Exchange National Bank v. Steele

• Decision Date: 30 June 1913
• Citation: 158 S.W. 969,109 Ark. 107
• Parties: EXCHANGE NATIONAL BANK v. STEELE
• Court: Arkansas Supreme Court

158 S.W. 969

109 Ark. 107

EXCHANGE NATIONAL BANK v. STEELE

Supreme Court of Arkansas

June 30, 1913

Appeal from Lonoke Circuit Court; Eugene Lankford, Judge; reversed.

STATEMENT BY THE COURT.

This was a suit in replevin, brought by appellant in the Lonoke Circuit Court, to recover the possession of two mules, the appellant claiming title to the mules as an innocent purchaser of a note given to Eagle & Co., of England, Ark by T. E. Tolson for the purchase price of said mules, the title thereto remaining in Eagle & Co. until the full purchase price should be paid. Eagle & Co. did a large business at England and borrowed large sums of money from the appellant bank and deposited as collateral for these loans various notes payable to their order and taken in the course of their business. The note which forms the basis of this suit reads as follows:

"On or before the 1st day of October, 1911, for value received the undersigned promises to pay to Eagle & Co., or order, one hundred and eighty dollars, with interest at 10 per cent per annum from date until paid, negotiable and payable at England, Ark., it being for one brown mare mule, sixteen hands high, nine years old, named Kate; one brown horse mule fifteen and one-half hands high, six years old, named Jack and this day delivered to the maker of this note, with the understanding and agreement by and between the maker of the note and Eagle & Co. that the title of above described property is and shall remain in said Eagle & Co. until above amount is paid in full."

It is undisputed that appellant became an innocent purchaser of this note on the 24th of January, 1911, but appellees claim that they paid the note in question to Eagle & Co., on or about December 1, 1911. Appellant alleged that appellees were in possession of the mules, claiming the title thereto and had refused to deliver them upon demand made therefor and that they were worth $ 207, and judgment was prayed for the recovery of their possession, or for their value in case delivery could not be had. Appellant filed proper affidavit and bond, but appellees filed cross bond and retained possession of the mules, and in their answer denied appellant's right to the immediate possession and alleged that they were entitled to the possession by virtue of having paid to Eagle & Co. for Tolson the note sued upon. That this payment was made on December 1, at which time Eagle & Co. transferred the mules to them, and that they made this payment without any knowledge of any claim in favor of plaintiff. The value of the mules as stated in the complaint was denied in the answer, but admitted upon the trial to be $ 207.

Various exceptions were saved by appellant during the progress of the trial which we need not discuss here, for under our view of the law as applicable to the undisputed evidence in this case, a verdict should have been directed for appellant. It is admitted that the note was in appellant's possession at the time the payment was made to Eagle & Co., but appellees insist that they should be protected in their payment because appellant had constituted Eagle & Co. as its agent to collect this and other notes given and used as this one was, and they say that if express authority to this effect had not been given, that such authority was implied from the course of dealing between the bank and Eagle & Co. The only witnesses who testified in the case were T. J Hudson, who was the bookkeeper for Eagle & Co., appellee Steele, and Hussman, the assistant cashier of the bank, and Tolson, the maker of the note. There was no evidence on the part of the appellees that they had any personal knowledge of the course of dealing between Eagle & Co. and the bank, and the evidence in regard to Eagle's agency and authority in the collection of the notes, or of their course of dealing from which such authority could be inferred, consisted of the evidence of Hudson and of Hussman. Hudson testified that Eagle & Co. borrowed large sums of money from the appellant bank and deposited notes payable to them as collateral security always for an amount in excess of the sum borrowed. Upon his examination by appellee he was asked these questions:

Q. Did the Exchange National Bank ever collect any of these notes from the parties--who collected these notes from the parties--notes put up as collateral security?

A. Eagle & Co. Up until about two years before he failed, Eagle had paid the plaintiff (appellant) the amounts he had borrowed from it.

Q. In collecting these notes, have you frequently sent to the bank for the notes, collected them and sent the money to the Exchange National Bank?

A. We have done that, not frequently.

Q. When you got the money and when you got the note back from the bank, did you then turn the note over to the party who paid you?

A. Yes sir.

Q. Did the Exchange National Bank ever make any objections to the collection of these notes which they held as collateral security?

A. None that I ever heard of.

Q. Now, of these notes which you had placed there and of which you did not have possession, who made the collection of these notes, you or the Exchange National Bank?

A. We have been in the habit of making the collections. When Eagle's note in favor of the bank fell due and he did not have the money to take it up, we usually asked for more time; sometimes on the same collateral. We sometimes exchanged collateral with the bank. The note in suit was paid to Eagle & Co. by Mr. Steele for Mr. Tolson.

These answers were all given over appellant's objections and Hudson further testified over appellant's objection that the appellant bank did not notify any maker of the notes held by them of their possession, and further that sometimes Eagle & Co. would have a party who would refuse to pay his note until they sent to the bank and got it. That when this was done they would write for the note and send the bank a check for the amount of the note. This witness also gave the following answers:

Q. Do you know whether or not the Exchange National Bank knew you were making these collections of these notes?

A. I do not know about that; I suppose they did, but I do not know.

Q. On any of them, you do not know whether or not the bank knew you were making collections?

A. Of course, when they were past due. I reckon the bank thought we were collecting them, but I do not know whether they knew it.

And he testified that when Mr. Steele came to pay the note his recollection was that he told him the note was deposited in Little Rock, but nothing was said about any custom or authority claimed by Eagle & Co. to make the collections, but upon his cross examination by appellant he testified that Eagle & Co. had no authority to collect the notes which they had transferred to that bank, but that they simply assumed authority to do so; that Eagle would write to the bank for one of the notes which had been deposited as collateral and would either send other collateral to take the place of the note which they had requested the bank to send or would send the bank a check to take up the note which they had requested to be sent. And he was asked this question:

Q. As a matter of fact, you were not constituted agents to collect these notes?

A. I do not know of any authority.

Upon the part of the appellant, Hussman testified that "when the collateral notes would begin to fall due, the bank would call Eagle's attention to the fact and request him to take them up or to give live paper and the bank never accepted a note as collateral which was past due."...