McFall v. First National Bank of Forrest City

• Decision Date: 14 April 1919
• Docket Number: 231,185
• Citation: 211 S.W. 919,138 Ark. 370
• Parties: MCFALL v. FIRST NATIONAL BANK OF FORREST CITY
• Court: Arkansas Supreme Court

211 S.W. 919

138 Ark. 370

MCFALL v. FIRST NATIONAL BANK OF FORREST CITY

No. 231, 185

Supreme Court of Arkansas

April 14, 1919

Appeal from St. Francis Circuit Court; J. M. Jackson, Judge reversed.

Judgment reversed and cause remanded.

C. W Norton, for appellants.

The court erred in its instructions to the jury. They should have been instructed tat plaintiffs were entitled to "substantial" damages and that a mistake of the bank in dishonoring the checks would not excuse it from liability. 5 Cyc. 535; Ann. Cases, 1913, A. 999; 7 Am. Cases 818; 10 Id. 897; 121 P. 939; 67 N.E. 655; 5 R. C. L 550. If the depositor is a merchant or trader, "substantial" damages will be presumed without proof. 5 R. C. L. 550 and cases cited; Ann. Cases, 1913, A. 1002. See also 121 P. 939; 5 R. C. L. 549, 546; 7 Ann. Cas. 818.

Mann, Bussey & Mann and R. J. Williams, for appellee.

1. The court's instructions in this case were responsive to the pleadings and evidence. No special damages were alleged nor proven. The case was submitted on the theory that plaintiffs were entitled to substantial damages. The jury found that $ 50 was sufficient. There was no proof to warrant the submission of any other issue.

2. Substantial damages means that more than nominal damages should be assessed and is defined to be such damages as is fair and reasonable under the facts of the particular case. 15 L. R. A. 134.

3. Many cases hold that only nominal damages are recoverable where no measurable or tangible damages are shown, but here the trial judge adopted the general rule that the mere fact of refusal to pay the depositors' checks without a good and sufficient excuse is sufficient to warrant a recovery of substantial damages and so instructed the jury. 7 C. J. 696 and cases cited. The jury thought $ 50 sufficient and the judgment should be affirmed, as there is no error.

HUMPHREYS, J. MCCULLOCH, C. J., dissenting. Mr. Justice SMITH concurs.

OPINION

HUMPHREYS, J.

Appellants instituted suit against appellee in the St. Francis Circuit Court to recover damages for wrongfully and wilfully dishonoring or refusing to pay certain checks drawn by them upon appellee in favor of the Southwestern Telephone & Telegraph Company engaged in business in Forrest City, Arkansas, and various wholesale merchants engaged in business in Memphis, Tennessee. In substance, the complaint alleged that appellants were partners engaged in a general grocery and butcher business in Madison, Arkansas; that appellee was a national bank engaged in the banking business at Forrest City, Arkansas; that, in May, 1917, appellants were depositors in appellee's bank and issued checks on their deposit, payable to the Southwestern Telephone & Telegraph Company and certain wholesale merchants in Memphis, Tennessee, which checks, in the course of negotiation, were passed through banks in Memphis, St. Louis and Forrest City; that, in due course of business, said checks were presented to appellee for payment, and wrongfully and wilfully refused or "turned down" by it on the 18th, 19th and subsequent dates in May, 1917, to the damage of appellants in the sum of $ 6,000.

Appellee filed answer, denying that it wilfully or wrongfully refused to pay or "turned down" checks of appellants; or that appellants were damaged in any sum by reason of its refusal to pay the checks when presented, but admitting all other allegations in the complaint.

The cause was submitted to a jury on the pleadings, evidence and instructions of the court, upon which a verdict was returned and judgment rendered against appellee in the sum of $ 50. Under proper proceedings, an appeal has been duly prosecuted to this court from the verdict and judgment.

