First National Bank of Huttig v. Rhode Island Insurance Co.

• Decision Date: 30 November 1931
• Docket Number: 16
• Parties: FIRST NATIONAL BANK OF HUTTIG v. RHODE ISLAND INSURANCE COMPANY
• Court: Arkansas Supreme Court

43 S.W.2d 535

184 Ark. 812

FIRST NATIONAL BANK OF HUTTIG v. RHODE ISLAND INSURANCE COMPANY

No. 16

Supreme Court of Arkansas

November 30, 1931

Appeal from Union Circuit Court, Second Division; W. A. Speer Judge; reversed.

STATEMENT OF FACTS.

J. V Spencer instituted an action in the circuit court against D R. Spencer to recover $ 800 and the accrued interest, alleged to be due upon a promissory note executed by the defendant in favor of the plaintiff. Plaintiff also sued out a writ of garnishment against the Rhode Island Insurance Company of Providence, Rhode Island, to answer what moneys it might have in its hands belonging to said D. R. Spencer. The complaint was filed on August 25, 1930, but no summons was issued against the defendant, D. R. Spencer, until the 30th day of August, 1930. The garnishment bond was filed on the 25th day of August, 1930, and the writ of garnishment was issued in the case against the insurance company on the same day, which was served on the 27th day of August, 1930, by delivering a copy of the writ of garnishment to W. E. Floyd, insurance commissioner, the agent designated to accept service by the Rhode Island Insurance Company of Providence, Rhode Island.

The First National Bank of Huttig, Arkansas, was allowed to intervene in the case, and it asked judgment against the Rhode Island Insurance Company for $ 439.03, the amount of a draft which had been issued by the Rhode Island Insurance Company to the First National Bank of Huttig, to D. R Spencer, and to A. L. Barber, which had been transferred by Spencer and Barber to said bank. The draft, which is the subject-matter of this action, is as follows:

"No 42970.

"Rhode Island Insurance Company,

Providence, R. I. Aug. 21, 1930.

"Upon acceptance, pay to the order of Spencer Mercantile Company, D. R. Spencer, sole owner, First National Bank of Huttig, Arkansas, four hundred thirty-nine and .03 dollars ($ 439.03) in full satisfaction and discharge of all claims for loss and damage by fire to property insured under policy No. 155472, issued at El Dorado, Arkansas, agency of said company and occurring on the 9th day of May, 1930. In consideration of said payment, said policy is hereby canceled and surrendered.

"To Rhode Island Insurance Company,

"31 Canal St., Providence, R. I.

"E. G. Peiper, President."

A. G. Stephenson, cashier of the First National Bank of Huttig, was a witness for the bank. According to his testimony, he cashed the draft for $ 439.03 and paid the money to D. R. Spencer. The draft was indorsed to the bank by D. R. Spencer and A. L. Barber. This was on the 5th day of September, 1930. The bank sent the draft to its correspondents, and it was returned, after being forwarded to the Rhode Island Insurance Company, with the notation, "Payment stopped." The bank was notified by the insurance company that it would pay the draft if the bank would get the garnishment released. The bank has never received any payment on it. The bank had no information about any garnishment having been issued against the insurance company at the time it bought the draft. Two weeks before this, the bank had cashed a draft on the same insurance company for a larger sum, and it was paid by the insurance company. That draft was made payable just like the one in this suit, and to the same parties.

J. V. Spencer was a witness for himself and testified that he filed suit on the note, and took judgment against D. R. Spencer on it. Garnishment was issued on the day the suit was filed, August 25, 1930. He did not know why summons was not issued until August 30, 1930.

According to the testimony of Verne McMillen, he was attorney and agent for the Rhode Island Insurance Company, which had issued policies for insurance to D. R. Spencer on a stock of goods. The stock of goods was destroyed by fire on May 9, 1930. This particular draft was sent to him by the insurance company to be delivered, and witness delivered it to A. L. Barber on the 28th day of August, 1930. At that time he did not know that the writ of garnishment had been issued against the insurance company. The insurance company offered to pay the amount of the draft into the registry of the court for payment to whomsoever the court might decide was entitled to it.

The court found that the funds in the hands of the insurance company, amounting to $ 439.03, were due defendant, D. R. Spencer for a loss under an insurance policy, and was subject to garnishment in this case. The court found that J. V. Spencer was entitled to judgment against the Rhode Island Insurance Company, garnishee, in the sum of $ 439.03. The court found that the intervener, First National Bank of Huttig, Arkansas, was not entitled to recover from the Rhode Island Insurance Company on account of the draft sued on, but that it was entitled to recover from D. R. Spencer the sum of $ 439.03. Judgment was rendered in accordance with the findings of the court. First National Bank of Huttig, Arkansas, has appealed, and the Rhode Island Insurance Company has appealed from the judgment against it in favor of J. V. Spencer.

Judgment reversed, and cause remanded.

Gaughan, Sifford, Godwin & Gaughan, for appellant.

Verne McMillen, for Rhode Island Ins. Co., and Marsh, McKay & Marlin, for J. V. Spencer, appellees.

OPINION

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

The court erred in holding that the First National Bank of Huttig was not entitled to the proceeds of the insurance draft for two reasons:

In the first place, under our Negotiable Instruments Act, § 7896 of Crawford & Moses' Digest, where, in a bill of exchange, the drawer and the drawee are the same person, the holder may treat the instrument at his election either as a bill of exchange or as a promissory note. This was the law prior to the passage of the act in question. A bill of exchange drawn by the maker upon himself is in legal effect a promissory note and cannot be countermanded. Where a bill of exchange is drawn by a corporation upon itself, the instrument may be treated as an accepted bill or as a promissory note, at the election of the holder. 8 C. J., P 23, pp. 42-43; 3 R. C. L., P 62, p. 878; 1 Daniel on Negotiable Instruments (6th ed.), §§ 128 and 426; Hasey v. White Pigeon Beet Sugar Co., 1 Doug. 193; Cunningham v. Wardwell, 12 Me. 466; Marion and Mississinewa Rd. Co. v. Hodge, 9 Ind. 163; Drinkall v. Movius State Bank, 11 N.D. 10, 88 N.W. 724; Pavenstedt v. New York Life Ins. Co., 203 N.Y. 91, 96 N.E. 104, Ann. Cas. 1913A, page 805; and Bailey v. Triplett Bros., (Tex. Civ. App.) 286 S.W. 914.

In the present case...