Bank of Batesville v. Maxey

• Decision Date: 29 July 1905
• Citation: 88 S.W. 968,76 Ark. 472
• Parties: BANK OF BATESVILLE v. MAXEY
• Court: Arkansas Supreme Court

88 S.W. 968

76 Ark. 472

BANK OF BATESVILLE v. MAXEY

Supreme Court of Arkansas

July 29, 1905

Appeal from Independence Circuit Court, GUSTAVE JONES, Special Judge.

Reversed.

STATEMENT BY THE COURT.

R. L Maxey, a merchant of Independence County, borrowed two thousand dollars from the Bank of Batesville, and executed therefor the following note:

"$ 2,000.00.

Batesville Ark., Dec. 23, 1901.

"Four months after date, we, or either of us, promise to pay to the Bank of Batesville, two thousand dollars at ten per cent interest per annum from date until paid, for value received,

[Signed]

"R L. Maxey.

David Dearing.

"John H. Maxey.

M. D Maxey.

"W. A. Greenway.

J. B. Northcut.

"J. F. Morris.

M. G. Farris.

"W. W. Edmonson.

E. T. Fulks."

Maxey afterwards, before the note came due, failed in business, and was forced into bankruptcy, his estate being worth about 17 cents on the dollar. But the other parties to the note, who were in fact only sureties of Maxey, owned enough property to make the note good and the bank entirely safe. During the progress of the bankruptcy proceeding, Maxey, in order to protect his own sureties as far as possible, requested the cashier of the bank to file the note in the bankruptcy court, so that a pro rata part of the proceeds of the bankrupt's estate might be paid thereon. In compliance with this request the cashier filed the proceeds of the estate. Thereupon the cashier of the bank requested Mr. Casey, an attorney, of the firm of Yancey, Reeder & Casey, to look after the matter, in order that the note might not be stricken from the file of claims, and might be allowed its pro rata share of the proceeds. The attorneys did this, and the note was allowed as a claim against the estate. A dividend of 17 per cent. was afterwards paid on the claims against the bankrupt which amounted to $ 348 on this note.

Of this sum 10 per cent. was retained by the attorneys, Yancey, Reeder & Casey, or paid by the bank to them, and the remainder, $ 313.20, was credited on the note. This dividend apparently exhausted all the assets of the bankrupt's estate, and left the balance of the note unpaid. The firm of Yancey, Reeder & Casey, held for collection a number of claims against the bankrupt Maxey. Among these clients who had claims against Maxey was the White River Grocer Company, of which D. D. Adams was manager. After the bankrupt's estate had apparently been exhausted by the payment of the dividend mentioned, Adams received a telephone message from Maxey, asking him to come up to Penter's Bluff, and requesting him to bring Mr. Yancey and also Mr. Wolf, the cashier of the bank, with him. Maxey stated to Adams that if he would come up to the Bluff he would have parties there who could tell him how he could collect his debt. The cashier declined to attend the meeting, but Adams went up with his attorney, Mr. Yancey. They met there Maxey, the bankrupt, and also Fulks and Greenway, two of Maxey's sureties on the note to the bank. These parties gave information that tended to show that one Davis, a man of some financial means, was interested in the mercantile business that Maxey had carried on to such an extent as to make him responsible for the debts that Maxey had contracted in the line of that business. They also gave information which tended to show that Davis withheld goods of the value of $ 181 belonging to Maxey's estate, and had failed to turn them over to the trustees of that estate in bankruptcy. These parties, Adams representing his company, Fulks and Greenway two of the sureties on the note of Maxey to the bank, Maxey himself, and Yancey, the attorney, discussed ways and means by which Davis could be made to pay these debts. Yancey advised them that if they could prove the facts stated by them Davis could be made to pay the debts. Yancey and the firm of attorneys of which he was a member proceeded then along the line of the facts divulged at the meeting to obtain evidence to show that Davis was liable for such debts. From time to time they held consultations with Maxey and the other parties who had been present at the first meeting. They obtained the affidavits of Maxey and others, showing that Davis was an owner of an interest in the business that Maxey had carried on, and that he was liable for the debts, and also that he had withheld goods of the bankrupt's estate. They then had Davis summoned before the referee in bankruptcy to answer these charges. When Davis arrived in Batesville on the day set for the hearing of these matters, Yancey took him to his office, and showed him the affidavits of witnesses tending to show that he was liable for the debts, and had withheld assets of the bankrupt. A few hours afterwards, Davis and his attorney met Yancey, and the attorney of Davis told him that, under the facts which could be proved, he was liable, and advised him to settle the debts without further litigation. Davis did so, but, as he had been summoned to answer before the referee for a certain amount of goods of the bankrupt, which he had withheld, it was agreed that he should pay the value of those goods, $ 181, to the referee, and that it should be distributed through him to the creditors. The balance he paid to Yancey, Reeder & Casey, who executed to him a receipt for the same in the following words:

$ 4,740.67.

