Court Opinion

ID: 8031724
Source: CourtListenerOpinion
Date Created: 2022-09-09 03:16:18.722286+00
Date Added: 2024-06-11T16:36:59.608559
License: Public Domain

Morrissey, C. J.
Defendant Mechaley was a purchaser of live stock at Winner, South Dakota. January 6, 1917, he purchased hogs of each of the plaintiffs, and also from other parties, who have assigned their claims to plaintiff Burns. He gave checks upon the Lamro State Bank for the respective amounts. The checks were subsequently dishonored. The hogs purchased were shipped to the Omaha Live Stock Commission Company, which sold them and credited the proceeds, viz. $3,234.74, to Mcehaley’s account.
*265Prior to this time' Mechaley applied to the Lamro State Bank for a loan, or extension of credit, to be covered by a draft on the commission company. January 4, 1917, the bank inquired of the commission company, by telephone, if it would honor Mechaley’s draft. The company replied, both by telephone and by letter: “We will pay Mr. Mechaley’s drafts for the net proceeds of any stock billed to us, but will not pay these drafts ahead of shipment.”
The bank took Meekaley’s draft for $3,000 and presented it to the commission company. The draft was in terms as follows:
“Winner, S. D., Jany. 6, 1917.
“Pay to the order of Lamro State Bank $3,000 tlfree thousand and no/100 dollars. With exchange. Value received and charged to account of
“M. J. Mechaley.
“To Omaha Live Stock Com. Co., Omaha, Nebr.”
The commission company refused to accept, or pay, the draft because it had been notified that á third party was claiming an interest in the proceeds qf the shipment. The draft was presented a second time and payment again refused. A few days later plaintiffs sued Mechaley and the commission company, as garnishee, and the bank intervened. The commission company thereupon filed an affidavit asking for a determination of the rights of the adverse claimants, and offered to pay the money into court, or to such person as the court should direct. The company voluntarily agreed to pay, and did pay, to the bank so much of the fund held by it as was not necessary to safely cover the attachments and costs of suit.
The contention of the bank is that the draft operated as a valid assignment of $3,000 of the funds held by the commission company, and to this extent constituted a superior lien to that of the attaching creditors. It is argued that the draft was drawn against a special fund; that the drawee had agreed to pay the draft *266out of this fund; and that the draft therefore carried title to the fund against the attaching creditors.
Did the bank have a valid and enforceable assignment of the fund in the amount of the draft? The district court held that it did.
Section 5444, Rev. St. 1913, provides: “A hill of itself does not operate as an assignment of the funds in the hands of the drawee available for the payment .thereof.” In order that a draft or order niay operate as an equitable assignment of moneys belonging to the drawer in the hands of the drawee, it must be drawn on a specific fund or debt. The draft or bill in this case did not specify the fund out of which it was to «be paid, nor was there anything to show that it was intended by the drawer to be drawn against a particular fund. It was chargeable to Mechaley’s general account, and did not even cover the total amount due Mechaley from the commission company. Had Mechaley made subsequent consignments to the commission company, we see no reason why the bill might not have been paid, with equal propriety, out of such proceeds as out of the funds in question.
The bank did not have such interest in the fund as would defeat plaintiffs’ attachments, unless some force can be given to the letter of the commission company, previously referred to, in which it expressed its willingness to honor Mechaley’s drafts when it should hold sufficient funds with which to pay- them. But such promise, could not of itself operate as an assignment of the fund in suit or an acceptance of the draft in question. A promise to accept, or honor, a nonexisting bill must clearly identify the bill, or it is not enforceable. 1 Daniels, Negotiable Instruments (6th ed.) sec. 560.
The judgment of the district court is reversed, and the cause remanded, with directions to enter judgment in accordance with this opinion.
Reversed.
1. Bill of Exchange: Assignment of Funds. A written promise by a stock commission company to a bank to accept nonexisting bills of exchange to the amount of the net proceeds of stock shipped to it by the drawer — when the bank has taken a bill of exchange from the shipper for a valuable consideration, and live stock has been shipped to and sold by the drawee with proceeds in excess of the amount of the bill- — binds thd drawee and acceptor and operates to transfer the proceeds in its hands to the payee, to the amount of the bill, and the same are not liable to attachment or garnishment by other creditors.
2. -: -. Where in such a transaction neither the drawer nor drawee is asserting any right to the fund as against the payee, no other creditor of the drawer, in the absence of fraud, has any right to such proceeds.