Opinion
7 Div. 606.
October 28, 1930. Rehearing Denied January 13, 1931.
Appeal from De Kalb County Court; E. M. Baker, Judge.
Action by G. O. Talley against the Farmers' Merchants' Bank of Ft. Payne. From a judgment for plaintiff, defendant appeals.
Reversed and remanded.
Certiorari denied by Supreme Court in Farmers' Merchants' Bank v. Talley, 222 Ala. 455, 132 So. 876.
Counts C and D of the complaint are as follows:
Count C:
"The plaintiff claims of the defendant the other and further sum of $307.66 for this:
"That for some months prior to December 1928, the defendant and one C. C. Cole had a contract or agreement by which it was agreed between said parties, for their mutual benefit, that the said Cole was to buy cotton in the local market and issue his check for the same, and the defendant would pay the same when it was presented. That said arrangement had been carried out by both parties for some months and until almost the end of the cotton buying season, when the plaintiff sold to the said C. C. Cole four bales of cotton and received his check for payment, drawn upon the defendant, but when he presented his said checks for payment, the defendant failed and refused to pay the same. And the plaintiff further avers that if said contract was not in force and effect at the time he sold his said cotton to Cole, the defendant did not give any notice of that fact although said Cole was buying cotton in the same building with the defendant and the defendant knew that he was doing so, and was enabled to do so upon the belief of this plaintiff that the defendant would carry out his part of the contract and pay for said cotton.
"And the plaintiff further avers that the said defendant received the cotton warehouse receipts for his cotton herein alleged to have been sold to Cole and the basis of this [suit], sold said cotton or permitted said Cole to do so and received the proceeds of same in accordance with its contract with said Cole."
Count D:
"The plaintiff claims of the defendant the other and further sum of $307.66 for this:
"That sometime prior to December 1928, the defendant and one C. C. Cole, for their mutual benefit, entered into a contract or agreement by which said Cole was to buy cotton in the local market, or from others who had and desired to sell cotton, and issue his check for the same payable to the seller, and it was further agreed that the defendant would pay said checks when presented to it. That all during the cotton buying season said Cole bought cotton from the general public, drew his checks on the defendant for the same, took the cotton purchased, sold it and delivered the proceeds to the defendant, or turned the cotton over to the defendant directly for sale. That on or about the 20th day of December 1928, and while said contract or agreement between the defendant and said Cole was in effect, the plaintiff sold said Cole four bales of cotton and received from him his checks therefor, and when he presented said checks to the defendant, drawn upon the defendant, it failed and refused to pay the same.
"And the plaintiff alleges that said checks were and are the property of this plaintiff.
"And the plaintiff avers that said Cole complied with his part of the contract and turned over to the defendant the cotton warehouse receipts at the end of each day, sold said cotton, or permitted the defendant to do so, and that the money received for all of said cotton, including the cotton sold by the plaintiff, was turned over to the defendant in keeping with said contract or agreement."
The following are grounds of demurrer to the foregoing counts:
"1. It is not shown wherein or how this defendant has breached any legal duty owed by it to the plaintiff.
"2. The facts averred do not as a matter of law state a cause of action in favor of plaintiff as against this defendant.
"3. Said count shows on its face that whatever legal cause of action plaintiff may have by reason of the facts therein set forth is against C. C. Cole and not against this defendant.
"4. For aught that appears, other than as a mere conclusion of the pleader, the plaintiff has not been damaged by reason of the alleged breach of the contract or agreement between the defendant and said C. C. Cole.
"5. For aught that appears, other than a mere conclusion of the pleader, said alleged contract between defendant and said Cole was wholly without consideration, and for that reason not binding on defendant.
"6. For aught that appears defendant had a legal right as against the plaintiff to refuse and fail to pay said checks alleged to have been presented by plaintiff to the defendant.
"7. It is not averred whether said alleged contract between defendant and said Cole was verbal or in writing."
"9. Said alleged contract between defendant and said Cole is not set forth with sufficient certainty for issue to be joined thereon.
