Oklahoma State Bank v. Bank of Central Arkansas

• Decision Date: 18 October 1915
• Docket Number: 166
• Parties: OKLAHOMA STATE BANK v. BANK OF CENTRAL ARKANSAS
• Court: Arkansas Supreme Court

179 S.W. 509

120 Ark. 369

OKLAHOMA STATE BANK v. BANK OF CENTRAL ARKANSAS

No. 166

Supreme Court of Arkansas

October 18, 1915

Appeal from Lonoke Chancery Court; John E. Martineau, Chancellor affirmed.

Decree affirmed.

Geo. M Chapline and John W. Newman, for appellant.

1. Money which has been misappropriated to an innocent third party can not be recovered by the one from whom the funds were misappropriated. 180 U.S. 284. 1 Burr. 452; 25 L. R. A (N. S.) 631. The money here was applied to the note before the garnishment. 67 Ark. 223-227; 56 Id. 473, 482; 103 N.E. 780.

W. A Leach, for appellees.

1. The decree is right on the whole case and should be affirmed. When the garnishment was served, the money was to the credit of Muse at the bank. It was obtained by fraud and had never been credited on the note. 67 Iowa 11; 31 Minn. 230; 34 L. R. A. (N. S.) 734; 55 So. 47; 86 Ark. 140.

OPINION

MCCULLOCH, C. J.

This action was instituted in the circuit court of Lonoke County and after the issues were joined in the pleadings, the case was by agreement of parties transferred to the chancery court of that county and proceeded there to a final decree. The plaintiff, C. M. Keys Commission Company, a corporation doing business at East St. Louis, Illinois, claims an indebtedness against defendant, T. J. Muse, in the sum of $ 1,166.30, of which the sum of $ 1,150 was incurred by a draft drawn by Muse on said plaintiff in favor of one Ben Wildman, which said draft was deposited by Wildman for collection with the garnishee, Bank of Central Arkansas, at Lonoke, and paid by the plaintiff to said garnishee. R. F. Johnson and Oklahoma State Bank, a banking institution of Ada, Oklahoma, were both joined as defendants and a writ of garnishment was issued and served on the Bank of Central Arkansas. It was alleged in the complaint that the defendant Muse fraudulently represented to the plaintiff that said draft was drawn for the price of cattle purchased and shipped to plaintiff, and that the draft was drawn for the purpose of obtaining funds to pay a note of Muse to Johnson, which had been sent for collection by the Oklahoma State Bank to the Bank of Central Arkansas. It is further alleged that Johnson was the owner of the note and that he was aware of the design of Muse to obtain money from the plaintiff on false representations concerning the purchase of cattle in order to secure the payment of the draft for use in applying on the note. Defendant, Oklahoma State Bank, filed an answer and cross-complaint, claiming to be the owner of the note referred to in the complaint by assignment from Johnson, and alleging that said sum of $ 1,150, together with the additional sum of $ 220, also received by the Bank of Central Arkansas from Muse, had been applied on the note, and prayed for judgment against the Bank of Central Arkansas for the amount so applied on the note, but which had not in fact been remitted to said Oklahoma State Bank.

The facts of the case as developed in the testimony are as follows: The plaintiff was engaged in the cattle commission business at East St. Louis, and defendant Muse, who was operating as a cattle buyer in Oklahoma and Arkansas, opened up an account with the commission company for advances of money in payment of the drafts drawn on shipments of cattle which were to be sold on the market by the commission company for Muse. On September 23, 1913, Muse drew a draft on the plaintiff in favor of Ben Wildman for $ 1,150, and deposited the same for collection with the Bank of Central Arkansas. The amount of this draft was passed to the credit of Muse on that day by the Bank of Central Arkansas and the draft was forwarded for collection and promptly paid by plaintiff on presentation. Muse executed his negotiable promissory note to defendant, R. F. Johnson, for the sum of $ 1,550, dated June 26, 1913, payable October 1 after date. Johnson assigned the note before maturity to the Oklahoma State Bank, and on September 4, 1913, Oklahoma State Bank forwarded the note to the Bank of Central Arkansas for collection. This was done at the suggestion or upon the direction of Muse. The note was sent in the regular course of business with the usual instructions concerning the collection and return of the funds. Wildman testified that when he deposited the draft with the Bank of Central Arkansas for collection, he instructed the cashier to credit the same upon the note, but that statement is disputed by the cashier, who in his testimony says that the instructions were merely to credit the amount to Muse, which he did, and furnished Wildman a deposit slip showing such a credit to the account of Muse. On October 3 the cashier of the Oklahoma State Bank addressed a communication to the Bank of Central Arkansas concerning the Muse note which had been sent for collection, and inquired what amounts if any had been paid on the note and what was thought of the prospect for an early collection. The cashier of the Bank of Central Arkansas answered, stating that a draft on St. Louis for $ 1,150 had been sent for collection and that the cashier thought that "everything will be all right this week." It appears from the testimony that at that time the Bank of Central Arkansas had received a report of the payment of the St. Louis draft and that the money was then standing on the books of the bank to the credit of Muse.

Plaintiff sent one of its agents to Arkansas to look into the affairs of Muse, and said agent visited Des Arc, where Muse had been buying cattle, and also went to Lonoke on October 19 and called to see the cashier of the Bank of Central Arkansas and informed him of the condition of Muse's account with plaintiff and that Muse's conduct in the transaction was wrongful. This agent also informed the cashier of the Bank of Central Arkansas that a suit against Muse would be instituted, and asked that the deposit to Muse's credit be not disturbed until after the papers could be gotten out for a suit. Wildman called up the Bank of Central Arkansas from Des Arc on October 20 and gave instructions to apply the amount of the $ 1,150 collection on the Muse note. This was done by Wildman upon instructions of Muse. Wildman testified that Muse instructed him to do so and that statement is not controverted. The cashier made reply to Wildman that it would be done. The statement of the cashier was that he replied "all right." The cashier thereupon made a pencil indorsement on the back of the note, as follows: "Paid $ 1,150, 10-20-13." The cashier also made out a charge slip directing the sum of $ 1,150 to be charged to Muse on his account. He placed the charge slip on the hook and the bookkeeper subsequently entered it up on Muse's account, charging him with $ 1,150. On the night of October 20, the cashier consulted the attorney of the bank, who told him that in view of the prospect of a suit he had better not remit the proceeds to the Oklahoma State Bank but should hold the same for further development. This suit was instituted on October 21, 1913, and the writ of garnishment was served on the Bank of Central Arkansas on that date. The next day (October 22), the cashier erased the pencil indorsement on the note and caused the bookkeeper to credit the sum of $ 1,150 back to Muse, and the account stands in that...