Court Opinion

ID: 7996365
Source: CourtListenerOpinion
Date Created: 2022-09-09 01:42:58.962502+00
Date Added: 2024-06-11T16:35:12.319593
License: Public Domain

Ethridge, J.,
dissenting.
In my opinion the judgment rendered in this case departs substantially from established legal principles with reference to the right of a drawer to revoke a draft sent to a bank for collection with deed attached. A deposit for collection is a transaction by which a draft or other instrument providing for the payment of money is deposited with a bank to act as agent of the depositor for its collection. The universal rule appears to be that the owner of paper which has been sent to a bank for collection has the right, at any time prior to collection, to revoke the bank’s authority to collect, and to demand the return of the paper, and a refusal to comply with such a demand operates as a conversion. 9 C. J. S., Banks *270and Banking, Section 217. The relation which arises between the depositor and the bank is that of principal and agent. The relation of debtor and creditor does not arise prior to the collection of the instrument deposited. Ibid., Section 218; Bank of Shaw v. Ransom, 112 Miss. 440, 73 So. 280 (1916); Marine Bank & Trust Company v. Triplett, 149 Miss. 274, 115 So. 202 (1928). These principles are well-established both in Mississippi and elsewhere. It is my view that the undisputed facts, as distinguished from the conclusions of witnesses, show that the authority of the Peoples Bank to collect was revoked by Mrs. Lewis prior to collection and delivery of the deed, and that there was no delivery.
The controlling opinion states that the question is whether in fact there was a payment by, and a delivery of the deed to Shorter before the bank’s authority to collect was revoked by Mrs. Lewis. It answers this inquiry in the affirmative on the theory that the bank, under its commitment to Shorter, considered that it had the money in hand to pay the draft; that under the agreement between Shorter and the bank, the bank had stepped into Shorter’s shoes, and had in effect received the money from Shorter with which to pay the draft; that the bank substituted its commitment to Shorter for payment by Shorter of the money, before notice to stop delivery was given; and that conflicts in the various statements of the witnesses were resolved by the trial court. However, the facts and what happened seem to be undisputed. With deference, the controlling opinion gives determinative effect to the conclusions of the witnesses Shorter and Davis, President of the Peoples Bank, and thus draws a conclusion of delivery prior to revocation.
The bank received the draft and deed from Mrs. Lewis, through the Portland bank, on August 17. The letter from the Portland bank to the Mendenhall bank expressly described the latter’s agency: “Ton are authorized to deliver to Mr. Shorter this warranty deed upon payment of the draft above mentioned.” Shorter testified that *271he had previously “arranged” for the bank to lend him the money. He did not have it in his account. However, it is undisputed that when on August 18 he examined the deed and returned it to Mr. Davis, the bank president, he had not completed any arrangement for the loan and had not in fact received the loan. Shorter said that Davis handed him the deed “for inspection”, and that he advised Davis it was all right and “gave him back the deed to finish the papers that he had to finish and left it in his care for that purpose.” He admitted that Davis was then to have all of the papers “fixed up ready for me and my wife to come and sign.” The Shorters were to execute a note and deed of trust for the amount of the loan to Shorter from the bank, and the bank also was to obtain a title certificate from its attorney. Before Shorter had completed the necessary details for the loan, Mrs. Lewis, through her representatives, revoked on August 20 the bank’s authority to collect the draft and deliver the deed. The present suit was filed by Shorter on August 22, two days thereafter. Shorter testified that he closed the loan and obtained the $4,225 from the bank on August 22, two days after Mrs. Lewis had revoked the bank’s authority. This fact is undisputed in this record. On cross-examination Shorter stated that on August 18 he gave the deed back to Davis “to hold for me to finish completing the loan”. He was relying on Davis’ commitment. But of course Mrs. Lewis' was not relying on Davis’ commitment to Shorter. There is no showing that she knew anything about this particular commitment.
Shorter said that his loan with the bank was actually closed and completed on August 22, and that up to that time he did not actually have the money to apply on the deed, except “Mr. Davis’ word”. After appellant had revoked the bank’s authority, Davis refused to deliver the deed to Shorter. Shorter was asked, “Why did you borrow this money from the Peoples Bank on August 22?” He answered, “To take care of what hadn’t been finished.” He therefore admitted that he had not finished *272the necessary preliminaries to a loan from the bank on August 20 when appellant revoked the bank’s authority to deliver.
The only other witness whose testimony is pertinent to the issues in this case is Sidney D. Davis, President and Cashier of the Peoples Bank in Mendenhall. He stated that if a sight draft is forwarded to his bank for collection, “We remit when we have received authority either to charge the account or receive cash.” Of course neither of these contingencies had occurred when appellant revoked the bank’s authority. Davis testified that when he saw Shorter on August 18 Shorter did not actually pay the bank any cash money, but that he confirmed a prior agreement that the bank had made with Shorter to lend him the money. Davis was not willing to advance the money until the note and deed of trust were executed, and the bank obtained an attorney’s title certificate. He said, “It is not customary to advance money until then.” He testified that Shorter did not have sufficient deposits in the bank on August 18 to pay the draft, and that at the time appellant revoked the bank’s authority “no cash money had been delivered” to the bank by Shorter. Davis ’ own conclusion as a banker was that for all practical purposes “it was a closed deal” when Shorter told him on the 18th that he would accept the deed as written and would complete a loan from the bank. But of course that was only his conclusion and was not a statement of 'fact.