"10. For aught that appears, other than as a mere conclusion of the pleader, the legal title to said cotton is still in the plaintiff."
"12. For aught that appears said alleged contract between defendant and plaintiff was opposed to public policy.
"13. For aught that appears said alleged contract between defendant and said Cole was, as to this defendant, ultra vires and for said reason not enforceable as against this defendant.
"14. For aught that appears the plaintiff in selling said four bales of cotton to said Cole and accepting his checks therefor was not acting and relying upon said alleged contract between defendant and said Cole."
"17. It does not appear from the averments of said count, with sufficient certainty, upon what cause of action the plaintiff claims of the defendant the said sum of $307.66.
"18. It does not appear with sufficient certainty whether said sum of money is claimed of this defendant for failure to pay accepted checks or for a breach of contract between defendant and C. C. Cole made for the benefit of plaintiff.
"19. It is not shown wherein or how the plaintiff acquired any legal rights as against this defendant under or by virtue of said alleged contract between defendant and said C. C. Cole for a breach of which this defendant would be liable to plaintiff.
"20. The facts averred do not as a matter of law show that said alleged contract between defendant and said Cole was made for the benefit of plaintiff.
"21. For aught that appears, other than as a mere conclusion of the pleader, the defendant neither accepted or certified said checks in such manner as to create any liability on its part to plaintiff.
"22. For aught that appears the defendant did not accept said checks in writing.
"23. The facts averred do not as a matter of law show that defendant had contracted or agreed with plaintiff to pay said checks.
"24. For aught that appears, other than as a mere conclusion of the pleader, the checks in question were governed by Negotiable Instrument Statute and were never accepted or certified by defendant in such manner as to create any liability by defendant to plaintiff by the refusal on defendant's part to pay the same.
"25. Said count shows on its face that the contract or agreement of defendant to pay said checks was with C. C. Cole and not with the plaintiff.
"26. For aught that appears there was no duty on the part of defendant to have given notice that said alleged contract between defendant and said C. C. Cole was not in force and effect at the time plaintiff sold the said cotton to Cole.
"27. For aught that appears the plaintiff did not act or rely upon his alleged belief that defendant would carry out its part of said alleged contract between it and said C. C. Cole.
"28. For aught that appears the defendant did not know that plaintiff was acting and relying upon the alleged contract between defendant and said Cole when he made said sale of cotton to said Cole.
"29. No facts are averred which would, as a matter of law, give plaintiff a legal right to act or rely upon said alleged agreement between defendant and said Cole.
"30. The averments of said count are repugnant and inconsistent.
"31. The averment that said Cole was enabled to buy cotton in the same building with defendant 'upon the belief of plaintiff that the defendant would carry out his part of the contract and pay for said cotton,' is but a conclusion of the pleader."
"33. No duty is shown on the part of this defendant not to have permitted said Cole to sell said cotton.
"34. It is not shown wherein or how defendant breached any duty owed by it to plaintiff in permitting said Cole to sell said cotton."
"37. The averment that defendant received the proceeds of the sale of said cotton in accordance with its contract with said Cole is but a conclusion of the pleader.
"38. The facts averred in said count are too vague, indefinite and uncertain for issue to be joined thereon."
John B. Isbell, of Ft. Payne, and Culli, Hunt Culli, of Gadsden, for appellant.
