Darragh Company v. Goodman
Decision Date | 26 June 1916 |
Docket Number | 92 |
Citation | 187 S.W. 673,124 Ark. 532 |
Parties | DARRAGH COMPANY v. GOODMAN |
Court | Arkansas Supreme Court |
Appeal from Grant Chancery Court; Jethro P. Henderson, Chancellor reversed.
STATEMENT BY THE COURT.
These appeals involve the correctness of the decrees of the Pulaski and Grant Chancery Courts, the one requiring the receiver of an insolvent bank to pay from the moneys on hand at the time of its failure the full amount of certain drafts collected by it shortly before its failure to the drawer bank, to the exclusion of the general creditors, and the other denying the drawer of the draft such right to the payment of the amount collected out of the cash assets of the defunct bank, and have been consolidated for hearing.
It appears from the agreed statement of facts that the First National Bank of Atchison, Kansas, sent drafts with bills of lading attached on F. J. Darragh Company of Little Rock, to the State National Bank for collection. This bank, of which the Darragh company were customers, presented the drafts on June 15, 1914, and they were paid by said company's check on the collecting bank which charged the checks against the account of the payer and sent its draft on the National Bank of Commerce of St. Louis to cover the collection. Immediately upon receipt of the exchange, the Kansas bank forwarded it to St. Louis for collection, but before it reached there the State National Bank had suspended business and payment of the draft was refused by the St. Louis bank because of the failure of the drawer.
During the day and at the close of business of said June 15, 1914 the State National Bank had on hand the sum of $ 32,429.54 in cash. When it closed its doors on June 19, it had cash on hand only to the amount of $ 7,052.77, which went into the hands of the receiver, who took charge of the assets of the bank. Said sum was the lowest amount of cash the defunct bank had on hand at any time after the collection of the drafts. It continued business regularly to the time of closing its doors on June 19, 1914.
The court held the collection constituted a trust fund and ordered it paid out of the cash going into the hands of the receiver to the exclusion of the general creditors of the bank.
In No 4200, the Darragh company of Little Rock, on June 8, 1915 sent its draft on M. A. Davis of Leola, Ark., to the Bank of Leola for collection, with the direction contained in its circular letter, "Please collect this item for us on arrival of goods and remit proceeds in Little Rock exchange with your usual promptness."
On the 13th day of January, the Bank of Leola collected the draft and issued its "cashier's check" payable to the order of the Darragh company for the amount, and mailed it to said company. On the next day, the Darragh company deposited the said cashier's check in the England National Bank of Little Rock for collection, but the Leola bank failed and its affairs were taken charge of by John M. Davis, State Bank Examiner, on June 15, before said cashier's check could in due course be collected. The defunct bank had more cash on hand at the time it was taken charge of by the examiner than the amount collected on the draft, and had not had a less amount since the collection.
Decree reversed and cause remanded.
Coleman & Lewis, for appellant; H. M. Trieber, of counsel.
1. Under the facts of this case, only the relation of debtor and creditor existed. 93 Tenn. 353; 27 S.W. 669; 25 L. R. A. 523. Where paper is deposited with a bank for collection, such bank is an agent until the proceeds are received by it. It may then credit the proceeds to the depositor and establish the relation of debtor and creditor. 14 S. Dak. 512; 86 Am. St. 769, and note 797-8; 3 R. C. L., § 262, p. 634. It is not essential that the forwarder be a depositor; the rule is the same where the proceeds are not to be deposited, but remitted to the customer by draft. 3 R. C. L., § 261, p. 633; 95 Tenn. 579; 49 Am. St. 940; 32 L. R. A. 715, and note.
