Mercantile National Bank v. McCullough Tool Co.

This controversy determines which of two creditors shall bear a portion of the loss caused by the failure of an oil company. The determining question: May a third party action be brought upon a contract under which a bank agrees to lend money to an oil company to be disbursed to its creditors from a deposit account? The answer is “No” where (as here) the oil company has not authorized the bank to pay the specific account in a manner meeting the bank’s requirements for withdrawing money from the deposit account.

The Court of Civil Appeals, 250 S.W. 2d 870, allowed the tool company a recovery…