A check of itself does not operate as an assignment of funds of the drawer in the hands of the drawer, unless and until it is accepted. Code 1923, §§ 9207, 9203, 9147. An agreement for overdraft confers no greater right on the customer or the payee than if the customer had on deposit sufficient funds. Vandagrift v. Masonic Home, 242 Mo. 138, 145 S.W. 448; Spokane Eastern Trust Co. v. Huff, 63 Wn. 225, 115 P. 80, 33 L.R.A. (N.S.) 1023, Ann. Cas. 1912D, 491. A warehouse receipt is negotiable. Alabama Agri. Code 1927, § 452. The right of a third person for whose benefit a promise is made is affected with all the infirmities of the agreement as between the parties thereto. Meyerson v. New Idea Hosiery Co., 217 Ala. 153, 115 So. 94, 55 A.L.R. 1231. A bank is not bound by an agreement to honor overdrafts; such a contract is against public policy. S. R. P. Import Co. v. American U. Bank, 122 Misc. Rep. 798, 204 N.Y.S. 755; Lancaster Bank v. Woodward, 18 Pa. 357, 57 Am. Dec. 618; Culver v. Marks, 122 Ind. 554, 23 N.E. 1086, 7 L.R.A. 489, 17 Am. St. Rep. 377. When the evidence does not prove or tend to prove the material averments of the complaint, it is error to refuse the affirmative charge for defendant. Alabama Power Co. v. Conine, 207 Alabama 435, 93 So. 22; Hatch v. Varner, 150 Ala. 440, 43 So. 481.
Chas. J. Scott and J. A. Johnson, both of Ft. Payne, for appellee.
Plaintiff was entitled to recover under count 1. Allen v. Mendelsohn Son, 207 Ala. 527, 93 So. 416, 31 A.L.R. 1063; Farmers Bank T. Co. v. Shut Keihn, 192 Ala. 53, 68 So. 363; Meyerson v. New Idea Hosiery Co., 217 Ala. 153, 115 So. 94, 55 A.L.R. 1231. If there were no specific contract, the course of dealing was such that the law would imply one. It would be inequitable for defendant to receive the proceeds of plaintiff's cotton receipts and turn down the checks given in payment therefor. 13 C. J. 244, 705, 707; Potts v. First Nat. Bank, 102 Ala. 286, 14 So. 663; Ballard v. Home Nat. Bank, 91 Kan. 91, 136 P. 935, L.R.A. 1916C, 161.
G. O. Talley, plaintiff in the court below, sold to one C. C. Cole, on December 20, 1928, four negotiable cotton warehouse receipts payable to order of bearer, and received from said Cole three checks drawn on Farmers' Merchants' Bank, defendant in the court below. Said checks were dated December 20, 1928, signed by C. C. Cole Cotton Company, which was the trade-name under which said Cole bought and sold cotton, and were as follows: One for the sum of $146.36, payable to the order of plaintiff, G. O. Talley; one for the sum of $84.25, payable to the order of T. B. Beck; and the other being for the sum of $77.05, payable to the order of Odis Hammonds. The checks payable to order of Beck and Hammonds, respectively, were duly indorsed by them in blank. The transaction in question took place at Ft. Payne, Ala., at which place the defendant bank is located and does business as a bank under the laws of Alabama.
The plaintiff, Talley, took his checks to Collinsville, Ala., and there deposited the same with his bank, the first National Bank of Collinsville, Ala., and about the 25th or 26th of December the checks were returned to plaintiff by his said bank at Collinsville, unpaid, with notation that they were not paid by reason of insufficient funds.
On December 31st, plaintiff took his said checks to defendant bank at Ft. Payne, presented the same at the cashier's window, and requested payment, and payment was refused.
The plaintiff brought this suit to recover the aggregate sum of said three checks, viz. $307.66, and the suit as originally filed was against said C. C. Cole and defendant Farmers' Merchants' Bank, but by amendment the name of C. C. Cole was eliminated as a party defendant, and the trial resulted in a verdict for the plaintiff for the sum of $318.80, from the judgment on which defendant brings this appeal.
It was without dispute in this case that, at the time of the transactions in question, C. C. Cole was engaged in the business of buying and selling cotton at Ft. Payne, Ala., on his own account, under the trade-name of C. C. Cole Cotton Company, and that he maintained an office in the rear of defendant's bank, and that the sale of the warehouse receipts in question took place in said Cole's office.
It was the contention of plaintiff, on the trial of this case, that defendant bank had agreed with Cole that Cole could issue his checks drawn on defendant bank for cotton purchased by him during the day, and that the checks would be paid as an overdraft, and that at the end of each day's business Cole was to deposit with the defendant the warehouse receipts purchased by him during the day as collateral security to protect the overdraft growing out of the payment of Cole's checks on the defendant bank.
