Colonial Lumber Co. v. Andelusia Nat. Bank

Cook, J., delivered the opinion of the court. The appellant, Colonial Lumber Company, a corporation engaged in buying and selling lumber, instituted an attachment in chancery against Catón & Parker, lumber manufacturers, of Andelusia, Ala., and the Andelusia "National Bank, and the Jackson-State National Bank, of Jackson, Miss., the holder of the proceeds of a draft drawn on the appellant by Catón & Parker, and payable to the Andelusia National Bank. Upon the evidence offered in the court below a. decree in favor of the *575 Andelusia National Bank was entered, and from this decree this appeal was prosecuted. From the averments of the original bill and the proof offered in support thereof it appears that the appellant was engaged in the business of buying and selling yellow pine lumber at wholesale, buying the same from .manufacturers to be shipped, to destinations throughout the country in car lots; that it purchased from Catón & Parker several shipments of lumber which were declined by the consignees to whom it had sold the same, because it had been defectively manufactured and did not meet the requirements of the consignees or the specifications of the appellant; and that by reason of this breach on the part of Catón & Parker the appellant had sustained losses amounting to six hundred thirteen dollars and fifty-two cents. In order to recover this loss, the appellant conceived the idea of ordering from Catón & Parker another ear of lumber, and attaching in the hands of a Jackson, Miss., bank the proceeds of a draft to be drawn for the purchase price of the car of lumber, and in pursuance of this plan the appellant purchased a car of lumber from Catón & Parker, with instructions to ship the same to the Foster Lumber Company, of Athens, Ohio, and draw upon the appellant for eighty per cent, of the purchase price. Thereafter Catón &> Parker shipped the car of lumber as directed, and drew a draft on the appellant for the sum of six hundred and fifty-six dollars payable to the Andelusia National Bank, and deposited the same in the said Andelusia National Bank. The Andelusia National Bank credited the account of Catón & Parker with the full amount of the draft, and thereafter forwarded the draft to the Jackson-State National Bank of Jackson, Miss., for collection and remittance to the Andelusia National Bank, and the amount of the draft was paid by the drawee to the said Jackson-State National Bank, and immediately the proceeds of the draft were attached under the original bill filed in this cause against Catón & Parker, the Andelusia National Bank, and the Jackson-State National Bank. *576 Catón So Parker or the Catón' & Parker Lumber Company did not answer the bill of complaint, but the Andelusia National Bank filed an answer denying the material averments of the bill and the right of the appellant to subject the proceeds of the draft to its claim against Oaton & Parker, and averring that it was a holder in due course of the draft in question, and consequently that it was the owner of the proceeds of the draft, and the same were not subject to attachment for a debt due or alleged to be due by the defendant Catón So Parker Lumber Company, to the complainant. At the time the draft in question was paid by the appellant, and at the time of the filing of this original bill, the appellant had no reason to believe that there would be any breach of contract by Catón So Parker as to this last car, but when the car arrived at its destination it was refused by consignee on account of being defective in grade'and quality, and after considerable controversy over this shipment, with the consent of Catón & Parker, it was finally disposed of to another party at a loss of $368.20. At the trial of the cause, over the objection of the appellee, the appellant was permitted to amend its original bill so as to sue for the loss sustained upon this last car, and by cross-appeal the appellee assigns as error the action of the court in allowing this amendment. The cashier of the appellee the Andelusia National Bank testified that the Catón & Parker Lumber Company was a regular customer of appellee; that it was the custom of this lumber company to handle drafts on their customers through the appellee bank, the bank taking actual ownership of the drafts and crediting the proceeds to the Catón So Parker Lumber Company subject to' their check; that the appellee did not accept the particular draft in question as a collection item, but accepted it as a cash item and immediately credited the account of the Catón & Parker Lumber Company with the full amount of the draft. The exact status of the account of the Catón So Parker Lumber Company with the appellee between the deposit of the draft and the filing, *577 of this suit is not developed in the record, the only testimony bearing upon' this point being the answer of the cashier of the appellee to the following interrogatory: “If you have stated that the face of this draft was credited to Catón & Parker by your bank, state whether this amount was, before this suit, or has been subsequently, drawn out by Catón & Parker?” To this question, he replied: “The amount of this draft was drawn out by Catón & Parker Lumber Company before this suit.” The deposition of this witness was taken sixteen months after the suit was filed, and he testified that the Catón & Parker Lumber Company was then indebted to the bank in the sum of about five thousand dollars and