Summary
In Love v. Vina Banking Co., 1933, 168 Miss. 321, 150 So. 754, the Supreme Court of Mississippi stated (150 So. 755) that there was "no substantial conflict in the evidence as to how the transaction was understood at the time it was entered into, and the action of the parties in reference to it."
Summary of this case from In re Berger Steel CompanyOpinion
No. 30808.
November 13, 1933.
BANKS AND BANKING.
Where one bank arranged with another bank for advances to lumber company on demand notes with invoices of lumber as security, with understanding that any deficit in amount collected on invoices to pay notes should be charged to first bank and any surplus credited to it, and that notes not paid in due course would be charged to first bank, it was equitable owner of notes and invoices and entitled to offset amount of unpaid notes against its larger credit when second bank closed.
APPEAL from Chancery Court of Lee County.
Flowers, Brown Hester, of Jackson, and C.R. Bolton, of Tupelo, for appellant.
A surety on a note payable to a bank cannot upon a bank's becoming insolvent set off his deposit account upon the note if the principal remains solvent and no proceedings have been taken against the surety.
24 R.C.L., p. 861, sec. 65; New Farmer's Bank's Trustee v. Young, 39 S.W. 46.
The case of Love, Superintendent of Banks, v. Rogers, 140 So. 696, is decisive of the question at issue.
We respectfully submit that the court below was in error in holding that the Vina Banking Company was primarily liable on the assigned invoices and notes in question in this case, and in directing that the proceeds of the collection of said invoices be paid over as a preferred claim and the uncollected notes be delivered to it and all such charged against the deposit of the Vina Banking Company.
Travis Williams, of Russellville, Alabama, for appellees.
The best interpretation of a contract is the interpretation given the contract by the parties themselves while operating under the contract. The respective rights of appellant and appellee vested, eo instanta, at the moment the bank went into liquidation.
Citizens Bank of Greenville v. Kretschmar, 91 Miss. 608, 44 So. 830; Everglade Cyprus Co. v. Tunnicliffe (Fla.), 148 So. 192.
The rights of these litigants are not affected by any action taken by the liquidating agent, any change of the manner of transacting the business by him, or by whether or not he collected any of the notes without having to charge them to the Vina Bank. The Vina Bank account should be treated as a set-off against the Lumber Company notes as of the date the bank went into liquidation.
The relationship between bank and claimant of fund as respects preference is controlled by intention of bank and depositor at time of deposit, and the Bank of Tupelo can take no comfort from the fact that the special fund created by the Vina Banks' account was mixed with other moneys of the bank.
Tunnicliffe v. Sears, 140 So. 197; Everglade Cyprus Co. v. Tunnicliffe, 148 So. 192.
Nothing in this case brings the transaction within the statute of frauds.
Fites case, 215 Ala. 521, 111 So. 15; Ware v. Allen, 1 So. 738, 64 Miss. 545; Palmer v. Bridges, 151 Miss. 12, 117 So. 328; Lumber Co. v. McDonough, 154 Miss. 720, 123 So. 855; Fabscher v. Croupes (La.), 117 So. 439; Allen v. Smith Brand, 160 Miss. 303, 133 So. 599.
It is contended by appellant that the case of Love, etc. v. Rogers, 140 So. 696, is decisive of this case, but it is clear that the facts are so very different from the facts in the case at bar that it is not even an authority on the subject-matter of this litigation nor any phase of it.
Argued orally by C.R. Bolton, for appellant, and by Travis Williams, for appellee.
The Vina Banking Company, a banking corporation of the state of Alabama, had a customer, the J.C. Williams Lumber Company, which it was financing; but being a bank of limited capital, and the amounts loaned to the J.C. Williams Lumber Company being large, the superintendent of banks in Alabama was not willing for it to carry such loans. The J.C. Williams Lumber Company and the Vina Banking Company went to the People's Bank Trust Company, a banking corporation in Mississippi, located at Tupelo, Mississippi, and arranged for it to make advances on invoices of the lumber company, by which arrangement the J.C. Williams Lumber Company would make out invoices of the lumber, execute its demand note payable to the People's Bank Trust Company, attach thereto, as security, the invoice of said lumber, and deposit said note with the attached invoice in the People's Bank Trust Company, and the Vina Banking Company would be credited on its books for approximately eighty per cent. of the invoice price of said lumber.
It was agreed that, if the amount collected on the invoice attached to the note was insufficient to pay same, the deficit would be charged to the Vina Banking Company; but, if the invoice was in excess of the amount of the note, the overplus would be credited to the Vina Banking Company. It was understood that the People's Bank Trust Company would not bring any pressure to bear for the payment of said notes, but, if they were not paid in due course, the amount advanced by the People's Bank Trust Company would be charged back to the account of the Vina Banking Company, and the notes returned to the Vina Banking Company, and it would take up with the J.C. Williams Lumber Company the collection of such invoices and notes.
The accounts were carried on the books of the People's Bank Trust Company in the name of the Vina Banking Company, and no credits were given to the J.C. Williams Lumber Company.
This arrangement was entered into in September, 1932, and on December 24, 1932, the People's Bank Trust Company was taken over for liquidation by the state banking department. At the time of this taking over of said People's Bank Trust Company, the account of the Vina Banking Company showed a balance of four thousand four hundred seventy-three dollars and sixteen cents, and there were demand notes of the J.C. Williams Lumber Company held by the People's Bank Trust Company amounting to three thousand three dollars and seventy-five cents, on which had been collected approximately two thousand five hundred seventy-nine dollars. The Vina Banking Company desired to have these notes charged to its account, and the invoices and notes returned to it, which the superintendent of banks of Mississippi refused to do, but made demand upon the J.C. Williams Lumber Company for the amount advanced on said notes, which it refused to pay.
Thereupon, the J.C. Williams Lumber Company and the Vina Banking Company filed this suit setting up substantially the facts set forth above, and contending that the invoices and notes belonged, in equity, to the Vina Banking Company, and that its account should be charged with the same, so as to make an offset of the amount due to the Vina Banking Company by the People's Bank Trust Company. In other words, to reduce its deposit by the amount of the notes and invoices.
The court below adjudged that the Vina Banking Company was primarily liable for the notes and invoices, and that it was the equitable owner of same, and was entitled to have them offset against the amount due it by the People's Bank Trust Company in liquidation.
The entire transaction showed, by the dealings of the two banks, and the testimony, that the arrangement was one by which the Vina Banking Company was the equitable owner of the invoices, and that its agreement bound it to pay the demand notes.
There is no substantial conflict in the evidence as to how the transaction was understood at the time it was entered into, and the action of the parties in reference to it.
The legal title to the invoices and notes was in the People's Bank Trust Company, but the Vina Banking Company was the equitable owner thereof, and was entitled to an equitable offset.
As the invoices and notes were less than the amount of the deposit carried by the Vina Banking Company, it was entitled to have the notes charged to its account by way of setoff, and the notes returned to it by the People's Bank Trust Company.
For the reasons indicated, the decree of the chancellor will be affirmed.
Affirmed.