On the other hand, it was the contention of defendant that Cole had an account with defendant as a depositor, and that it never at any time agreed with Cole that it would cash Cole's checks in the manner as contended by plaintiff, and that the only agreement with Cole was that it would cash his checks if he had on deposit sufficient money with which to pay the checks, and that it would also cash his checks and carry the amount as an overdraft provided Cole had on deposit with defendant bank sufficient number of warehouse receipts to protect the defendant in paying out checks as an overdraft.
The case was submitted to the jury on three counts of the complaint, viz. counts 1, C, and D.
Count 1 of the complaint was in substantially the Code form for money had and received.
Both counts C and D, which are set out in the report of the case, appear to be based upon an agreement made between one Cole, a cotton buyer, and defendant appellant, for "their mutual benefit," whereby it was agreed that Cole should buy cotton during the day, issuing his checks therefor on defendant, and turning over to the defendant, at the close of each day's business, the cotton receipts for the cotton purchased during that day, and that defendant would honor or pay said checks so issued.
The evidence was without dispute that, at the time the checks in question in this suit were presented to defendant bank for payment, Cole did not have on deposit with defendant funds sufficient to pay the same, and neither did he have at said time on deposit with defendant, warehouse receipts, or other security, of sufficient value as collateral security to protect the defendant against loss in paying said checks.
There was no evidence offered upon the trial of this cause tending to show that the plaintiff at the time he sold the warehouse receipts to Cole was acting or relying upon any agreement between Cole and defendant to the effect that defendant would pay Cole's checks regardless of whether Cole had sufficient funds to his credit with which to pay the same, Cole in turn to deposit with defendant at the end of each day's business the warehouse receipts purchased by him during the day, to secure the payment of the overdraft.
The testimony of plaintiff appellee's witness Cole was without dispute that he drew a draft on Geo. H. McFadden, Gadsden, Ala., for $3,026.31, payable to defendant bank, and that he attached to said draft thirty-four cotton warehouse receipts, included in which number were the warehouse receipts, here involved, purchased by him from the plaintiff, and that the proceeds of the sale were credited to his account by defendant, and that he received the benefit thereof.
There was no evidence tending to show that defendant knew that Cole had purchased any cotton from plaintiff and plaintiff's witness Cole testified on cross-examination, and the testimony was without dispute in the case, that he did not take any receipt from the bank for the warehouse receipts turned over to it, and that neither did he furnish the bank with the number of the warehouse receipts.
There was no evidence offered as to the market value of the cotton in question other than that plaintiff (appellee) received the checks in question from Cole for the warehouse receipts.
"A check of itself does not operate as an assignment of any part of the funds to the credit of the drawer with the bank, and the bank is not liable to the holder, unless and until it accepts or certifies the check." Section 9207, Code 1923.
"A check is a bill of exchange drawn on a bank payable on demand. Except as herein otherwise provided, the provisions of this chapter applicable to a bill of exchange payable on demand apply to a check." Section 9203, Code 1923.
"A bill of itself does not operate as an assignment of the funds in the hands of the drawee available for the payment thereof, and the drawee is not liable on the bill unless and until he accepts the same." Section 9147, Code 1923.
It is clear from the Code sections quoted that this judgment cannot rest upon the "unpaid checks" drawn by Cole on defendant bank and delivered to appellee.
