McCollum v. Graber, 4-7484.

• Decision Date: 11 December 1944
• Docket Number: No. 4-7484.,4-7484.
• Citation: 184 S.W.2d 264
• Parties: McCOLLUM v. GRABER et al.
• Court: Arkansas Supreme Court

184 S.W.2d 264

McCOLLUM v. GRABER et al.

No. 4-7484.

Supreme Court of Arkansas.

December 11, 1944.

Dissenting Opinion January 8, 1945.

Rehearing Denied January 15, 1945.

Appeal from Circuit Court, Chickasawba District, Mississippi County; Zal B. Harrison, Judge.

Action by Frank McCollum against Meyer Graber and others to recover the proceeds of a government check alleged to have been stolen from plaintiff and cashed by defendants, who in turn received the money from the government. From a judgment for defendants, on an instructed verdict, plaintiff appeals.

Reversed and remanded.

W. Leon Smith, of Blytheville, for appellant.

Langdon R. Jones, of Kennett, Mo., for appellees.

McFADDIN, Justice.

Frank McCollum, as plaintiff, filed action against appellees, as defendants, to recover the amount of $238, the proceeds of a United States government check alleged to have been stolen from the plaintiff, and cashed by the defendants, who in turn received the money thereon from the United States Government. At the conclusion of all of the evidence, the trial court instructed a verdict for the defendants. Should the court have submitted the case to the jury? That is the only question involved on this appeal.

The rule is well established that in determining on appeal the correctness of the trial court's action in directing a verdict for the defendant we take that view of the evidence most favorable to the plaintiff. La Fayette v. Merchants Bank of Ft. Smith, 73 Ark. 561, 84 S.W. 700, 68 L.R.A. 231, 108 Am.St.Rep. 71; Brigham v. Dardanelle & R. R. Co., 104 Ark. 267, 149 S.W. 90; and see many other cases collected in West's Ark. Dig., Vol. 2, Appeal and Error, p. 615. With this rule in mind, we give the plaintiff's version of the facts:

On February 28, 1943, check for $238 was issued by the Treasury Division of the United States, drawn on the Treasurer of the United States, payable to "Mary Pepple, Pascola, Mo.", and stating: "Object for which drawn: Veterans' Administration." Mrs. Mary Pepple, who lived 125 yards from the store of the appellant in Pascola, Missouri, endorsed the check and received the full amount of money on the check from the plaintiff on March 2, 1943. There were no banking facilities at Pascola. The next day while the plaintiff was making a list of various checks to take to Kennett, Missouri (his banking point), he was called from his office for a moment, and when he returned the check was gone. It was stolen in his absence. At that time it bore only the endorsement of Mary Pepple. Immediately after the discovery that the check had been stolen, plaintiff notified the Government in an endeavor to have payment stopped. Neither Mary Pepple nor anyone for her, nor the plaintiff nor anyone for him, ever transferred or delivered the check to the defendants or anyone for them. The fact that the check was stolen from the plaintiff is not controverted. The trial court so stated.

The defendants, trading under the firm name of Graber's Department Store, are engaged in business in Blytheville, Arkansas, some twenty-five miles from Pascola, Missouri. At the times herein involved the Government was building near Blytheville an airport and other facilities for the war effort; and the government paydays were the first and fifteenth of each month; and the defendants cashed many government checks at the store after banking hours. On March 8, 1943, the defendants cashed the check here involved, without requiring the holder to endorse the check or be identified in any way, although there was a sign furnished by the United States Government hanging over the cash register in the defendants' store, and warning that all persons presenting checks should be identified. When the defendants cashed the check, it contained only the endorsement of Mary Pepple. Such was the plaintiff's case. The defendants claimed in defense that they were holders in due course, and were therefore protected.

Before reviewing the testimony of the witnesses (and there were only two) for the defendants, we state some of the applicable legal principles. Arkansas adopted the Uniform Negotiable Instruments Law by Act No. 81 of 1913, as now contained in section 10152 et seq., of Pope's Digest. Section 10213 of Pope's Digest is section 55 of the Negotiable Instruments Law, and reads: "When title defective. The title of a person who negotiates an instrument is defective within the meaning of this act when he obtained the instrument, or any signature thereto, by fraud, duress, or force and fear, or other unlawful means, or for an illegal consideration, or when he negotiates it in breach of faith, or under such circumstances as to amount to fraud."

