Hooten v. State Use Cross County

• Citation: 178 S.W. 310,119 Ark. 334
• Decision Date: 21 June 1915
• Docket Number: 63
• Parties: HOOTEN v. STATE USE CROSS COUNTY
• Court: Supreme Court of Arkansas

178 S.W. 310

119 Ark. 334

HOOTEN v. STATE USE CROSS COUNTY

No. 63

Supreme Court of Arkansas

June 21, 1915

Appeal from Cross Chancery Court; Charles D. Frierson, Chancellor on exchange; reversed in part; affirmed in part.

Decree affirmed in part and reversed in part.

Benjamin Harris and Gordon Frierson, for appellant Merchants & Planters Bank & Trust Company.

1. Liability can not be fixed upon this appellant on account of the conduct or the knowledge of Hooten and Going. They at no time in the transaction acted or assumed to act for the bank or in their capacity as directors or officers of the bank. 57 F. 20; 118 F. 789; 6 Am. & Eng. Ann. Cases 675.

The principal is liable for the tortious acts of agents only when the same are done in the course of their employment. 75 Ark 579; 31 Cyc. 1584.

2. The fact that Frayser at one time discussed with Going the matter of the bank's signing Hammett's bond is a circumstance which can only afford ground for suspicion or conjecture, and is not sufficient to prove fraud. 11 Ark 378; 9 Ark. 482; 22 Ark. 184; 96 Ark. 65.

Fraud will not be inferred where a statement may as well have been made from a good motive as from a bad, or where an act may as well have been done from a good motive as from a bad motive. 9 Ark. 485; 11 Ark. 378.

3. When Hooten presented his check and demanded the bank draft Frayser had no discretion in the matter. Had he refused to honor the check, the bank would have been liable, if damage had resulted from the refusal. 56 Ark. 508, and cases cited; 67 Miss. 60, 6 So. 615; 3 Ruling Case Law, 177.

Frayser had no such actual knowledge of fraud as would make it his duty to pursue a course entirely different from the ordinary course of banking business. He would not be authorized so to act upon mere surmise, suspicion or conjecture. 67 Miss. 60; 27 Am. & Eng. Ann. Cases, 1342 and note; 56 Ark. 508.

Appellees were not damaged by reason of the failure to call for the treasurer's endorsement, and if they lost nothing by reason of this failure, there is no liability on the bank. 96 Ark. 379; 7 Ark. 171; 79 Ark. 160; Id. 266; 91 Ark. 310; 94 Ark. 26; 12 Ark. 296; 71 Ark. 305; 74 Ark. 68; 43 Ark. 454; 53 Ark. 275.

Allen Hughes, for appellants Hooten and Going.

1. Appellants are not liable in conversion or for receiving what they knew to be stolen property, as claimed by appellees' counsel.

The draft never passed out of the treasurer's hands and into the hands of the county or into any depository for the county, nor was it intermingled with any county funds.

The act of the county judge in counting it could not invest the county or the several road and school districts thereof with any title to the drafts. None of the plaintiffs ever acquired by these transactions any character of title to the draft that would entitle them to recover either the specific property or for the conversion thereof. 2 Cooley on Torts (3 ed.), 848, and note 85.

2. Appellants are not liable as co-conspirators to cheat and defraud the road and school districts. The alleged conspiracy, if any, is not in itself actionable. 1 Cooley on Torts (3 ed.), 210 and notes; 3 Joyce on Damages, § 2231 and note 1.

The loss to the county, the road districts and the school districts resulted from Hammett's prior defalcations, or his subsequent embezzlements, which were the proximate causes of the loss and damage sustained by the plaintiffs. Bowers on Actionable Misrepresentations, 149.

3. The court erred in including interest on the amount of the draft from July 29, 1912, as a part of the judgment against appellants. No demand had been made on them for delivery of the money. On unliquidated demands, interest is not recoverable. Sedgwick on Damages (6 ed.), 377. Treated as a judgment based on the charge of conspiracy to cheat and defraud, or an action for deceit, interest is recoverable only from date of the judgment. 86 Ark. 600, 608.

M. P Huddleston, N. F. Lamb and Archer Wheatley, for appellees and cross-appellants.

1. Going, Hooten and the Merchants & Planters Bank & Trust Company are liable in conversion. When the draft was returned to the bank, the title to it was in Hammett, as county treasurer. Going and Hooten had actual knowledge of this title, and the character of the endorsement imparted the same information to the bank. Moreover, Frayser had prior knowledge of the shortage, and, at the time he issued the draft, knew that it was to be used by Hammett in his settlement. Hammett had no right to endorse it to any person except for deposit to his credit as county treasurer. 29 Ark. 500-509; 102 N.E. 363; 104 N.E. 845.

A bank or other person receiving a draft endorsed as this one was, can take no more than an equitable title, and receives its subject to all defenses and to all the rights of other parties in it or its proceeds. 99 Ark. 458; 5 R. C. L., Bills & Notes, § 59, p. 536; 48 P. 197-201; 22 N.W. 12; 85 F. 120; 12 So. 512; 58 P. 447; 47 Conn. 417-427; 22 S.E. 127-129; 58 N.E. 1057; 56 F. 849-853; 11 N.W. 758; 44 P. 446; 77 N.W. 1083; 75 N.W. 786.

