WALTERS v. BANK OF AMERICA NAT TRUST SAVINGS ASS (1935)

On May 10, 1930, the plaintiff herein, Esther A. Walters, commenced an action in the superior court of the county of Los Angeles against the Republic Securities Corporation to recover the sum of $8,505.25, and interest, on the promissory note of said corporation. On the same day a writ of attachment was issued out of said court in said action and placed in the hands of the sheriff of said county who levied the same on the Bank of America of California by delivering to and leaving with R. C. Elliott, the assistant cashier of the said bank, a copy of said writ of attachment, together with a notice that all moneys, goods, credits, and debts due or owing or any personal property in the possession or under the control of said bank belonging to the Republic Securities Corporation was attached by virtue of said writ. At the time of the service of said writ of attachment the Republic Securities Corporation had on deposit in its checking account with said Bank of America of California, and at the office or branch of said bank at which said writ of attachment was served, the sum of $8,086.16. At that time the Republic Securities Corporation was indebted to the Bank of America of California in the sum of over $50,000 on a past-due promissory note which was secured by pledge of shares of corporate stock, promissory notes, and three grant deeds of real property. The notes were executed in favor of Wright, Alexander & Co. and assigned to the Merchants' National Trust & Savings Bank, and the grant deeds were executed by Wright, Alexander & Co. in favor of the Merchants' National Trust & Savings Bank, and covered certain parcels of real property particularly described in said deeds respectively. Wright, Alexander & Co. were the predecessors in interest of the Republic Securities Corporation. Thereafter the defendant bank, the Bank of America National Trust & Savings Association, succeeded to all the rights and assumed all the obligations of the Bank of America of California and of the Merchants' National Trust & Savings Bank. At the time of the levy of said attachment, the Bank of America of California was the owner of said note, and was the holder of all said securities. For convenience we will refer to the note as the $50,000 note. The Bank of America of California, while it made no answer to the writ, at the time of the service thereof made the following notation on the account of the Republic Securities Corporation: ‘Hold all. A/c attached. 5/10/30.’ Subsequently a return and answer signed, ‘Bank of America of California, by Irene Camp,’ was delivered to the sheriff. This return and answer was dated May 15, 1930, and stated, ‘Defendant indebted to bank.’ On the day of the service of said writ of attachment, Mr. Brown, the vice president of said Bank of America of California, and the manager of the branch of said bank at which the deposit of $8,086.16 was carried, called Mr. Wright, the president of the Republic Securities Corporation, to the bank and informed him of the service of said writ of attachment upon said bank, and told him, according to the testimony of Mr. Wright, ‘that it would be necessary to debit our balance with the amount that was to our credit, and to apply the same on the note.’ Mr. Wright informed Mr. Brown that there had been a number of checks issued by his company against said bank. Mr. Brown agreed to take care of and pay said checks as they were presented for payment, and stated ‘that the amount so transferred to the note would be immediately recredited to our account.’ As a result of this conversation, and on May 11, 1930, an entry on the $50,000 note was made purporting to show a payment thereon of $8,086.16. The bank thereafter paid a number of outstanding checks drawn on said account, and on May 27, 1930, credited the account of the Republic Securities Corporation with said sum of $8,086.16, and on the same day debited said promissory note in the same amount of $8,086.16. On July 14, 1930, plaintiff in her action against the Republic Securities Corporation recovered judgment in the sum of $9,408.47 besides costs. Subsequently thereto a writ of execution was issued on said judgment and placed in the hands of the sheriff of said county for service, who returned the same wholly unsatisfied. Thereupon plaintiff instituted this action to recover from the defendant bank the sum which the Republic Securities Corporation had on deposit at the time of the levy of said attachment.

On demand of plaintiff, a jury was impaneled to try the issue presented by the pleadings. At the conclusion of the evidence, the trial court directed the jury to render a verdict in plaintiff's favor, and in compliance which such direction a verdict was returned upon which a judgment was subsequently entered in favor of the plaintiff for the sum of $8,086.16, together with interest from May 10, 1930, the date of the levy of said attachment. From this judgment the defendant has appealed.

In support of its appeal, the defendant contends:

(1) That the levy of the writ of attachment was of no validity, for the reason that it was served only upon R. C. Elliott, assistant cashier of the Bank of America of California, who was not then an officer of said bank.

