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439

FEDERAL RESERVE BOARDX-5018

WASHINGTON

DDRESS OFFICI L CORRESPONDENCE T O

T H E FEDER L RESERV E BO RD

December

1 4 , 1 9 2 7 .

Dear S i r :

• Through the courtesy o f Messrs. Locke, Locke, Stroud and.

Randolph, I enclose f o r your information a copy of an opinion rendered.

November 23rd

by the

Supreme Court

o f

Texas

in the

caae

o f

Odle

v .

Barnes.

You w il l rec al l that this was a case involving th e alleged, neg-

ligence

of the

Federal Reserve Bank

o f

Dallas

i n

connection with

the c o l -

lect ion of a check drawn on the First National Bank o f Morgan, Texas

r

now

closed. I have previously forwarded to you a copy of the opinion deliver-

ed by the court o f civil appeals, (X-4824).

The opinion of the court o f civil appeals settled a l l issues as

to the

l i a b i l i t y

of the

Federal Reserve Bank,

but

th er ea ft er , upon motion

of the plaintiff, Odle, certain questions were certified to the supreme

court concerning

th e

l i a b i l i t y

of the

First National Bank'of

F t .

Worth,

the bank which forwarded th e item to the Federal Reserve Batik o f Dallas

f o r

collection

and

also

th e

bank upon which

the

remittance draft taken

i n

settlement of the cash letter to the Morgan bank was drawn. The questions

a re

contained

in tho

opinion,

and as you

w i l l

see,

were based upon

th o

theo-

r y

that perhaps

th e

facts

in the

case were

o f

such

a

nature that

the act

of the

Morgan bank

i n

drawing

the

draft

on the Ft .

Worth bank constituted

an equitable assignment of the funds t o i t s credit with t h e F t . Worth bank*

The supreme court answered a l l o f tho questions favorably to the First

National Bank of F t . Worth.

Very truly yours,

v

Walter Wyatt,

General Counsel.

Enclosure.

LETTER TO COUNSEL OF ALL FEDERAL RESERVE BANKS.

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X-5018-a

COPY

N o. 807-4863,

COMMISSION

OF

APPEALS,

1 4 0

SECTION

B.

J \ S . ODLE,

APPELLANT,

v s .

S . C .

BARNES,

e t a l ,

APPELLELS.

FROM BOSQUE COUNTY,

TENTH DISTRICT.

CERTIFIED QUESTION.

The c e r t i f i c a t e o f t h e chief just ice of the

Court o f Civil Appeals f o r t h e Tenth District, by which

we

acquire jur isd ic t ion

o f

this case

i s a s

follows:

Appellant J . S . Odle instituted this suit against

appel lees

S. C.

Barnes, Farmers Guaranty State Bank

o f

Meridian, hereinafter called Meridian hank, t h e First

National Bank

o f

Fort; Worth, here in c a l l e d For t Worth

bank, a n d t h e Federal Reserve Bank o f Dallas, herein

called Reserve hank, t o recover th e sum o f $345.00. The

case

was

t r i e d

i n t h e

County Court

o f

Bosque County

and

judgment rendered f o r a l l t h e defendants. J . S . Odle p e r -

f e c t e d an appeal t o this court, and upon hearing o f said

appeal

t h e

judgment

of the

County court

was

affirmed.

The

case

i s

before

u s on

appellant's motion

f o r

rehearing.

A

brief statement o f t h e pleadings and the f indings o f fact

by this court a r c s e t o u t i n t h e opinion o f this court, a

cert i f ied copy

o f

which wi ll accompany t hi s c e r t i f i c a t e

and

shal l b e considered a s incorporated her ein f o r a l l proper

purposes.

Appellant i n h i s motion f o r rehearing concedes that

t h e draft drawn by th e Morgan bank upon t h e Fort'j Worth bank

i n

favor

of the

Reserve bank

f o r

$1850.77

i n

payment

o f

checks presented

t o t h e

Morgan bank

f o r

payment

by

said

R e -

ser ve bank, among which was included t h e Barnes check upon

which this suit

i s

based,

d i d n o t i n

i t s e l f c o n s t i tu t e

an

assignment of any of the funds on deposit i n said Fort Worth

bank,

but ho

contends that

t h e

drawing

o f

said draft, under

t h e f a c t s o f this case, constituted a s between t h e Morgan

bank,

t h e

bank examiner

and the

receiver

of

said bank

on

one hand, and appellant and the banks acting a s h i s agents

4

•1 -

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&*30l8*a

441

ih t he

col lect ion

o f

said Barnes check

on the

other

1

hand,

kn

equitable assignment

o f

suff ic ient

of the

funds

on

deposit

in t he Fort Worth bank to the credit of the Morgan bank t o

discharge th e same, or sS leas t that th e same constituted an

equitable assignment o f suff ic ient o f said funds to pay the

amount

due him as

proceeds

of the

col lection

o f

said Barnes

feheck.