2. The above named appellants are also liable as co-conspirators to cheat and defraud the plaintiff school districts and road districts. 70 N.E. 27; 101 Ind. 293308; 60 A. 74-80; 12 N.E. 865 (952), 17 N.E. 898; 2 Bishop New Crim. Law, § 190; 3 Chitty Crim. Law, §§ 1141-1143; 4 Wend. 229; 3 Greenleaf on Evidence, § 93.

3. They are also liable as the recipients of what they knew to be stolen property. The draft was made payable to Hammett individually. When he endorsed it to himself as treasurer, it became the property of the plaintiffs, and it became unlawful for Hammett or any other person to use the draft otherwise than for deposit to his account as treasurer, as provided by statute, Kirby's Dig., § 7176; article 16, section 12, Const.; Kirby's Dig., § 1842; Id., §§ 6292, 6293; 82 N.C. 308; 38 P. 926.

4. The Bank of Commerce of Earle, is liable for the draft issued by it to James H. Hammett. When returned, the endorsements, erasures and forgeries appearing upon the back of the draft were of such character as to charge the bank with notice that the draft was the property of A. H. Hammett, treasurer of Cross County. See authorities cited under division 1, supra. See, also, on the question of the forgery and erasure, 28 S.E. 622; 31 Conn. 170; 122 N.W. 466; 30 S.W. 245; 6 Mo.App. 200; 70 Mo. 643; 67 Ga. 494; 39 Mo. 369; 64 N.E. 54; 99 N.W. 879; 6 Ill. 475; 106 S.W. 833; 7 Cyc. 949; 67 N.W. 845; Joyce on Defenses to Commercial Paper, § 474; 89 A. 639.

5. The Massachusetts Bonding & Insurance Company is liable: (1) Under the facts presented in this record, Ogan and Daltroff, the agents at Wynne, were general agents of the bonding company, not special agents. 48 Ark. 138-145; 103 Ark. 79; 65 S.W. 841; 10 So. 304; 41 N.E. 888; 26 Me. 84; 52 N.W. 866; 20 P. 771; 67 A. 399; 101 P. 564; 82 N.E. 52; 84 N.E. 540; 85 N.E. 793; 96 Ark. 456; 49 Ark. 320; 100 Ark. 360.

Apparently the agents at Wynne had authority to execute the bond after communicating with Holly Springs by 'phone, or after telling the county judge that they had done so, who had the right to presume that they had performed their duty in that respect, and in dealing with them, and through them with the company, he was not bound by any further restrictions, limitations or private instructions of which he had no information, given by the principal to its agents. 90 Ark. 301; 4 N.E. 20; 94 N.W. 510; 90 S.W. 737; 5 A. 504; 64 N.W. 1100; 54 N.W. 811; 92 N.W. 58; 104 N.W. 319; 10 Wall. 604, 19 L.Ed. 1008; 60 S.W. 10; 3 S.W. 486; 74 S.W. 72; 16 So. 29; 73 S.W. 881; 79 S.W. 1013; 23 So. 259; 122 F. 228; 135 F. 636; 68 S.E. 19; 21 L. R. A. 409.

II. The bonding company ratified the act of the agents at Wynne in executing the bond.

When the principal learns that his agent has exceeded his authority, the former must act promptly if he desires to repudiate, and such repudiation must consist of notice given to the third party. A mere wrangle between the principal and agent is not sufficient. 96 Ark. 505; 60 Mich. 150; 26 Ill. 447; 96 U.S. 640; 11 Ark. 189; 99 Ark. 358; 50 Ark. 458; 13 F. 74; 11 S.W. 1024; 97 P. 433; 47 P. 721; 49 A. 1121; 80 N.W. 48; 69 Pa.St. 426; 139 P. 234; 10 Ala. 755; 69 Ala. 373; 70 Ky. 334; 70 Mo. 290; 58 Tenn. 579; 43 Vt. 133; 40 Wis. 431; 51 Miss. 21.

Hawthorne & Hawthorne, for appellees.

1. Appellants were guilty of conversion, and the evidence clearly shows that the appellant bank entered into the conspiracy as fully and completely as either of the other defendants. Pomeroy, Equity Jur. 1048; 75 N.Y. 547; 29 L. R. A. (N. S.) 908; 18 L. R. A. (N. S.) 630; 21 Ark. 260; 31 Ark. 272.

2. On behalf of the sureties in the first and second bonds, we submit the question which set of sureties, if either, is secondarily liable for the $ 1,000 and the $ 13,000. See 13 Mass. 208.

The sureties are not liable for interest on the money until after a proper demand was made upon them or their principal for delivery of the money. 29 L. R. A. (N. S.) 362; 55 Id. 381.

They are not liable upon either bond for any sum of money which was tendered to the county court on July 29, 1912. 1 L. R. A. 118, and notes.

Bradshaw, Rhoton & Helm, for Massachusetts Bonding & Insurance Company.

1. The authority of Ogan and Daltroff as agents was in writing and was limited to the execution of only two or three kinds of bonds and in limited amounts. Whatever authority they had was fully disclosed to the county judge. The agents at Wynne were special agents. Persons dealing with special agents must look to their authority. 17 Ark. 154; 23 Ark. 411; 74 Ark. 557; 92 Ark. 315; 81 Ark. 202; 104 Ark. 150; 105 Ark. 111; 34 Ark 246; 41 Ark. 177; 51 Ark. 483; 62 Ark. 33; 65 Ark. 144; 105 Ark. 680; 96...