(2) That said bank had a right of setoff as against the said deposit of $8,086.16, by reason of the $50,000 note held by it against the Republic Securities Corporation, and therefore it was not indebted to said corporation in any amount at the date of said levy.

(3) Were the three grant deeds held by the bank mortgages?

(4) That the court erred in requiring the defendant to go to trial before a jury. Regarding this fourth contention, we think it apparent that defendant sustained no injury by reason of the presence of the jury at the trial of this action. As the verdict in favor of the plaintiff was rendered in pursuance of the direction of the trial judge, the judgment based upon this verdict was in reality the action of the trial judge rather than that of the jury. Had there been no jury, upon the evidence before him, the trial judge would undoubtedly have rendered a judgment in favor of the plaintiff upon the merits of the action. The defendant would then have been in a less advantageous position than that in which it now finds itself, with only a directed verdict against it. Conceding that plaintiff, by failure to deposit the fees in time, waived her right to a jury trial as claimed by appellant, it is apparent that appellant has not sustained any injury by the order of the court directing a jury trial for the action. The other points we will take up in the order named above.

The Bank of America of California at the time of the levy of said writ of attachment had several branches throughout the state of California at whieh its business was transacted. One of these branches was located at the corner of Seventh and Spring streets in the city of Los Angeles, in which branch bank the Republic Securities Corporation had on deposit said sum of $8,086.16, the amount in controversy in this action. R. C. Elliott was assistant cashier of this branch of said bank at the time the writ of attachment in the action brought by plaintiff herein against the Republic Securities Corporation was served upon said bank. It is contended by the defendant that said levy was illegal and of no validity, as Elliott was neither the manager nor an officer of said bank at the office and branch thereof where said money was deposited. Section 542 of the Code of Civil Procedure at the time of said levy provided that debts and credits of a debtor in the possession or control of a banking corporation maintaining branch offices ‘must be attached by leaving a copy of the writ and the notice with the manager or any other officer of said banking corporation * * * at the office or any branch thereof.’ No claim is made that R. C. Elliott was the manager of said branch of the Bank of America of California. As to the official status of R. C. Elliott in said bank at the time of said levy, he testified that he was a junior officer, and that, regardless of who in the bank accepted service of a writ of attachment, he was the one to whom the process would automatically come in order to see that the proper notice of such attachment was carried through the bank, and that, when writs of attachments were served upon him, he made a search of the record of the bank to see if it had anything to be attached, and that he would start the attachment on its was by giving notice thereof to all departments. Marco Hellman, superintendent and chairman of the executive committee of the Bank of America of California at the time of the levy of said attachment, testified that Mr. Elliott's appointment as assistant cashier was confirmed along with all other officers by the board of directors of the bank, and that, when attachment papers were to be served upon the bank the other officers usually sent the process server to Mr. Elliott to have the papers served upon him. This is substantially all the evidence before the court regarding Mr. Elliott's official connection with the bank. The defendant made no attempt to show that Mr. Elliott was not an officer. If he was not such officer, the evidence of that fact was in the possession of the defendant, and it alone was in a position to produce direct evidence of the true connection of Mr. Elliott with the bank in which he was then employed. Its failure to produce the evidence in its possession raises a presumption that such evidence, if produced, would have operated to its prejudice and would have supported the case of the plaintiff. Bone v. Hayes, 154 Cal. 759, 765, 99 P. 172; Wantz v. Union Bank & Trust Co., 137 Cal.App. 98, 105, 29 P.(2d) 882, 31 P.(2d) 826. The evidence, though not of the strongest character, was sufficient to show that Elliott was acting as an officer of the bank at the time of the service of said writ of attachment. In fact, any other inference from the facts proven would not be justified. We think further that the defendant bank is in no position to question the service of said writ. Its predecessor, the Bank of America of California, had not only designated Elliott as the proper person upon whom writs of attachment should be served, but it directed process servers to Mr. Elliott as such person or officer. The only reasonable inference to be derived from the evidence is that in the present instance the deputy sheriff who served the writ upon Mr. Elliott was directed by an officer of the bank to serve the same on Mr. Elliott. That the service upon Mr. Elliott was recognized as a valid and legal service upon the bank is clearly shown by the evidence. Not only was a notation made in the account of the Republic Securities Corporation that the account was attached, but the executive head of this branch of the bank took up the matter of the attachment with the president of the corporation and informed him of the fact that the corporation's account had been attached. ‘Every object of the service is obtained when the agent served is of sufficient character and rank to make it reasonably certain that the defendant will be apprised of the service made.’ Roehl v. Texas Co., 107 Cal.App. 691, 704, 291 P. 255; Milbank v. Standard Motor Const. Co., 132 Cal.App. 67, 71, 22 P.(2d) 271. As the evidence shows that the bank designated Mr. Elliott as the person upon whom writs of the character here involved were to be served, that it advised process servers of that rule, and in this very instance apparently directed the writ to be served upon its assistant cashier, that it thereafter recognized said service by making a notation upon the Republic Securities Corporation's account, advised the president of that corporation of said attachment, and took steps to protect itself from any liability by reason of said service, the defendant is now in no position to question said service and is estopped from denying the validity or binding effect thereof. Roehl v. Texas Co. 107 Cal.App. 691, 707, 291 P. 255; Carpy v. Dowdell, 115 Cal. 677, 682, 47 P. 695; Nicholson v. Randall Banking Co., 130 Cal. 533, 538, 539, 62 P. 930.