As for counts C and D of the complaint, we are of the opinion and hold, that the following, if not others, of the grounds of demurrer interposed thereto, were appropriate, and should have been sustained: 1, 2, 3, 4, 5, 6, 7, 9, 10, 12, 13, 14, 17, 18, 19, 20, 21, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31, 33, 34, 37 and 38. Vandagrift v. Masonic Home, 242 Mo. 138, 145 S.W. 448; Meyerson v. New Idea Hosiery Co., 217 Ala. 153, 115 So. 94, 55 A.L.R. 1231; Code 1923, §§ 6339, 6365; 13 C. J. p. 709, § 817; Gulf Compress Co. v. Sykes-Tweedy, 159 Ala. 669, 48 So. 481; Gulf Compress Co. v. Harris, 158 Ala. 343, 48 So. 477, 24 L.R.A. (N.S.) 399; S. R. P. Import Co. v. American Union Bank, 122 Misc. Rep. 798, 204 N.Y.S. 755; Lancaster v. Woodward, 18 Pa. 357, 57 Am. Dec. 618; Culver v. Marks, 122 Ind. 554, 23 N.E. 1086, 7 L.R.A. 489, 17 Am. St. Rep. 377; 6 R. C. L. 886. In greater part, any observations we might make as to the reasons for our so concluding would be but a repetition of the language of the several grounds of demurrer, which are set out in the report of the case. We might, though, quote, as conclusive of one fatal deficiency in the contract or agreement alleged to have existed between Cole and the defendant appellant, and sought to be made the basis of said counts C and D, the following principle of law, to wit: "The fact that one not a party or a privy to a contract is incidentally benefited under it is no reason for declaring that the contract was made and intended for his benefit." 6 R. C. L. 886, citing Gulf Compress Co. v. Harris, C. Co., 158 Ala. 343, 48 So. 477, 24 L.R.A. (N.S.) 399. Under any view, as we see it, the facts alleged in these counts as intending to show that the alleged contract between Cole and defendant was made for plaintiff appellee's benefit, in such sort that he might maintain a suit thereon, are not as strong in their legal effect as those held insufficient in the case of Gulf Compress Co. v. Harris, C. Co., supra.
In this case it is apparent that the alleged promises of the alleged agreement between Cole and the bank were not intended by them for the benefit of the plaintiff. It is obvious that the thing in the mind of both Cole and the bank was not to secure the payment of the amount agreed to be paid to the sellers of cotton. The contract, as indicated by the allegations of counts C and D, was not made for the benefit of the sellers of cotton. The benefit to them was incidental. Gulf Compress Co. v. Harris, C. Co., supra. The apparent sole purpose of Cole in making the contract was to obtain a line of credit, while that of the bank was to make loans to Cole.
So far as count 1, the count claiming for "money had and received," is concerned, we observe: "Such an action (money had and received) is appropriate whenever the defendant has money in his possession which belongs of right to the plaintiff. * * * This right in the plaintiff to the money which bestows on him the right to maintain the action for it must arise in some form, where the law implies a promise on the part of defendant that he will pay it to the plaintiff, and the only privity between the parties that needs be shown arises from this promise, implied by law, that the defendant, having money in his hands that belongs, ex aequo et bono to the plaintiff, will pay it over to him." Hudson v. Scott et al., 125 Ala. 172, 28 So. 91, quoted and made a part of the opinion of the Supreme Court in the case of Farmers' Bank Trust Co. v. Shut Keihn, 192 Ala. 53, 68 So. 363, 365. No such situation exists here. The cotton receipts were negotiable instruments. Agricultural Code of 1927, § 412. And the undisputed testimony shows that they had been lawfully negotiated by Cole to McFadden. Id. § 452. The money here sued for is the proceeds of the sale of the receipts in question, and the cotton, by Cole to McFadden, with the bank (appellant) chargeable with no notice of the manner of Cole's acquiring possession of same. We see no way in which the law would imply a promise on the part of the bank to pay this money over to plaintiff. The proof shows that it actually paid it, by crediting his account therewith over to Cole. And this was its right and duty. To hold otherwise would, it seems to us, make shipwreck of the law of negotiable instruments. If in this particular case it may appear that the law works a hardship on the plaintiff, the natural observation is that plaintiff had it within his power to protect his interests by retaining possession of the cotton receipts until he was actually paid therefor. The trial court should, at appellants' request, have given the general affirmative charge in its favor on count one, as indeed it should have on the whole case. For the erroneous rulings we have indicated, the judgment is reversed, and the cause remanded.
Reversed and remanded.