Case Name: O'HARA et al. v. TEXAS NAT. BANK OF FORT WORTH
Court: Texas Courts of Civil Appeals
Jurisdiction: Texas
Decision Date: 1927-10-13
Citations: 299 S.W. 649
Docket Number: No. 2061
Parties: O’HARA et al. v. TEXAS NAT. BANK OF FORT WORTH.
Judges: 
Reporter: South Western Reporter
Volume: 299
Pages: 649–652

Head Matter:
O’HARA et al. v. TEXAS NAT. BANK OF FORT WORTH.
(No. 2061.)
Court of Civil Appeals of Texas. El Paso.
Oct. 13, 1927.
Rehearing Denied Nov. 23, 1927.
K. R. Craig and Geo. A. Titterington, both of Dallas, for plaintiff in error.
Samuels & Brown, of Fort Worth, for defendant in error.

Opinion:
HIGGINS,. J.
W. W. O'Hara executed and delivered his cheek for $1,500 to the order of C. C. Marshall, dated May 4, 1925, drawn upon the First National Bank of Grandview, Tex.
The payee indorsed the cheek in blank and deposited same on May 6, 1925, in the Farmers' Bank of Duncanville, Tex., an unincorporated bank, owned by W. B. Cupp. Said bank issued a deposit slip for the check, signed by Cupp in favor of F. W. Marshall, the wife of C. C. Marshall. Above Cupp's signature upon the slip was written, "For collection and return only."
The cheek was indorsed by the Farmers' Bank to the order of any bank or banker, and with other.items, aggregating $1,827.98, was sent to the Texas National Bank of Fort Worth, Tex., defendant in error, on May 6, 1925, accompanied by letter, signed by C. C. Marshall, cashier'of the Farmers' Bank, which reads:
"We inclose for collection and credit items as listed. Deliver papers only upon payment of draft. Return at once all unpaid items.
"N. P. 88-1035. Protest all items over $20.00 not bearing this stamp or similar stamp containing the transit number of a preceding bank in-dorser."
On the same day defendant in error acknowledged receipt to the Farmers' Bank by card reading:
"We credit as follows: $1,827.98.
"Received for collection:
"We debit: -.
"All items not payable in Fort Worth received by this bank for credit or collection are taken upon the express condition that this bank is nqt to be held liable for the acts or omissions of any other bank or collector to whom they may hereafter be transmitted or loss in transmission, the liability of this bank being hereby limited to its own acts; and should the collecting party convert the proceeds, or remit in checks or drafts which are thereafter dishonored, the amount for which credit has been given will be charged back."
At the time the Farmers' Bank was indebted to defendant in error in the sum of about $6,000.
The president of defendant in error testified his bank credited the Farmers' Bank with the $1,827.98, and the saAe was checked out before returns were obtained upon the cheek. Defendant in error indorsed the check and forwarded same for collection. Payment had been stopped, and the drawee refused to pay the same. The Farmers' Bank failed on May 6,1925.
Defendant in error brought suit upon the check against O'Hara, joining the independent executors of the estate of C. 0. Marshall, who had died. Mrs. Marshall intervened, setting up that she was entitled to the amount of the cheek. Defendant in error asserted that it was the holder of the check in due course. O'Hara admitted liability upon the check and asked that he be protected against the adverse claims of the parties. Judgment was rendered in favor of the Texas National Bank. Mrs. Marshall prosecutes this writ of error.
The unrestricted indorsement of the check and its deposit in the Farmers' Bank evidenced prima facie the transfer of title to the check, but as between the immediate parties to the transaction it was competent to qualify the indorsement and deposit by the deposit slip issued contemporaneously with the deposit, the two writings constituting the contract. 8 O. J. 357.
The courts are practically unanimous in holding that the title to paper deposited for the special purpose of collection does not pass to the bank. Bank of Sherman v. Weiss, 67 Tex. 331, 3 S. W. 299; New York Life Ins. Co. v. Patterson & Wallace, 35 Tex. Civ. App. 447, 80 S. W. 1058; Hobart Nat. Bank v. Fordtran (Tex. Civ. App.) 122 S. W. 413, and many other cases cited in 11 A. L. R. 1046, 1047.
The slip shows that the check was deposited "For collection and return only"; hence the title did not pass to the Farmers' Bank. This defect in the title of the Farmers' Bank, however, would not affect the right of one who acquired the cheek in due course without notice of the collateral agreement evidenced by the deposit slip. An indorsee of negotiable paper must acquire title thereto in order to give him the status of a holder in due course. 11 A. B. R. 1043, note.
The indorsement of the Farmers' Bank also evidenced prima facie its intention to transfer the title, but the letter transmitting the check to defendant in error was a part of the same transaction and stated that it was inclosed for collection and credit. This letter qualified the unrestricted indorsement of the Farmers' Bank. It plainly evidences the intention of the Farmers' Bank that the proceeds, when collected, should be credited, but in numerous cdses it has been held that where paper is deposited for collection the title does not pass though it is intended for credit when collected. However, there are cases which hold the contrary where the paper, though indorsed, "For collection," was deposited and credited as cash subject to eheck. 11 A. L. R. 1048,1049. But as to the latter line of cases it seems to us that the receiving bank could not change the character and effect of the transaction by an unauthorized credit subject to cheek prior to collection.
In the present case the only evidence of the purpose and intention of the Farmers' Bank is its indorsement upon the eheck and its letter of transmittal. This letter says the items were 'inclosed for collection and credit. This alone, we think, evidences plainly that the items transmitted were not to be credited until collected, but if there could be any doubt about the matter it is removed by the further direction to deliver papers only upon payment of draft, to return at once all unpaid items, and to protest certain items. These latter directions are inconsistent with the idea that it was the intention of the Farmers' Bank to transfer immediately the title to the various items, for such control over the paper would be warranted only if it remained the owner,
We are therefore of the opinion the title to the check'did not páss to defendant in error, and the character of the transaction was not changed by its unauthorized immediate credit subject to eheck. Hence, the title remained in Mrs. Marshall. The deposit slip issued by the Farmers' Bank was excluded upon objection of defendant in error that it had no notice thereof; but the question of notice is immaterial in view of the fact that the transaction between the two banks was insufficient to pass the title. The court erred in excluding the slip.
This ruling renders it unnecessary to discuss other questions presented in the brief of plaintiff in error except to say that the books of the defendant in error are the best evidence of what they show, and the court erred in admitting the testimony o£ its president as to what they show.
Reversed and remanded.