2. The funds of the bank were not augmented by the collection of the drafts. Checks of third parties on a bank with which they are depositors, which are paid by crediting the bank and charging the drawers on its books, do not increase the cash in bank and present no basis for a preference to the depositor. 3 R. C. L., § 268, p. 639; 78 N.Y. 269; 34 Am. St. 532; 69 Miss. 759; 30 Am. St. Rep. 585; 56 F. 759; 64 A. 923; 53 N.W. 923; 71 S.W. 977; 86 Am. St. 769, and note, 804, 806, 807, etc.
3. A decision of this case involves the construction of the National Bank Act and should follow the construction of the act by the Federal courts. 194 F. 593; 8 C. C. A.; 1 Enc. U. S. Rep. 548; 73 U.S. 628; 172 Id. 425.
Hinton & Rogers and Comer & Clayton, for First National Bank and F. J. Darragh et al.; G. F. Williams and Grover T. Owens, for Darragh et al.
1. The draft was not deposited generally and treated as cash, but was sent for collection and remittance. The bank had no title; the intention of the parties will prevail as to ownership of the proceeds. 49 Neb. 786; 59 Am. St. 572; 14 S.D. 512; 86 Am. St. 769, and note, PP 2 and 3, p. 782 and P 1, p. 786. The bank did not take title to the proceeds of the draft. 49 Neb. 786; 59 Am. St. 572; 86 Id. 769, and note. See 136 F. 90; 134 Id. 724; 145 A. 146; 118 Ill.App. 491.
Moore, Smith, Moore & Trieber, for appellee, in Darragh v. Goodman; Coleman & Lewis, of counsel.
In the absence of any agreement to the contrary, a collecting bank becomes the owner of the money collected, and is under obligation to pay or remit the amount; the relation of debtor and creditor is established. Here remittance was requested in Little Rock exchange, which authorized the Bank of Leola to substitute its own obligation, hence there was no trust. 93 Tenn. 353, 25 S.W. 669, 25 L. R. A. 523. This case is directly in point. See also 104 Ark. 560.
OPINIONKIRBY, J., (after stating the facts).
It is contended on the one hand that only the relation of principal and agent existed between the collecting bank and the drawer of the drafts collected and that the amount collected remained the property of the drawer, a trust fund which the receiver could be required to account for to the exclusion of the general creditors, and on the other that only the relation of debtor and creditor was created by the transactions and the drawers of the drafts were not entitled to any preference payment out of the cash assets of the defunct bank.
No principle of law is better established than that a general deposit of money in a bank passes the title immediately to the bank and establishes the relation of debtor and creditor between the bank and its customer, the depositor. Covey v. Cannon, 104 Ark. 550, 149 S.W. 514, 518; Warren v. Nix, 97 Ark. 374, 135 S.W. 896; Steelman v. Atchley, 135 S.W. 902, 98 Ark. 294; 3 R. C. L. 261; Merchants' & Planters' Bank v. Meyer, 56 Ark. 499, 20 S.W. 406; Plano Mfg. Co. v. Auld, 14 S.D. 512, 86 N.W. 21, 86 Am. Rep. 769, and note; Carroll County Bank v. Rhodes, 69 Ark. 43, 63 S.W. 68.
It is likewise well established that a bank receiving a draft for collection merely, is the agent of the remitter, drawer or forwarding bank, and takes no title to the paper or the proceeds when collected, but holds same in trust for remitting. Second National Bank v. Bank of Alma, 99 Ark. 386, 138 S.W. 472; Okla. State Bank v. Bank of Central Arkansas, 120 Ark. 369, 179 S.W. 509; 3 R. C. L., p. 633; 3 Am. Enc. of L., p. 815; 5 Cyc., p. 514; Macy v. Roedenbeck, 227 F. 346, 353, and other authorities cited on appellees' brief.
There is no question in either of these cases but that the drafts were sent for collection only, with the expectation that the proceeds should be remitted immediately upon the receipt thereof by the collecting bank and nothing indicating that the parties intended that the drafts or proceeds should not remain the property of the owner. Such being the case, we hold that the deposit by the State National Bank of the funds...
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