He

further contends that

by

vi r tue

o f

such equitable

assignment he became th e owner o f a sufficient amount of the

funds on deposit in tho Fort Worth bank to the credit of the

Morgan bank to pay him the amount o f said chock, to-wit,

$45.00. He further contends that i t became th e dutjy of the

Fort Worth to remit said amount to him as proceeds o f

th e col lect ion o f h i s said check. H is said contentions are

more folly se t ou t i a h ie motion f o r rehi&ring, which i s

ordered transmitted herewith and made a part hereof. The

transcript and statement o f facts i n this case a r e also

transmitted herewith f o r such uso as your Honorable Court

may see f i t to

make

of the

same. Since

i t i s n o t

clear

that appellant can secure a review of our action on h is

motion by appl ication f o r wri t o f error, we deem i t

expedient to cer t i f y to your Honorable Court f o r detcrminar-

t ion tho issues of law so presented, as f o l l o w ;

FIRST QUESTION.

Did the act of the Jforgen bank i n drawing i t s

draf t on the Fort Worth bank i n favor of the Reserve baric,

constitute, under tho facts o f this case, an equitable

assignment o f suff ic ient of the funds t o i t s credit i n

th e

hands

o f

said Fort Worth batik

to pay the

same

or to

•oay th e amount due appellant a* t he proceeds of the

col lection

of the

Barnes check, which proceeds were

i n -

cluded i n said draft?

SEC01TB QUESTION.

Was i t the legal duty of the Fort Worth bank,

under tho facts i n this case, to hold i n i t s hand# a

sufficient amount of the funds on deposit with i t tjo the

credit

of the

Morgan beak

to pay the

amount

doe

appellant

as the proceeds of the col lection o f said check, and to

remit the- saite to him as such?

THIRD QUESTION.

Should appellant have

had

judgment against

the

Fort Worth >»*•>*• i n t h e trial court under h i s pleading# and

tho evidence adduced f o r t he amount o f said check, less

such dividends as had beon remitted end paid to him by

appellees on account o f such collection? ^

I t i s

conceded

by a l l

parties*

as

indeed

i t

must

bo, that th o drawing o f i t s draft by the Morgan basl: on the

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X-5018-a

M

Fort Worth Bank i n favor of the Federal Reserve Bank: did not

o f i tsel f consti tute an assignment o f * n y portion of the

funds

of the

Morgan hank

on

deposit

in t he

Fort Wotth Baric.

The contention o f appellant i s that under th e circumstances

surrounding this transaction

th e

drawing

o f

such draft

con-

st i tu ted an equi tab le assignment o f such fund# in t he Fort

Worth bank,

a t

least

to the

extent

of the

balance

due

after

deducting th e payments received from th e defunct bank.

There

i s

nothing shown

i n t h e

certificate that would

take this case out of the ordinary transaction to constitute

th e draft an equitable assigopient of any portion of th e Morgan

bank deposit with th e Fort Worth bank. Indeed, th e opinion

rendered

by the

Court

o f

Civil Appeals, which

i s

made

a

fa r t

of the certificate, contains this language:

The evidence discloses with reasonable certainty

that said draft was received by the Fort Worth bank after

th e order from th e bank examiner stopping payment thereon.

There is no evidence that th e Fort Worth bank was advised

at the time i t received or returned said draft that th e same

represented

i n

part

th e

oroceds

o f t he

Barnes cjhaclc.

The f i r s t f act this found by the Court o f Civi l

Appeals discloses a situation that negatives any inference

o f

actual payment

by i t o f the

Morgan bank draft,

and

l i k e -

wise negatives any r ight , ranch. less duty, to pay W e draft ,

since at the time o f i t s receipt th e order f o r payment b ad boon

countermanded by tho agent i n change of the Morgan bank. Pay -

ment V i t a f te r such payment had been stopped would have been

a breach o f duty by i t , and t he circumstances therefore d id

not j u s t i f y the holding that i n equity there had been a p a y * * # .