Section 10217 of Pope's Digest is section 59 of the Negotiable Instruments Law, and reads: "Who deemed holder in due course. Every holder is deemed prima facie to be a holder in due course; but when it is shown that the title of any person who has negotiated the instrument was defective, the burden is on the holder to prove that he or some person under whom he claims acquired the title as holder in due course. But the last mentioned rule does not apply in favor of a party who became bound on the instrument prior to the acquisition of such defective title."

In 8 Am.Juris. 331 et seq., the general rules on theft of a negotiable instrument are stated as follows:

"Theft generally. It is familiar law that one in possession of chattels by theft can convey no title to an innocent purchaser. Coin and bank bills are excepted from this rule, however. As to those, even if feloniously obtained, the holder can convey a good title to an innocent purchaser. From the highest considerations of public policy and of commercial necessity, the law also excepts from the rule negotiable instruments acquired for value in good faith before maturity and without notice. Such paper takes the place and performs, to a large extent, the office of money. It is used for the transaction of much the largest part of the business of mankind. It would be embarrassing, therefore, if every taker of such paper was bound, at his peril, to inquire into the title of the holder, and if he was obliged to take it with all the imperfections and subject to all the defenses which attach to it in the hands of the holder. It has, therefore, become settled by force of considerations such as these that a thief or any other person having possession of such paper fair upon its face can give a holder in due course a good title to it, against all the parties thereto, as well as the true owner. Consequently, the well-settled rule of law is that the transfer of stolen negotiable paper, indorsed in blank or otherwise negotiable by delivery, to a bona fide purchaser, for value, without notice and before maturity, vests in him a title good against all the world. This is the rule both at common law and under the Negotiable Instruments Law. * * * (p. 331)

"* * * If circumstances exist as to the purchaser of stolen paper which are calculated to raise suspicion in the mind of a man of ordinary prudence and discretion, such a purchaser will be prevented from acquiring title better than that of his vendor. * * * (p. 332)

"* * * the transferee of lost negotiable paper must, to acquire valid title thereto, have both paid a valuable consideration and taken it bona fide; if circumstances exist which are calculated to raise suspicion in the mind of a man of ordinary prudence and discretion the purchaser of such paper will be prevented from acquiring better title than that of his vendor." (p. 334)

See also 10 C.J.S., Bills and Notes, § 507, p. 1117.

In the Uniform Laws Annotated, published by Edward Thompson Company, in the title on "Negotiable Instruments" (Volume V, part 2, page 229, et seq.), there are annotations on section 59 of the Uniform Negotiable Instruments Law. In note 52 on page 247 under the subject of "Theft", there are cases from numerous jurisdictions to sustain the general rule that proof of theft shifts the burden of proof to the holder to prove that he, or someone under whom he claims, acquired the title as a holder in due course, i. e., for value and in good faith.

In Daniel on Negotiable Instruments, 7th Ed., §§ 1731-1732, the rule is stated:

"Section 1731. How title may be acquired from thief or finder. — Although the robber, or finder of a negotiable instrument, can acquire no title against the real owner, still if it be indorsed in blank, or payable or indorsed to bearer, a third party acquiring it from the robber, or finder, bona fide, for a valuable consideration, and before (but not so, if after) maturity, without notice of the loss, may retain it as against the true owner, upon whom the loss falls, and enforce payment by any party liable thereon; upon the principle that whenever one of two innocent persons must suffer by the act of a third, he who has enabled such third person to occasion the loss must sustain it. And it is now settled in England and in the United States that even gross negligence on the part of such bona fide holder in receiving the instrument does not impair his title, nothing short of mala fides impeaching it. Not only does the mala fide transferee or holder of a negotiable instrument acquire no right to enforce payment, but the loser may at once hold him liable in an action of trover or assumpsit, or for money had and received. * * *

"Section 1732. Presumptions as to bona fide ownership of lost bills and notes. — Some doctrines of evidence remain to be stated. The legal presumption is that the holder of a note is not a finder or thief, but a bona fide transferee for value. When, however, the loss by the original owner, or the theft from him, is proved, the burden of proof shifts, and the holder must show that he acquired it bona fide for value, and before maturity, or from some one who had a perfect title. * * *"

From these authorities, — and with the theft of the check from the plaintiff being uncontroverted, —...