We will now consider the defendant's contention that it had the right to set off as against said deposit the liability of the Republic Securities Corporation on said $50,000 note. The note was past due at the date of the levy, and, as we have seen, it was secured by pledge of certain personal property and three deeds to real property. As these deeds were given as security for the payment of an indebtedness, they might be construed as mortgages. In the case of McKean v. German-American Savings Bank, 118 Cal. 334, 50 P. 656, it was held that, in an action to recover a bank deposit, the bank is not entitled under section 438 of the Code of Civil Procedure to set off the amount due on a promissory note secured by a mortgage. Since the date of said note and in the year 1927 (St. 1927, p. 1620), section 438 of the Code of Civil Procedure has been amended, and defendant contends that in its amended form said section of the Code permits a bank to set off as against a deposit in said bank the indebtedness of the depositor to the bank, even if the latter indebtedness is secured by a mortgage on real property. We do not consider it necessary to decide this question, as we are satisfied that, if the bank had such right of set-off, it waived said right by agreement with said depositor prior to the levy of said attachment. Prior to the deposit in said bank of any of the funds which went to make up said sum of $8,086.16 on deposit at the date of said levy, Mr. Brown, the vice president and manager of the bank where said deposit was carried, expressly agreed with the president of the Republic Securities Corporation that no part of said funds if deposited in said bank, would be applied in payment of said $50,000 note, nor would the bank set off the amount due on said note against the funds deposited with it by said corporation. In pursuance of this agreement, said funds were deposited in said bank and were so held by said bank at the date of said levy. Such an agreement is binding upon the bank. American Surety Co. v. Bank of Italy, 63 Cal.App. 149, 218 P. 466; Lucey Mfg. Corporation v. Morlan (C.C.A.) 14 F.(2d) 920, 923; Ballard v. Home Nat. Bank, 91 Kan. 91, 136 P. 935, L.R.A.1916C, 161; Drumm-Standish, etc., Co. v. Farmers' State Bank, 132 Kan. 736, 297 P. 725; Joy v. Grasse, 173 Minn. 289, 217 N.W. 365, and Gillen v. Wakefield State Bank, 246 Mich. 158, 224 N.W. 761, 765. As the bank, under its agreement with the depositor, had no right to apply the amount of the deposit to the payment of said note, the deposit at the time of the levy constituted simply a debt due from the bank to the depositor, and as such was subject to attachment by suit of a creditor. An attaching creditor acquires the right, and may be said to step into the shoes, of the attached debtor, and, in the case of credits or personal property belonging to the debtor and in the possession or control of a third person, the attaching creditor by the levy of the writ of attachment upon the said third person acquires whatever right the debtor had in said money or personal property at the time of said levy. Marble Co. v. Merchants' National Bank, 15 Cal.App. 347, 115 P. 59; Carter v. L. A. National Bank, 116 Cal. 370, 372, 48 P. 332; section 544, Code Civ.Proc. As between the bank and its depositor, the deposit was simply a debt due from the bank to the depositor, or, in other words, a credit due the depositor. The bank waived any right it may have had to apply the amount of this deposit to the indebtedness of the depositor upon its promissory note held by the bank. The levy of the attachment upon the bank rendered the latter liable to the attaching creditor the plaintiff herein, for the amount of the deposit, ‘until the attachment be discharged or any judgment recovered by him be satisfied.’ Section 544, Code Civ.Proc. As the attachment was never discharged and plaintiff's judgment against the original debtor is wholly unsatisfied, this liability of the bank, the defendant herein, to the plaintiff became absolute to the full amount of the funds on deposit in the bank at the time of the levy.