that it then had on deposit with the bank the sum of one thousand five hundred eighty-six dollars and seventy-four cents, but there was no effort whatever to show the state of this account between the time of the deposit of the draft and the filing of the suit, further than this state'ment of the cashier of the bank that the amount of this draft had been checked out before this suit. Under no view of this case would the appellant be entitled to recover any part of the proceeds of this draft as against the appellee, the purchaser thereof, for losses sustained by reason of defective lumber in shipments made prior to the one covered by the particular draft and bill of lading, and for which losses the original suit was filed. In the case of Bank v. Searles, 81 Miss. 169, 32 So. 314, it was held that a bank which purchased a draft with bill of lading attached occupies, as to the consignee, the situation of the consignor only as to the goods represented by the particular draft and bill of lading, and that the consignee, after paying the draft and receiving the bill of lading, cannot subject the proceeds of the draft in the hands of a collecting bank to his demand for damages or losses sustained on other and prior shipments of goods, although they may have been included in one contract of sale. The bill as originally filed sought to recover only losses on prior and wholly disconnected *578 shipments, and consequently the court below was correct in denying recovery for these losses. There is an additional reason why this action of the court was correct, and that is, the appellant utterly failed to prove that any such losses had been sustained. The next question presented for consideration is whether the court erred in permitting’ the appellant to amend its bill so as to seek a recovery for losses, amounting to three hundred sixty-eight dollars and twenty cents, sustained by reason of defective lumber in the shipment represented by the particular draft and-bill of lading in controversy. At the time this original bill was filed, the appellant had no information in regard to the defective character of this last shipment of lumber, and no reason to believe that any loss would be sustained on account of this shipment. Our statute and practice require that amendments shall be liberally allowed so as to prevent delay and injustice, and we do not think the court erred in permitting, this amendment by which it was sought to recover a loss that had been discovered after the filing of the original bill. This amendment having been permitted, there remains for consideration the action of the court in denying recovery against the appellee, out of the proceeds of the draft, the three hundred sixty-eight dollars and twenty cents loss alleged to have been sustained on the oar of lumber for the purchase price of which the particular draft was drawn. The holder of a draft or other ■ negotiable paper payable to or indorsed to him is presumed to have a bonafide title to, and to have paid value for it, and the burden of showing to the contrary is upon him who asserts rights to the proceeds thereof or sets up defenses against it. Harrison et al. v. Pike Bros. & Co., 48 Miss. 46; Emanuel v. White, 34 Miss. 56, 69 Am. Dec. 385. But the mere crediting of a depositor’s -account with the full amount of a draft does not constitute a bank a bona-fide purchaser of the.draft. To be such,-the holder of the draft must actually part with something of value, and if *579 it is shown that the bank merely gave credit to the depositor for the amount of the draft without actually paying out any funds, such bank is not a bona-fide holder for value. In the case at bar it was affirmatively shown that the entire amount of this draft was drawn out before this suit, but there was no effort whatever made to show the exact status of the depositor’s account between the date of the draft and the filing of the suit. It was shown that at the time of the taking of the deposition of appellee’s cashier, which was about seventeen months after the filing of the suit, the depositor had to its credit in the appellee bank a sum in excess of the amount of this draft; but this was immaterial. The material inquiry was as to the state of the account at the time of and before the bank received notice of an infirmity in the draft by the filing* of the suit. As to this the record is entirely silent. The draft was drawn and credit therefor given on January 17,1923, and this suit was filed on February 3, 1923. During the time intervening* between the date of the draft and the filing of the suit, the depositor’s entire balance may have been drawn out, or its account may have been overdrawn. If the contention of the appellant that in order to constitute the bank a holder for value, it was necessary that the depositor’s entire balance should have been drawn out between the date of the credit and the filing of the suit, be conceded, it was not shown that such was not the case, and the presumption that the bank was a purchaser for value must prevail. In the case of Bank of Gulfport v. Smith, 132 Miss. 63, 95 So. 785, it was hold that when a bank receives for deposit a check payable to the depositor and drawn on another bank, and permits the depositor to withdraw the amount of the check before notice of any infirmity therein, it becomes a holder for value of the check. It seems that this holding is controlling here, and consequently the decree of the court below will be affirmed. Affirmed.