Batesville, Ark., July, 11, 1902.

"Received from W. E. Davis the sum of forty-seven hundred and forty dollars and sixty-seven cents in full settlement of the following accounts, and notes proved in bankruptcy in the estate of R. L. Maxey:

Talley Lumber Company

$ 68.00

$ 64.35

Charles Mosby

37.50

J. B. Younger

541.32

Seaton & Lindsay

32.68

L. R. Simpson

59.15

White River Grocery Company

234.31

Bank of Batesville

1,758.92"

Then follow the names of other creditors represented by the attorneys and amounts due each; the receipt being signed. "Yancey, Reeder & Casey, attorneys for the above mentioned creditors."

The attorneys then deducted 25 per cent. of the amount collected for their services in collecting, and paid the balance to the creditors. To the bank they paid $ 1,309.19, which sum it credited on the note. Afterwards, the bank demanded of the sureties that they pay the balance due on the note, and upon their refusal to do so brought this action at law to recover the same.

The defendants appeared, and for answer admitted the execution of the note. But they alleged that the money was borrowed by Maxey to use in the mercantile business carried on in his name at Penter's Bluff, and was so used, but that the business, though carried on in the name of Maxey, in fact belonged to W. E. Davis, and that Davis was in law liable for the debts of that business, including the debt of the bank for borrowed money. That Davis, after Maxey had become bankrupt, agreed with Yancey, Reeder & Casey that he would pay in full all claims of creditors of R. L. Maxey represented by them. That said attorneys represented the plaintiff, Bank of Batesville, and received from Davis payment of the balance due on said note in full, and that the bank, with full knowledge that such attorneys had acted for them in such settlement, received a part of said money, and thus ratified and confirmed their action. They further set up that, under the circumstances, the bank was estopped to deny that Yancey, Reeder & Casey were its attorneys in that settlement. Wherefore they alleged that the bank was bound by the settlement, and could not recover in this action.

On the trial the court, at the instance of defendant, gave, among others, the following instruction:

"I. The jury are instructed, as a matter of law, that if a person adopts a transaction done in his behalf by an agent who had no authority to do it, he must adopt it in its entirety; he cannot adopt it in part, and repudiate it in part. And if the jury believes from the evidence that Yancey, Reeder & Casey accepted for the plaintiff the money paid by Davis, and that the plaintiff bank either accepted or retained a part of the money so received by said attorneys for it after it had notice that the said attorneys had acted for them in the premises, then this was a ratification of the acts of Yancey, Reeder & Casey in accepting said money, and plaintiff is bound thereby." The jury returned a verdict in favor of the defendant, and the bank appealed.

Case reversed and cause remanded.

S. D. Campbell, J. C. Yancey and Samuel M. Casey, for appellant.

The evidence fails to show any agency of Yancey, Reeder & Casey to collect this note for appellant under the evidence. This is not a case of agency by estoppel, and the court erred in so instructing the jury. 75 N.Y. 547; Big. Estop. 434; 35 Ark. 376; Ib. 293; 36 Ark. 114; 66 Am. D. 478; 56 Mich. 182; Abb. Civ. Trial Brief, 324; 48 Ark. 445. Agency can not be proved by the declaration of the agent himself. 46 Ark. 228. The court erred in refusing to direct a verdict for appellant. 65 Ark. 329; 55 Ark. 347; 21 Ark. 329; 29 Ark. 497; 67 Ark. 223; 21 Ark. 395; 64 Ark. 119; 57 Ark. 468; 7 Ark. 386.

W. S. Wright, for appellees.

OPINION

RIDDICK, J., (after stating the facts.)

This is an action by a bank against a number of defendants, who were sureties on a promissory note of one Maxey executed by him to the bank for a loan of $ 2,000....