F. A. Kadane v. SEC. Nat. Bank , 219 S.W. 506 ( 1920 )

Appellant sued Hurst Produce Company and applied for a writ of garnishment against Security National Bank, Dallas, Tex., claiming said produce company was indebted to it (appellant) in the sum of $738. The writ of garnishment was duly served upon said bank. Said bank answered that the Hurst Produce Company drew for $4,680 on appellant, which was sent by the Produce Exchange Bank of Kansas City for collection, which draft was paid; that said Produce Exchange Bank claims ownership of said fund. Said garnishee prays that said Produce Exchange Bank be made a party and the rights of all parties may be fully adjusted. Said Produce Exchange Bank of Kansas City, Mo., filed an answer and cross-action, alleging that it had for a valuable consideration and without any notice of any claim or offset against it by appellant become the owner of the draft by receiving it from the drawer and furnished it for collection to the garnishee and had paid the said drawer for it and was an innocent purchaser.

Appellant answered its pleading, and specially answered to the cross-action of said Produce Exchange Bank that said bank had sold it 400 cases of eggs for so much per dozen, aggregating $4,680, warranted to be of certain quality, and were to be shipped from Oklahoma to Dallas, Tex., and a draft was drawn with bill of lading attached; that before paying said draft, it discovered said eggs were not as represented, of which it advised Hurst Produce Company, and asked a rebate, which was refused, and, owing to the rules of the food commission, appellant was required to accept said eggs, notwithstanding their bad condition, and it therefore paid said draft under protest, that at the time it paid said draft it did not know that the Produce Exchange Bank claimed to be the owner of same, and that since the filing of this suit it had recovered judgment against said Hurst Produce Company for $505.07, with interest and costs of suit, and asks for the payment of same out of the money in garnishee's hands.

The Produce Exchange Bank answered the foregoing plea by general demurrer and special exception and general denial. The general demurrer was sustained, to which appellant excepted. The special exceptions of appellant to the Produce Exchange Bank's claim for damages by way of interest and attorney's fees were also sustained, to which action of the court said bank excepted.

A trial was then had before the court without a jury and resulted in judgment in favor of Produce Exchange Bank against Security National Bank, garnishee, for $800, the amount that the parties had agreed should be held by garnishee until the end of the litigation. The appellant excepted and gave notice of appeal.

For the purpose of having the court decide on the merits of this case the appellant admits that the Produce Exchange Bank credited the Hurst Produce Company with the amount of said draft on its books. The pleadings as herein stated show the true status of the transaction in the premises, and it was further shown that the Produce Exchange Bank had on deposit for Hurst Produce Company in excess of the amount due appellant at the time of the transaction with which it could have reimbursed itself, had it so applied said fund.

The first assignment of error and propositions thereunder are as follows:

"The court erred in sustaining the general demurrer of intervener, Produce Exchange Bank, to the amended answer of F. A. Kadane Co., for the following reasons:

"(a) Said answer showed that the plaintiff had purchased or agreed to purchase a carload of eggs from the Hurst Produce Company, and that said eggs were guaranteed to be fresh current receipt candled eggs, and that when said eggs were received they were not according to guaranty, and were not fresh current receipt candled eggs, but were of inferior quality.

"(b) That the Hurst Produce Company drew a draft on said plaintiff for $4,680, with bill of lading attached, in payment of said eggs, and that it was necessary under the ruling of the United States Food Administration of the government for said plaintiff to receive said car of eggs, and in order to receive same it was necessary for plaintiff to take up said draft before he could secure said bill of lading, which he did under protest and under necessity and duress.

"(c) That when said plaintiff paid said draft in order to receive said bill of lading, and inspected said car of eggs, he found same undergrade and defective, and he at once notified the Hurst Produce Company that adjustment was necessary, which said company refused to make and said plaintiff issued writ of garnishment against the Security National Bank, and impounded said funds in the hands of the Security National Bank.

"(d) That said plaintiff was licensed by the United States government to do business as a commission merchant, and he would have been subject to fine and of forfeiture of license if he had not received said car of eggs.

"(e) That said Produce Exchange Bank, when it acquired said draft with bill of lading attached, acquired no greater right to said draft or to the funds given in payment of same than said Hurst Produce Company had or may have had, and the said draft was taken subject to all proper offsets, counterclaims, and credits due said plaintiff on said draft by Hurst Produce Company.

"(f) That said plaintiff recovered judgment on March 12, 1919, against the Hurst Produce Company in the original suit for $505.07, together with interest thereon at 6 per cent, per annum from September 13, 1918, with all costs."

Propositions. "(a) In sustaining a general demurrer the facts alleged in the pleading are taken as true, and every reasonable intendment is in favor of the sufficiency of the pleading.

"(b) One who purchases a car of eggs under guaranty that same are fresh candled current receipt, and said car of eggs is shipped with draft attached to bill of lading, the purchaser is entitled to a proper rebate or offset to the price of the car of eggs, if same are of inferior grade and quality.

"(c) If a bank or third party acquires title to said draft with bill of lading attached, the bank or third party occupies no better position in a suit to collect the full amount of said draft than the original drawer.

"(d) If a draft for car of eggs, with bill of lading attached, is paid by the drawee under protest, necessity, or duress, the funds or proceeds of the draft are subject to garnishment while in the custody of the receiving bank to the extent of the proper damage or offset on account of inferior grade in quality of the car of eggs, even though the draft may have been acquired or purchased by a third party."

The majority of the court are of the opinion that the facts pleaded show that the appellant was not entitled to the remedy sought, and that the court did not err in sustaining the demurrer of the Produce Exchange Bank to the appellant's amended answer setting up defensive matters to the Produce Exchange Bank's cross-bill; in other words, that the matters of defense set up by appellant did not, under the circumstances, entitle it to recover and hold that the judgment should be affirmed. The writer hereof takes a different view from that of the majority, and is of the opinion that the matters set up by appellant, which, if true, were sufficient to defeat appellant's contention as stated in proposition (d), and that the contention stated in proposition (d) is a correct principle and is supported by the following authorities: Commercial Bank v. State Bank, 153 S.W. 1175; Smith v. Houston National Bank, 202 S.W. 183; Blaisdell Co. v. Citizens' National Bank, 96 Tex. 626, 75 S.W. 292, 62 L.R.A. 968, 97 Am. St. Rep. 944; Landa v. Lattin, 19 Tex. Civ. App. 246,46 S.W. 48; Northwestern Nat. Ins. Co. v. Woodward, 18 Tex. Civ. App. 496,45 S.W. 185, writ of error denied 93 Tex. 716, 45 S.W. 185.

The case of Blaisdell Company modifies the principle in some particulars in the case of Landa v. Lattin, but we think it reaffirms the principle as stated in proposition (d), as above stated. The court erred in sustaining said demurrer, and, if the proof sustained the defense pleaded by appellant, it will be entitled to recover against the fund garnished sufficient to pay out of it judgment for damages.

The judgment of the court below is affirmed.