- 5 n

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w o r n *

B a t t h e

c o n t e n t i o n

o f

a p p e l l a n t

i e n e t

t e c h n i c a l l y

a

not ional

payment,

but

rather th at

h e

should

b e

protected upon

t h e

theory

o f

eq ui ta bl e ass ignm ent. Whether

o r n o t

there

was an

a s s i g n -

ment p r o tanto o f t h e funds would, dopend upon t h e transac t ion

between appel lant

a n d t h e

Morgan hank

I n

drawing

i t s

d r a f t ,

a n d

n o t

upon anything

t h e

Tort forth bank

d i d o r d i d n o t d o . T h e

ass ignment,

I f a n y w a s

e f f e c t e d

i n l a * o r

e q u i t y ,

w a s t h e a c t

o f t h e

Itorgan bezfic. There

i s

n o t h i n g i n

t h e

record

t o

show

that there

w as

anything

o a t o f t h e

ordinary

i n t h e

drawing

o f

th i s draf t aga ins t funds o n d e p o s i t i n t h e f o r t Worth Bank.

There i s nothing t o i n d i c a t e a n y intent ion whatever o n t h e part

o f t h e Morgan beak tha t t he re sho ul d b e each a n eeetgament.

I t doee n o t appear t o have covered a s p e c i f i c d e p o s i t , ( a s i n

Hatley v . West # % a s Sat'l Bank, 2 8 4 . S , W. 5 4 0 ) , o r a l l O f t h e

general deposit*

n o r i s

there

an y

other circumstance

t o

take

i t

o u t o f t h e

ordinary transact ion,

a n d t o

save

t h e

case from

t h e

s t a t u t e ,

( A r t .

$947,

S e c . 1 8® ) t o t h e

e f f e c t t h a t

a

chock

o f

i t s e l f d oe s

n o t

operate

a s a n

assignment

of any

p a r t

o f

t h e

funds

t o t h e

c r e d i t

o f t h e

drearer with

t h e

bank.

Appe l lant s tre sse s t h e incongrui ty , a s w e l l a s t h e

hardship, o f h o l d i n g m a t Barnes< chec k upon t h e Morgan bank

g i v e n

i n

payment

o f h i s

vendor's l i e n note he ld

b y

appe l lant ,

we®

p a i d ,

a nd y e t ,

t h a t

h e ,

a p p e l l a n t ,

i f

h e l d

t o

have

n o

'• • I '

:

' ' • • V . • •

dominant rlg&t

i n t h e

proceeds

o f

suc h payment.

A i t

thi s

cons ldorai

i o n c a n

have

no

inf luence upon

o u r

answer

t o t h e

q u es t io n s c w t i f l o d . l o t h i n g

i s

before

u s

except

t h e

quest ions

o f I m # # # propounded, a n d w e o f course indicate n o o&mAm

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X-5018-a

upon t h e quest ion o f payment by Barnes or any other question

4 4 4

than t h e ones here specif ically answered.

Our conclusions a r e n o t inf luenced in an y wise by

a cons iderat ion o f t h e opposing rules o f agency f o r c o l l e c t i o n

o f checks a n d d r a f ts , i l l u s t r a t e d on th e on e hand by Tillman

County Bank

v .

Behringer,

113 Te x . , 415 , 25 7 S . W. 20 6 , an d

on th e

Ather hand

by

Douglas

v .

Federal Reserve Bank

o f

Dal las ,

( U . S . ) 7 0 L . E d . , 1 0 5 1 . Whether each succe eding c o l l e c t i n g

hank i s to be t r e a t e d a s t h e agent o f t h e payee o r a s t h e agent

only o f i t s immediate forwarder, t h e result would be t h e same

i n either instance i n this case .

Prom what we have sa id i t follows that each of th e

questions propounded should

ho

answered

i n t h e

negat ive ,

and

we accordingly so recommend.

OCIE SPEER,

Judge.

The

opinion

o f t h e

Commission

o f

Appeals answering

c e r t i f i e d q u e s t i o n s

i s

adopted

and

ordered cert i f ied ,

to th e

Court o f Civil Appeals.

THOS B . GREENWOOD,

Assoc ia te Just i ce .

Wm PISRSON,

Assoc ia te Just i ce .

Chief Justice Cureton n o t s i t t i n g .

November 2 3 , 1 9 2 7