The further contention is made that, even conceding that the bank had a right of set-off, it never exercised such right. In view of our holding that the bank had waived any right of set-off it may have had, it is not necessary for us to pass upon this contention, and we expressly refrain from expressing any opinion thereon.

The same observation may be made regarding appellant's third contention, which is that the deeds held by the bank as security for the payment of the $50,000 note were not in legal effect mortgages. Whether the bank's claim against the depositor was secured by a mortgage upon real property would not in any way affect or change the legal aspect of its agreement not to exercise its right of set-off entered into with the depositor before any of the funds were deposited with said bank. We have held that such an agreement was made, and that the bank was concluded thereby from exercising any right to set off its indebtedness against said deposit.

Besides the questions already passed upon, there are two others, perhaps of minor importance, but, as they are discussed in the briefs and oral argument, they should have our attention.

The first of these questions relates to the real ownership of said sum of $8,086.16 deposited with the bank at the date of the levy. It is claimed on the part of the defendant that the actual ownership of this fund was in the Sparr Realty Corporation and that the Republic Securities Corporation was simply the fiscal agent of the Sparr corporation; that the funds in said deposit were actually the property of the latter company, and that, as the attachment reached only property in the possession or control of the bank belonging to the Republic Securities Corporation, no lien attached to said deposit, as the funds thereof were the property of a third person, the Sparr Realty Corporation. The evidence in the case shows that there was some business connection between these two companies, but fails to go to the extent claimed for it by the defendant. The Sparr Realty Corporation made no claim to said deposit either by serving a third party claim or by petition in intervention herein or, so far as the record shows, in any other manner. It appears to be content to let the parties hereto settle between themselves the true ownership of said fund, without either objection or interference on its part. Furthermore, as we have seen, this fund as originally deposited in said bank was paid out on the checks of the Republic Securities Corporation, and no attempt was made to show that any part of it was expended for the benefit of the Sparr Realty Corporation. In these circumstances we are not disposed to give serious consideration to the contention of the defendant that those funds belonged to the Sparr Realty Corporation at the time of the levy.

The second of these minor questions involves the failure of the plaintiff to have execution levied upon the bank on its judgment against the Republic Securities Corporation. As we have seen, an execution was issued on said judgment, but it is conceded that it was not levied or served on the bank. The liability of the bank under said levy is not affected by the subsequent failure to serve upon it a writ of execution. Section 544, Code of Civil Procedure, fixes the liability of the bank under the facts here shown, and makes it liable to the plaintiff for the amount of credits, debits, or property in its possession at the time of the levy until the judgment recovered by the plaintiff in the attachment action is satisfied. However, this liability of the bank to the plaintiff was contingent upon the latter recovering judgment in the attachment suit. Upon the recovery of such judgment, this liability became absolute, and the plaintiff was then entitled to recover the amount sequestered by the levy of the attachment. The plaintiff would also be entitled to recover interest upon the amount due from the date. of its judgment in the attachment suit, but not before that date. As the trial court allowed interest from May 10, 1930, the date of the levy of the attachment, and not from the date of judgment, which was July 14, 1930, the judgment should be modified to correct this error.

The judgment is accordingly modified by striking therefrom the provision awarding plaintiff interest from May 10, 1930, and by substituting the date July 14, 1930, and as so modified the judgment is affirmed; respondent to recover costs on appeal.

CURTIS, Justice.

We concur: WASTE, C. J.; THOMPSON, J.; SHENK, J.