The evidence disclosed that on May 14, 1917, appellants, who were engaged in the mercantile and butcher business at Madison, Arkansas, deposited $ 293 with appellee, who was engaged in the banking business at Forrest City; that they drew checks against the deposit on and after May 14, 1917, in payment of a telephone bill and goods purchased in Memphis; that the deposit was sufficient to pay all checks drawn; that the check to the telephone company was presented to appellee and refused; that the checks issued to wholesale merchants in Memphis passed through Memphis, St. Louis and Forrest City banks in the regular course of business; that four of them were presented to appellee prior to May 24, 1917, and refused; that one of the checks was refused on the 18th and 21st days of May; that on the 19th day of May the attention of the bank had been called by Mr. McFall to the fact that appellants had money in the bank to pay the checks, and, on the 21st day of May, their attention was again called to that fact by Mr. Scales, who showed the cashier the deposit slip issued to them for $ 293 on the 14th day of May, for which they had not received credit; that thereafter checks were refused until appellants made a deposit on May 22nd of a sufficient amount to pay them; that, on May 25th, the error was discovered and appellee gave appellants credit as of that date for the sum of $ 293 deposited by them on May 14th.

This appeal involves a determination of the rule by which to measure damages against a bank for refusal to pay a merchant depositor's check, who has sufficient funds on deposit to pay it. There is no statute in our State fixing the measure of damages in this character of case; so, under section 623 of Kirby's Digest, the common law rule will control. The common law rule, as stated in Siminoff v. Jas. H. Goodman & Company Bank (Cal.), 18 Cal.App. 5, 121 P. 939, is as follows: "Substantial damages are recoverable against a banker for dishonoring the check of a depositor where there is sufficient money in his hands at the time to meet it." See also Rolin v. Steward, 14

C. B. 595, and other English cases referred to in the note to the annotated case of Lorick v. Palmetto Bank & Trust Company (S. C.), Am. & Eng. Ann. Cas., vol. 7, p. 818. The note appears on page 819. The great weight of American authority is clearly in accord with the common law rule. The general rule announced under the heading, "Liability of Bank to Drawer" in 5 Cyc., p. 535, is as follows: "If the bank neglect or refuse to pay on order of a depositor, where the latter has sufficient funds on deposit and no other good excuse exists, the depositor can maintain an action against the bank for the money, and is entitled to recover substantial damages for such refusal." The text is supported by a number of cases from many States in the Union. Touching upon the measure of damages in this character of case, it is said in Ruling Case Law at page 548 that "even where the depositor is unable to show any special loss or injury, the authorities seem to be almost universal to the effect that he is not limited to mere nominal damages" and that the depositor "is entitled to recover general compensatory damages." The doctrine thus announced in the text is sustained by leading American cases under citations 15 and 17. It is indicated in the note to Blanche O. Lorick v. Palmetto Bank & Trust Co., vol. 7 Am. & Eng. Ann. Cas. 818, that the American cases adhering to the common law rule have followed the English case of Rolin v. Steward, 14 C. B. 595; 78 E.C.L. 595, and that the American cases announcing a contrary rule have followed the English case of Marsetti v. Williams, 1 Barn. & Adol. 415, 20 E.C.L. 412. In that note, the case of Rolin v. Steward, supra, is characterized as a leading case on that subject, and the fact is emphasized that Judge Campbell "instructed the jury that they ought not to limit their verdict to nominal damages, but should give the plaintiff such temperate damages as they should judge to be reasonable compensation for the injury which they must have sustained from the dishonor of their checks;" and that the case of Marzetti v. Williams "can hardly be considered as an authority in point," because the point at issue was not involved in that case. Concerning the latter case, it is said in the note that "the only question before the court was whether or not the defendant was entitled to a nonsuit because the action should have been brought in contract and not in tort. Beyond that point the statements are merely obiter ." The chief reasons assigned in support of the doctrine sustained by the great weight of authority, to the effect that a merchant or trader has a right to recover substantial damages for the wrongful refusal of a bank to honor his check when he has sufficient funds in the bank to pay it, is that I the wrongful act of the banker in refusing to honor the check imputes insolvency, dishonesty or bad faith to the drawer of the check, and has the effect of slandering the trader in his business." 5 R. C. L. 549. These reasons are sound and all sufficient. Many other reasons have been assigned but we deem it unnecessary to reiterate them here, as we do not understand that learned counsel for appellee seriously controvert the common law rule adopted by the weight of American authority. In fact, they virtually concede the rule in their opening and closing statements to the effect that the court, in substance, instructed the jury that appellants were entitled to substantial damages and that the case was tried and the verdict returned on that theory. We have examined the several instructions given by the court on the measure of damages and find that they precluded the idea that appellants, being merchants, were entitled to recover substantial damages, without first making proof that they had sustained actual damage. For example: The court gave the following written instructions:

"The jury is instructed that if you find from the evidence that the checks were not paid, notwithstanding plaintiffs had...