Davis was asked, “When was the money actually loaned to Mr. Shorter?” He replied, “On August 22, 1953”, which was two days after appellant had revoked the bank’s authority to deliver the deed. Finally, Davis testified as follows: “Q. What was your intention when you handed the deed to Mr. Shorter? Did you intend for him to take the deed and record it? . . . Q. What was your intent as you handed him the deed? A. My intent was to let him examine that deed and see if it was in order and see if that was the land he had bought. Q. To *273examine the deed? A. To see if that was the land he had bought. He said, ‘That is it. It is O. K. As far as I am concerned, I am ready to complete the execution of the deed of trust to the bank and wind the transaction up.’ Q. You did not consider the transaction closed and that he could then take the deed and record it from that moment on, did you? A. No, sir.” So by Davis’ own admission, he naturally had no intention of letting Shorter have the deed until he had signed the note and deed of trust to the bank, and certainly had no intention or purpose of delivering it to Shorter on August 18, until those necessary business details were consummated. It is a matter of common practice and experience among members of the bar and businessmen that the money representing a loan from a bank to a borrower is not advanced until the borrower has executed a promissory note and the necessary deed of trust or other collateral to secure it and until the title has been cleared to date. The president of the Mendenhall bank admitted that was his practice and that he had no intention to deliver the deed to Shorter on August 18, until the papers for the loan were executed. Yet the effect of the controlling opinion is to hold that the execution of the note and deed of trust, and the obtaining of a title certificate were mere incidental details, the absence of which did not preclude delivery of the deed on August 18. It seems to me that the holding is contrary to the undisputed facts in this case, to accepted and sound business practices, and to established rules of law.
The majority opinion holds that the bank had substituted its commitment to Shorter for the cash money, and had thereby paid the draft before revocation of authority. However, I can find no evidence to support the conclusion that the bank had in fact substituted its commitment to Shorter for payment by Shorter of the draft in cash. Certainly Mrs. Lewis had no intention of any such substitution, and more importantly, the bank clearly had no authority and no intention to make such *274a substitution. If on August 20 Shorter had refused to sign the loan papers, the bank without a doubt would have considered that the draft was not paid, and in fact it would not have been paid. Unquestionably, if the bank’s title certificate on August 20 had reflected a defective title, the bank would not have made the loan to Shorter, and it would not have paid the draft. The result reached by our judgment here seems to me to be wholly unwarranted by the undisputed facts, and established business customs and rules of law.
, In 9 C. J. S., Banks and Banking, Section 243, is a discussion of "what may be accepted in payment.” The general rule is that a bank having paper for collection is negligent in receiving in payment therefor anything but money, unless a special authority to do otherwise is shown. There was no such special authority here. The same text states the basic rule as follows: ‘ ‘ The collecting bank may accept in payment, if it is solvent, a check drawn on itself and based on a sufficient deposit, or its own certificate of deposit; but it cannot accept, in lieu of money a note or other claim against itself, which the debtor may have, no matter how valid the claim. ” Montreal Bank v. Ingerson, 105 Iowa 349, 75 N. W. 351 (1898). Here there was no equivalent of paying the draft or crediting its amount to the drawer, Mrs. Lewis. Davis, the bank president, does not contend that any such credit was made or attempted to be made.
The controlling opinion suggests that the bank’s commitment to Shorter was substituted for Shorter paying the money. But of course there was no valid substitution as to the drawer, Mrs. Lewis. The bank’s limited agency for collection and delivery of the deed contemplated no such unusual departure from standard business practice. The basic rule is stated in 26 C. J. S., Deeds, Section 43 d, p. 244: "Where a deed is given to a third person to hold until the performance of some act by the grantee or the happening of some contingency, it does not operate as a delivery to the grantee, until the performance *275of such condition, and a delivery by the depositary contrary to the directions of the grantor will not pass the title.” So if there were an attempted delivery of the deed, and all of the testimony indicates there was not, still a delivery by the bank contrary to the directions of Mrs. Lewis would not pass the title. The trial court’s opinion was based upon the mistaken idea that the deed was placed in the Peoples Bank under an irrevocable escrow contract. But this position is untenable, because Mrs. Lewis never signed any contract to sell this land, ,or any escrow agreement. Nor is there any showing that there was an intention to create an irrevocable escrow agreement. 30 C. J. S., Escrows, Section 5. The majority opinion does not mention that, theory.
So my view is that on the undisputed facts, as distinguished from the witnesses’ conclusions, there was no payment of the draft and delivery of the deed prior to revocation of the bank’s authority to deliver it. Mrs. Lewis had the power at any time prior to collection to revoke the bank’s authority, and under the testimony of both Shorter and Davis this was done. Hence I would reverse the decree of the trial court and render judgment for appellant.
Kyle and Gillespie, JJ., join in this dissent.