City Nat. Bank v. Citizens' Bank

• Decision Date: 24 January 1927
• Docket Number: (No. 121.)
• Citation: 290 S.W. 48
• Parties: CITY NAT. BANK OF FT. SMITH v. CITIZENS' BANK OF PETTIGREW.
• Court: Arkansas Supreme Court

290 S.W. 48

CITY NAT. BANK OF FT. SMITH v. CITIZENS' BANK OF PETTIGREW.

(No. 121.)

Supreme Court of Arkansas.

January 24, 1927.

Appeal from Washington Chancery Court; Lee Seamster, Chancellor.

Suit by the Citizens' Bank of Pettigrew against the City National Bank of Ft. Smith. Decree for plaintiff, and defendant appeals. Reversed, and action dismissed.

So far as the issues raised by the appeal in this case are concerned, this is a suit in equity by the Citizens' Bank of Pettigrew against the City National Bank to recover the sum of $1,000, the amount of a draft drawn on the defendant in favor of the plaintiff and alleged to have been accepted by the defendant. The suit is defended on the ground that the drawer of the draft had no funds in the defendant's bank with which to pay it and that the acceptance of the defendant was made under a mistake of fact.

The record shows that on November 10, 1923, the Citizens' Bank of Pettigrew, in Madison county, Ark., mailed at Pettigrew to the City National Bank of Ft. Smith, Ark., the following draft:

                                             "Nov. 6, 1923
                

"The Farmers' State Bank, Oklahoma City, Okl.

"Pay to the order of Citizens' Bank ($1,000.00) one thousand dollars for value received and charge to account of R. J. Conneway. To City National Bank, Ft. Smith, Ark."

November 11th was Sunday, and November 12th became Armistice Day and a holiday. When the City National Bank opened for business on Tuesday, November 13th, the draft had arrived. One of the clerks in the bank mailed on the same day a postal card to the Citizens' Bank of Pettigrew, which is as follows:

"The City National Bank, Ft. Smith, Ark., November 13, 1923. Your letter of 11, received.

                We credit your account ............... 1000
                We entered for collection 
                We debit your account 
                

"Checks and drafts on other points credited subject to payment.

"Yours truly,

                                  "The City National Bank."
                

The account of R. J. Conneway was also charged with the sum of $1,000 by another clerk. The attention of the cashier of the City National Bank was called to the matter later in the day of the 13th inst., and he examined the account of Conneway to see if he had any funds in the bank. Finding that Conneway had no funds in the bank, he directed the draft to be at once returned to the Citizens' Bank of Pettigrew. This direction was given before the close of banking hours, but it seems that the letter returning the draft was not received by the Citizens' Bank of Pettigrew until November 15, 1923. The advice card or acceptance copied above was received by the Citizens' Bank of Pettigrew on November 14, 1923.

According to the testimony of the cashier of the City National Bank, Conneway was not a regular customer of the bank, but had borrowed money from it on one occasion previously and had deposited some collateral security with the bank. The amount so borrowed was due and unpaid at the time of the transaction in question, and the collateral was still in the hands of the City National Bank. The draft and the notice of nonpayment was dated November 15th, but this was a mistake of the stenographer and the actual date was November 13th. The direction of the cashier to return the draft with notice of nonpayment was made during banking hours but too late to be forwarded to the Bank of Pettigrew on that day.

The Citizens' Bank of Pettigrew refused to accept the return of the draft on the ground that the postal card received by it, above referred to, was an absolute acceptance of the check and was not merely an advice card showing the receipt of the draft as claimed by the Citizens' National Bank. R. J. Conneway had been connected with the Citizens' Bank of Pettigrew, and that bank knew that he had no funds on deposit in the City National Bank at the time the draft in question was drawn, but it expected that Conneway would be in Ft. Smith on November 12, 1923, and arrange for the payment of the draft. Conneway had returned from Oklahoma and was in the Citizens' Bank of Pettigrew on the day the card of acceptance or advice was received, which was November 14, 1923. The Citizens' Bank of Pettigrew, as soon as it received the postal card in question, treated it as an acceptance or payment of the draft, and made an entry in its books crediting the account of R. J. Conneway with $1,000. The draft was given by Conneway to the bank in payment of an antecedent indebtedness, and it is not shown that the Citizens' Bank of Pettigrew will in any wise be injured if the postal card in question is not treated as an absolute acceptance and payment of the draft.

The chancellor found the issues in favor of the plaintiff, and rendered a decree in favor of the Citizens' Bank of Pettigrew against the City National Bank of Ft. Smith in the sum of $1,000. To reverse that decree, this appeal has been prosecuted by the City National Bank.

Jas. B. McDonough, of Ft. Smith, for appellant.

W. N. Ivie, of Fayetteville, for appellee.

HART, J. (after stating the facts as above).

Michie in his treatise on Banks and Banking, vol. 2, § 141 (1c) lays down the general rule governing cases of this sort as follows:

"Where a check is offered and received by the drawee bank as a deposit, credited to the holder's account, and charged to the account of the drawer, the transaction is irrevocably closed and cannot be rescinded or recalled by the bank or the drawer without the consent of the person to whom payment was made, except for fraud or mistake."

The general rule proceeds upon the theory that when a bank accepts a check or draft on itself by depositing to the credit of the person presenting it, the amount of the check, it is presumed to know whether the check at...