Court Opinion

ID: 6236302
Source: CourtListenerOpinion
Date Created: 2022-02-17 20:33:19.458218+00
Date Added: 2024-06-11T08:58:03.602154
License: Public Domain

Mr. Justice Sterrett
delivered the opinion of the court,
The transactions out of which this suit arose were not in the regular course of a banking business, in which the plaintiffs in error were engaged. The firm, through one of its members and cashier, McGough, became the custodian of Allen’s counterparts of the contracts for the sale of oil, and also undertook to act as stakeholder of the special deposits, known in the trade as margins, which were required to be made to cover any loss the vendees might sustain by Allen’s failure to deliver the oil. Allen was without funds, and Hartley, the defendant in error, having money on deposit in the bank, agreed to place at the disposal of its cashier a sufficient sum to meet the amount Allen might be required to pay under the terms of the contracts in case he failed to comply with them. He accordingly drew the checks in controversy, to the order of McGough the cashier, one for “ twelve hundred and fifty dollars margin on contract for 5000 barrels of oil sold S. King per contract in the hands of said McGough,” and the other for “ five thousand dollars margin (or collateral guarantee) on Erazer and Allen contract for 10,000 barrels of oil at'$3.07J.” Before the maturity of the first contract, it was adjusted by the parties and cancelled without the payment of anything by Allen. The second contract was also settled by the parties before it matured for $687.50, which was all that was ultimately required to be paid on the part of Allen out of the margins on both contracts. The bank w'as fully advised of these facts; and doubtless to the extent of the amount required to settle the contracts and pay the losses incurred by Allen, it had a right to use the funds placed at its disposal by Hartley for that purpose;1 but it did more. It paid over to Allen the residue of the $6250, covered by the checks. It was of this that the defendant in error complained in the court below. He *471insisted that the payment to Allen was a misapplication of the money; that what remained of the funds he had placed at the disposal of the hank for a special purpose belonged to him, and not to Allen, as soon as that object was accomplished.
It was claimed by the defendants below that, aside from the checks, Hartley had subsequently authorized the payment of the money to Allen ; but the jury,'to whom this question of fact was fairly submitted, found that no such authority had been given. The payment to Allen was therefore a misappropriation of the money, unless the checks themselves operated as a transfer of the funds for the use of Allen.. They were not drawn to his order. On the contrary, they were made payable to the order of the cashier for the purpose expressed on their face, and the bank was thus authorized to apply the whole amount, if necessary, to pay or adjust margins on the contracts of which it was the custodian; but, after that object was accomplished and the contracts were cancelled, Hartley, and not Allen, was entitled to the residue. In other words the checks operated as a specific appropriation, to the extent named therein, of the drawer’s funds, to be applied by the bank solely to the payment of such sum or sums as Allen might become liable to pay, in the event of his failure to comply with the terms of the contracts, and the bank as custodian of the money for that specific purpose had no right to appropriate it in any other way.
We think, therefore, that the learned judge committed no error in construing the checks as he did, and in holding that the bank was bound to take notice of the limitation which the drawer had thus placed on the use to be made of his funds.
There is nothing in any of the assignments that appears to require further notice. We discover no error in any of them.
Judgment affirmed.