season they sold, at various times, a large quantity of cotton to the said Carothers, for which payments were made by drafts collected through the said Corinth Bank Trust Company. Between November 19 and November 28, 1930, Jones Son shipped to the said Carothers several lots of cotton and drew drafts on him for the purchase price thereof, amounting to five thousand six hundred sixty-six dollars and fifty-six cents; while Burrow Co. shipped to him cotton to the value of six thousand two hundred nine dollars and sixteen cents, and drafts aggregating that amount were likewise drawn. All of these drafts with bills of lading attached were deposited in the Bank of Saltillo and by it forwarded to the People's Bank Trust Company of Tupelo, and by the latter bank forwarded to the Corinth Bank Trust Company for collection.
Upon receipt of these drafts, the Corinth Bank Trust Company charged them to the account of the said Carothers, thereby increasing the amount of overdraft already existing therein. Upon charging these amounts to the account of Carothers, the Corinth Bank Trust Company credited the amounts to its bill of lading account for the purpose of holding the fund for ninety-six hours, as required by law, before making remittance therefor in accordance with the instructions of the People's Bank Trust Company. For that part of the proceeds of these drafts that had been held for the statutory period of ninety-six hours, the Corinth Bank Trust Company issued its draft on the First National Bank of St. Louis, and forwarded same to that bank to be credited to the People's Bank Trust Company of Tupelo, Mississippi, but this draft was received by the First National Bank of St. Louis after the Corinth Bank Trust Company had closed for liquidation, and it was not paid. For the balance of the proceeds of the drafts of Jones Son and Burrow Co., held by the said Corinth Bank Trust Company, no remittance was made, and at the time this bank closed for liquidation this balance stood on its books charged to the account of Carothers, and credited to its bill of lading account. On November 26, 1930, the said Carothers owed the Corinth Bank Trust Company, by overdraft, the sum of twenty thousand three hundred forty-eight dollars and fifty-nine cents, and so the account stood when the bank was closed for liquidation on November 28, 1930; but the said Carothers was all the while solvent.
On November 22, 1930, V.M. Carothers owed the Corinth Bank Trust Company, by way of overdraft, the sum of twenty thousand four hundred forty-nine dollars and seven cents secured by shippers' order bills of lading for five hundred twenty-eight bales of cotton, and on this date the bank presented these bills of lading to the manager of the compress in which the cotton was stored, and received in exchange therefor negotiable warehouse receipts for five hundred twenty-eight bales of cotton. These receipts, with others, making a total of seven hundred four bales of cotton covered thereby, were deposited with Abe Rubel Co. of Corinth, Mississippi, for which trust receipts were issued showing that these warehouse receipts were held for the account of the Chase National Bank of New York, and on the same day the Corinth Bank Trust Company executed its promissory note for thirty thousand dollars in favor of the said Chase National Bank, pledging as security therefor the said trust receipts issued by Abe Rubel Co. for seven hundred four bales of cotton. The Chase National Bank gave the Corinth Bank Trust Company credit for this note, and this sum was checked out before the bank closed on November 28, 1930. At the time the Corinth Bank Trust Company closed, it owed the Chase National Bank of New York one hundred twenty-five thousand dollars, which included the thirty thousand dollar note secured by the above-mentioned trust receipts, and after its closure, with the consent of the liquidating agent of the bank, the said V.M. Carothers paid to the Chase National Bank the amount of his overdraft with the Corinth Bank Trust Company, and secured the release of the five hundred twenty-eight warehouse receipts pledged to secure the thirty thousand dollars note, and which covered cotton purchased from the appellees, Jones Son and Burrow Co.
Before the said Carothers paid his overdraft, however, the said J.W. Jones Son and Burrow Co., appellees herein, filed separate bills of complaint against J.S. Love, superintendent of banks, in charge of the liquidation of the Corinth Bank Trust Company, and against V.M. Carothers, praying, first, for a preference claim against the assets of the Corinth Bank Trust Company for the respective amounts owing them; and, second, if they were not entitled to this relief, for decrees against the said Carothers for such amounts. The superintendent of banks admitted the validity of the claims of the appellees against the Corinth Bank Trust Company, but denied that these claims were preference claims. The two causes were consolidated, and upon the final hearing the court rendered a decree granting the appellees a preference against the assets of the Corinth Bank Trust Company, and directing the superintendent of banks, in charge of the liquidation of such bank, to pay the claims of the appellees as prior or preference claims out of the assets of said bank. From this decree granting the preference, this appeal was prosecuted.
Upon the essential facts, the case at bar does not appear to us to be distinguishable from the cases of Ryan Sons v. Paine, Receiver, 66 Miss. 678, 6 So. 320, and Kinney Co. v. Paine, Receiver, 68 Miss. 258, 8 So. 747, and therefore it is ruled by the doctrine announced in those two cases. The decree of the court below will therefore be affirmed.
Affirmed.