Saf-T-Boom Corp. v. Union Nat. Bank of Little Rock

• Decision Date: 29 April 1963
• Docket Number: No. 5-2966,SAF-T-BOOM,5-2966
• Citation: 236 Ark. 518,367 S.W.2d 116
• Parties: CORPORATION, Appellant, v. UNION NATIONAL BANK OF LITTLE ROCK et al., Appellees.
• Court: Arkansas Supreme Court

Page 116

367 S.W.2d 116

236 Ark. 518

SAF-T-BOOM CORPORATION, Appellant, v. UNION NATIONAL BANK OF LITTLE ROCK et al., Appellees.

No. 5-2966.

Supreme Court of Arkansas.

April 29, 1963.

Moses, McClellan, Arnold, Owen & McDermott, by E. M. Arnold and W. E. Henslee, Little Rock, for appellant.

Chowning, McHaney, Mitchell, Hamilton & Burrow, Pope, Pratt & Shamburger, by Donald S. Ryan, Little Rock, for appellees.

HOLT, Justice.

This action stems from a controversy about the ownership of a $5,644.80 check made payable to the appellant, Saf-T-Boom Corporation. The check was accepted and paid by the appellee, Union National Bank, upon an unauthorized endorsement.

The appellant demanded that the Bank make good to it as the named payee, the check which appellee, Robert L. James, had negotiated upon his unauthorized endorsement. The Bank refused and then froze or impounded the balance in James' personal account which was the sum of $1,204.58. Thereupon the appellant filed suit against the appellee, Union National Bank, for wrongful payment to James of the $5,644.80 check. The Bank denied liability and as an affirmative defense alleged, inter alia, that the check was given to appellant without consideration and was not drawn in payment of an existing obligation to the appellant. The Bank cross complained against James for any amount that might be awarded to the appellant on its complaint. James denied liability to the Bank for cashing the check upon his unauthorized endorsement and cross complained against his employer, Saf-T-Boom Sales and Service Corporation, for sales commissions earned but unpaid to him, together with certain advances made by him to the company. Saf-T-Boom Sales and Service Corporation denied the validity of James' complaint and filed a cross complaint against James for conversion of the $5,644.80 check as company funds belonging to it and in addition thereto asked for damages because of the loss of its franchise rights due to James' unauthorized endorsement, or conduct, all of which James denied.

The appellant, Saf-T-Boom Corporation, is an Arkansas corporation and is the owner and manufacturer of a safety device for crane-type heavy equipment. On February 1, 1960, appellant entered into a contract with appellee, Saf-T-Boom Sales and Service Corporation, a separate and distinct Arkansas corporation, which contract granted to it the exclusive franchise to market these devices within the United States with the exception of the State of Arkansas. On February 1, 1961, Saf-T-Boom Sales and Service Corporation made a contract with the appellee, Robert L. James, by which he became its general manager and sales representative. He was, also a director of Saf-T-Boom Corporation. In June of 1961, Robert L. James and Jack E. Hill, a fellow salesman, sold twelve of these safety devices, or $5,644.80 worth of them, to the Elliott Equipment Company of Nashville, Tennessee. Based on this sale, the Sales and Service Corporation forwarded a purchase order to Saf-T-Boom Corporation which in turn filled the order by causing the twelve devices to be shipped direct to Elliott, the purchaser. The appellant billed Saf-T-Boom Sales and Service Corporation for the amount of the sale, less the sale commission of 50%. The Sales and Service Corporation billed Elliott. In paying for these devices Elliott, the purchaser, made the $5,644.80 check payable to Saf-T-Boom Corporation, the appellant, and mailed it to 1613 Main Street, Little Rock, Arkansas, which address was the joint office of both corporations. On June 3, 1961, upon receipt of the check at this address, James proceeded, without authority, to endorse the check 'Saf-T-Boom Corporation--R. L. James, Director' and added, 'Robert L. James', his personal endorsement. He then presented the check for payment to appellee, the Union National Bank of Little Rock. The Bank honored his endorsement and deposited $5,044.80 in Robert L. James' personal account and gave James the balance of $600.00 in cash. The check was duly paid by the drawee bank at Nashville, Tennessee. At the time of this transaction the appellant, Saf-T-Boom Corporation, maintained its corporate bank account with the appellee, Union National Bank. The Bank had on file the resolution of the appellant's Board of Directors and a signature card authorizing the recognition by the Bank of only two signatures. It is undisputed that James had no authority to endorse this check. Neither did he have authority to negotiate checks for the Sales and Service Corporation.

At the time of this transaction, James contended that his employer, the Sales and Service Corporation, was indebted to him for commissions in the sum of $7,156.25. As distributor, the Sales and Service Corporation was indebted at this time to Saf-T-Boom Corporation, the owner and manufacturer of the safety device, in the amount of $8,874.54.

This litigation was submitted to the Circuit Judge, sitting as a jury, who found that the purchaser, Elliott, was indebted to appellee, Saf-T-Boom Sales and Service Corporation; that the check in question was erroneously made payable to the order of appellant, Saf-T-Boom Corporation, and that the Sales and Service Corporation was the legal...