Arkansas Valley Bank v. Kelley

• Decision Date: 27 February 1928
• Docket Number: 234
• Citation: 3 S.W.2d 53,176 Ark. 387
• Parties: ARKANSAS VALLEY BANK v. KELLEY
• Court: Arkansas Supreme Court

3 S.W.2d 53

176 Ark. 387

ARKANSAS VALLEY BANK v. KELLEY

No. 234

Supreme Court of Arkansas

February 27, 1928

Appeal from Sebastian Circuit Court, Fort Smith District; J. Sam Wood, Judge; affirmed.

Judgment affirmed.

Warner Hardin & Warner, for appellant.

Daily & Woods, for appellee.

OPINION

SMITH J.

At the trial from which this appeal comes the court made a finding of fact which presents the issues in the case. Without reciting the testimony, it may be said that the finding of fact is largely in accord with the undisputed testimony, and as to any matters about which there was a conflict, is supported by substantial testimony. We therefore assume the facts to be as found by the court. This finding is as follows:

"During the season of 1925 H. J. Payne acted as agent for Leigh Kelley for the sale of the latter's potatoes, under a verbal contract, by the terms of which Payne was required to find purchasers, deliver to them the potatoes, collect the purchase price, and remit the proceeds, less his commission, to the defendant Kelley. That, pursuant to such contract, Payne sold, among others, three cars of potatoes belonging to Kelley, Patty and Rogers to one H. W. Burrough, and took the latter's check for the sum of $ 1,664.68 to cover the purchase price, said check being drawn on the Bank of Lavaca and payable to 'H. J. Payne & Sons'; that said sale was made on the sole judgment of Payne, and the identity of the purchaser was not known to Kelley and associates. That said check was indorsed by Payne, the name of Kelley and his associates not appearing thereon, and deposited in his (Payne's) checking account with plaintiff bank in the name of H. J. Payne, Agent. That Payne was acting as agent for some fifteen or twenty other growers of potatoes under similar contract, and deposited the proceeds of all sales made by him for all growers in this same checking account; that he remitted to all such growers by check drawn on said account; that Kelley and his associates had no knowledge of the fact that collection from Burrough had been made by check payable to Payne; that, in accepting such check from Payne and in crediting the amount thereof to Payne's checking account, plaintiff had no knowledge of Payne's agency for Kelley and associates in the matter of the sale of potatoes, nor of his agency for various other potato growers; that, in so crediting such check to the account of Payne, plaintiff relied solely on the indorsement and credit of Payne; that, subsequently to the indorsement, deposit and crediting of the Burrough check, as aforesaid, Payne remitted to Kelley by checks drawn on said account for seven or eight cars of potatoes which he had sold for Kelley, such remittances including, among other cars, the three cars sold to Burrough; that said checks so drawn by Payne to Kelley on the plaintiff bank were presented by Kelley to plaintiff for payment and were by plaintiff paid; that thereafter the Burrough check was returned to plaintiff unpaid, resulting in an overdraft in the said account of Payne with plaintiff; that plaintiff made demand on Payne to make good the overdraft, but made no demand on Kelley for nearly two months after the overdraft was created. That plaintiff did not notify Kelley or his associates that it would look to them for payment of the overdraft for said period of nearly two months; that, after demand was made on Kelley, plaintiff accepted a payment of $ 100 from Burrough on said overdraft account. That the checks given by Payne to Kelley were accepted by Kelley in good faith in payment of amounts which he was entitled to receive from Pane; that said checks were presented by Kelley in good faith to plaintiff for payment, and were deliberately paid by plaintiff."

Upon this finding of fact the court declared the law as follows:

"That, in the transaction between plaintiff and Payne, Payne was acting for himself, and not for Kelley and associates; that Kelley and associates are not liable to plaintiff as undisclosed principals of Payne; that, in accepting Burrough's check and crediting it to Payne's checking account, and in paying the checks of Payne drawn against it, plaintiff elected to rely solely on the credit of Payne; that the return of the Burrough check unpaid merely resulted in an overdraft of Payne's account with plaintiff, for which overdraft plaintiff's recourse is against Payne and Burrough alone."

