Causey v. Eiland

Decision Date09 January 1928
Docket Number89
Citation1 S.W.2d 1008,175 Ark. 929
CourtArkansas Supreme Court

Appeal from Searcy Chancery Court; Sam Williams, Chancellor affirmed.


O. C Eiland brought this suit in equity against O. G. Nichols to foreclose a mortgage on a stock of drugs and fixtures to secure the payment of three notes of $ 1,000 each and the accrued interest, all of which were overdue. Writs of garnishment were also sued out against the Bank of Swifton at Swifton, Arkansas, and the American Exchange Bank of Leslie Arkansas. The Bank of Swifton answered the writ of garnishment, and asked directions as to whom it should pay the amount of a certified check issued by it to O. G. Nichols in the sum of $ 3,500. The American Exchange Bank of Leslie filed its answer to the writ of garnishment, and admitted that the certified check in question had been indorsed to it by O. G. Nichols and that it had credited the amount of said check partly to Nichols and partly to William Ashley.

The material facts raising the issues involved in this appeal may be briefly stated as follows: On February 22, 1926, O. G Nichols entered into a contract with G. A. Causey and others for the sale of a stock of drugs owned by him in the town of Swifton, Arkansas, for the sum of $ 2,527.47. On the 26th day of February, 1926, G. A. Causey gave his check to O. G Nichols for $ 2,527.47 in payment of the purchase price of said stock of drugs. On the same day the Bank of Swifton issued to O. G. Nichols its cashier's check for $ 3,500, which included the purchase price of said stock of drugs. Nichols did not tell the purchasers of the stock of drugs that he was indebted to O. C. Eiland for the purchase price of the same, or that he owed any other debts, except a few small bills.

On the first day of March, 1926, O. G. Nichols deposited cashier's check in the American Exchange Bank of Leslie, indorsed in blank by him. According to the testimony of Roy Hudspeth, cashier of the bank, Nichols and William Ashley came into the bank with a cashier's check on the Bank of Swifton for $ 3,500. Nichols directed that $ 500 of this amount should be credited to him and that the sum of $ 3,000 should be deposited to the credit of William Ashley. Ashley had been a former employee of the bank, and went back to a box in the bank and got out a note owed him by Nichols and credited the sum of $ 3,000 on it. The cashier thinks he gave a deposit slip to William Ashley and also gave Nichols a deposit slip for $ 500.

According to the testimony of William Ashley, Nichols told him that he wanted to pay him $ 3,000 on a note for $ 4,500, which had been given to him by Nichols for money borrowed from him by Nichols. Nichols indorsed the cashier's check in his favor on the Bank of Swifton for $ 3,500 and gave it to the cashier of the American Exchange Bank. Pursuant to the directions of Nichols, $ 3,000 of this amount was credited on the $ 4,500 note of Nichols to Ashley, and $ 500 was credited to the individual account of Nichols. The testimony of Ashley was corroborated by O. G. Nichols.

The cashier's check and the indorsements thereon are as follows:

"Bank of Swifton, No. 3796.

"Swifton, Arkansas, 2-26-26.

"Pay to the order of Mr. O. G. Nichols, $ 3,500, exactly thirty-five hundred dollars ($ 3,500).

Signed "W. D. Morgan, Cashier."

"(Cashier's check).

Indorsements: "O. G. Nichols. Pay to order any bank or banker or trust company, March 1, 1926. Signed American Exchange Bank, Leslie, Arkansas.

"Pay to order of any bank, banker or trust company, March 3, 1926. Grand Avenue National Bank, St. Louis, Missouri.

"Pay to order of Little Rock Clearing House, prior indorsements guaranteed. Signed Federal Trust Company, Little Rock, Arkansas, March 4, 1926.

"Pay to order any bank, banker, or trust company. Little Rock Clearing House."

Other facts will be stated or referred to in the opinion.

The chancellor found the issues in favor of the garnishees, and dismissed the garnishments against them. To reverse the decree in this respect G. A. Causey and others have duly prosecuted an appeal to this court.

Decree affirmed.

Ira J Mack and Boyce & Stayton, for appellant.

D. T. Cotton, for appellee.


HART, C. J., (after stating the facts).

The decree of the chancellor was correct. The rule governing the liability of a bank on a certified check has been clearly stated by the Supreme Court of Alabama as follows:

"A certified check has a distinctive character as a species of commercial paper, the certification constituting a new contract between the holder and the certifying bank; the funds of the drawer are, in legal contemplation, withdrawn from his credit and appropriated to the payment of the check and the bank becomes the debtor of the holder as for money paid and received." National Bank v....

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