Upon this finding of fact and declaration of law, judgment was rendered in favor of Kelley and his tenants, all of whom were sued by the bank for the amount of the check drawn by Burrough in payment of the three cars of potatoes sold by Payne to Burrough belonging to Kelley and his tenants, for which check the bank had given Payne credit, who remitted the proceeds to Kelley by cheek drawn upon the account of Payne, as agent, with the plaintiff bank, and this appeal is from that judgment.

Appellant insists, for the reversal of the judgment of the court below, that the declaration of law is not supported by the finding of fact made by the court, as it appears from the facts found by the court that Kelley and his tenants were the undisclosed principals of Payne, their agent, and received the benefits of the transaction by which Payne procured the money from the plaintiff bank. It is insisted that, as Payne was the agent for an undisclosed principal who received the proceeds of the worthless check deposited by him, the principal should be held liable for the amount of this check as for money had and received to the account of the principal. The plaintiff bank asked findings to this effect, which the court refused to make, and the plaintiff duly excepted to this refusal.

Payne and Burrough were made defendants to this suit, and judgment was recovered against them for the want of an answer.

It appears that, before the institution of this suit, Burrough had agreed with the plaintiff bank to repay the amount of his worthless check at the rate of $ 100 per week, and that, pursuant to this agreement, a payment of $ 100 was actually made, but, as Burrough defaulted in the subsequent payments, the bank brought this suit, and has recovered judgment against both Payne and Burrough for the amount of the overdraft, less the hundred-dollar credit.

Appellees insist that, the bank having elected to sue Burrough and Payne, cannot also pursue the inconsistent remedy of suing them. As we have concluded that the declaration of law above quoted is correct, we do not consider or decide whether the bank is barred from suing Kelley, having sued Kelley's agent and Burrough.

It will be borne in mind that Payne employed his own method of making collections for the potatoes sold for the account of Kelley and his tenants and other potato growers, and all money so received by Payne was placed to the credit of his account as agent. But Kelley was not Payne's only principal, as all growers for whom Payne sold potatoes were also his principals, and there was no disclosure to the bank that Kelley was one of these. It was within the discretion of the bank to have accepted Burrough's check for collection for Payne's account, or to accept it as a cash deposit for that amount, and it elected to take the latter action. It was not induced to do so upon the faith of Kelley's credit or Payne's agency for Kelley, as Kelley was not known in the transaction.

In the case of J. M. Robinson & Co. v. Bank of Pikeville, 146 Ky. 538, 142S.W. 1065, it was held by the Court of Appeals of Kentucky (to quote a syllabus) that, "where a bank receives, not for collection, but as so much money, a check, and places the amount to the credit of a customer, it assumes liability for such amount to all persons to whom the customer may give checks." The opinion in that case quoted from the case of First Nat. Bank of Cincinnati v. Burkhardt, 100 U.S. 686, 25 L.Ed. 766, as follows:

"When a check on itself is offered to a bank as a deposit, the bank has the option to accept or reject it, or to receive it upon such conditions as may be agreed upon. If it be rejected, there is no room for any doubt or question between the parties. If, on the other hand, the check is offered as a deposit and received as a deposit, there being no fraud and the check genuine, the parties are no less bound and concluded than in the former case. Neither can disavow or repudiate what has been done. The case is simply one of an executed contract. There are the requisite parties, the requisite consideration, and the requisite concurrence and assent, of the minds of those concerned."

No question is made here about the good faith of the bank, or of that of Payne or Kelley. A loss has been sustained, which some innocent person must suffer, and the question is, Where must that loss fall?

In the case of First Nat. Bank of Detroit v. Burkham, 32 Mich. 328, the facts were that the drawees of a bill, the genuineness of which was not disputed, sought to recover from the payees the amount of the bill, which they had accepted and paid. The ground upon which the drawees sought to recover was that they had paid under a mistake of fact, which mistake consisted in their security from the drawer of the bill being fictitious, when they supposed it to be genuine and reliable. Upon these facts Judge Cooley, speaking for the Supreme Court of Michigan, there said:

"It is not claimed in this case that, if the drawees had relied upon the responsibility of the drawer, and that had failed them, they would have had any ground of recovery against the payees. But we think it would be an exceedingly unsafe doctrine in commercial law, that one who has discounted a bill in good faith, and received in its payment the strongest possible assurance that it was drawn with proper authority,...