Selma Sav. Bank v. Webster County Bank

• Decision Date: 20 December 1918
• Citation: 206 S.W. 870,182 Ky. 604
• Parties: SELMA SAV. BANK v. WEBSTER COUNTY BANK. SELMA SAV. BANK v. FARMERS' NAT. BANK.
• Court: Kentucky Court of Appeals

206 S.W. 870

182 Ky. 604

SELMA SAV. BANK v. WEBSTER COUNTY BANK.

SELMA SAV. BANK v. FARMERS' NAT. BANK.

Court of Appeals of Kentucky.

December 20, 1918

Appeal from Circuit Court, Webster County.

Separate actions by the Selma Savings Bank against the Webster County Bank and the Farmers' National Bank. Judgment for defendants in each case, and plaintiff appeals. Reversed with instructions.

E. B Anderson, of Owensboro, Ernest Woodward, of Louisville, and Foster Hayes, of Owensboro, for appellant.

Hunt &amp Burnett, Bourland & Blackwell, and G. L. Withers, all of Dixon, for appellees.

MILLER J.

As the questions presented in these two appeals are identical, they will be considered and decided together. The appellant, Selma Savings Bank, an Iowa banking corporation doing business at Selma, Iowa, was the plaintiff in each case; the two appellees, the Webster County Bank and the Farmers' National Bank, banking corporations doing business in the city of Clay, Webster county, Ky. were the defendants in the respective cases, and are the appellees here.

James W. Nall, of Webster county, was a customer of the appellee the Farmers' National Bank, and J. L. Townsend, Jr., of the same county, was a customer of the appellee the Webster County Bank. J. A. Baldwin, an Iowa cattle dealer, sold certain cattle to Nall and Townsend. In payment of his cattle so purchased Nall, on February 13, 1917, drew his check on the appellee Farmers' National Bank in favor of Baldwin for $1,957.50 and on the same day Townsend drew his check for the same amount, and in favor of Baldwin, on the appellee the Webster County Bank. On the same day Baldwin indorsed these checks and offered to sell them to the appellant, the Selma Savings Bank; but before that bank would buy either of the checks, it telegraphed the two Kentucky banks asking if the checks would be honored. The telegram to the Farmers' National Bank reads as follows:

"Selma, Iowa, Feb. 13, 1917.

Farmers' National Bank, Clay, Ky.

Will you pay check of Jas. W. Nall up to $2,000.00 for cattle?

Selma Savings Bank."

On the same day the Farmers' National Bank answered this telegram by another, in the following language:

"Clay, Ky. Feb. 13, 1917.

Selma Savings Bank, Selma, Iowa.

We will honor James W. Nall's check for $5,000.00 when properly signed.

Farmers' National Bank."

The telegram to the Webster County Bank was as follows:

"Selma, Iowa, Feb. 13, 1917.

Webster County Bank, Clay, Ky.

Will you pay check of J. L. Townsend, Jr., up to two thousand dollars, for cattle?

Selma Savings Bank."

In response thereto the Webster County Bank answered:

"Clay, Ky. Feb. 13, 1917.

Selma Savings Bank, Selma, Iowa.

We will honor J. L. Townsend, Jr.'s, check for two thousand dollars.

Webster County Bank."

After receiving these assurances from the two Kentucky banks the Selma Savings Bank cashed the checks, paying therefor their face value, and in due course it presented them to the respective appellees for payment which was refused. The Selma Savings Bank thereupon filed these actions against the two Kentucky banks, and, demurrers having been sustained to the petitions and the petitions dismissed, the plaintiff appeals.

The petitions are in the usual form, setting forth the above facts. In response, however, to a motion by the defendant in each case to require the plaintiff to file the checks and the telegrams referred to, the plaintiff filed the original check in each case, and further stated that neither of the telegrams was in its possession, but that the facts with reference thereto, in the case against the Farmers' National Bank, were as follows:

"The telegram dated February 13, 1917, at Selma, Iowa, and addressed to the defendant, was sent by the plaintiff in regular course over the Western Union Telegraph line from Selma, Iowa, to Madisonville, Ky.; that there is no telegraph office or agent in Clay, Ky. and that Madisonville, in Hopkins county, is the nearest office of the Western Union Telegraph Company to Clay, Ky. and that said message sent by defendant as aforesaid was delivered by the Western Union Telegraph Company to the Cumberland Telephone & Telegraph Company at Madisonville on February 13, 1917, in the usual and regular course of business. The said message was delivered to the defendant on said date by the operator of the Cumberland Telegraph & Telephone Company at Madisonville, telephoning the contents thereof to the cashier of the defendant, and that said defendant and said cashier could have procured a written copy thereof by requesting the same.

That immediately after receipt of the message quoted in the petition from plaintiff to defendant, and on the same day, the defendant, acting by and through its cashier, telephoned to the telegraph company the message quoted in the petition as addressed from the defendant to plaintiff, and caused the same to be transmitted in regular course of business to the defendant (plaintiff) on February 13, 1917, which date said message was delivered to defendant (plaintiff) in regular course by the Western Union Telegraph Company, and was and is in writing and was and is as quoted in the original petition."

The response in the case against the Webster County Bank was the same in substance, the only difference being it stated that the message from the defendant to the plaintiff was telephoned to the Postal Telegraph Company at Wheatcroft, Ky. and by it was delivered to the Western Union Telegraph Company at Louisville, and by the Western Union Telegraph Company to the plaintiff. By agreement it was ordered that the response in each case should be taken as an amended petition, and it was so treated by the demurrer.

The circuit court was of the opinion that no recovery could be had because there was no written acceptance or certification of the checks, signed by the defendants, or by an agent of the defendants duly authorized in writing, as required by section 19 of the Kentucky Negotiable Instruments Law (Ky. Stats. § 3720b, subsec. 19). It was not contended that the acceptance or certification of the check could not have been made by telegram; but as the telephone had been used in the transmission of the message, the telegraphic answers thus sent by the two Kentucky banks could not be considered as writings signed by the defendants. This means either that the circuit court was of opinion that telegrams are not to be treated as writings signed by the defendants, or that the telegraphic operators at Madisonville and Wheatcroft were agents of the Kentucky banks in forwarding the messages, and that neither of them had been authorized to do so in writing.

Preliminary to a discussion of the facts, we quote here for convenience the following sections of the Kentucky Negotiable Instruments Law, which are subsections to section 3720b of the Kentucky Statutes:

"Sec. 19. The signature of any party may be made by an agent duly authorized in writing."

"Sec. 132. The acceptance of a bill is the signification by the drawee of his assent to the order of the drawer. The acceptance must be in writing and signed by the drawee. It must not express that the drawee will perform his promise by any other means than the payment of money." "Sec. 134. Where an acceptance is written on a paper other than the bill itself, it does not bind the acceptor except in favor of a person to whom it is shown and who, on the faith thereof, receives the bill for value."

"Sec. 185. A check is a bill of exchange drawn on a bank payable on demand. Except as herein otherwise provided, the provisions of this act applicable to a bill of exchange payable on demand apply to a check."

"Sec. 187. Where a check is certified by the bank on which it is drawn, the certification is equivalent to an acceptance."

"Sec. 189. A check of itself does not operate as an assignment of any part of the funds to the credit of the drawer with the bank, and the bank is not liable to the holder, unless and until it accepts or certifies the check."

It will be observed that the requirement that the acceptance must be in writing, signed by the drawee, is practically the same as that found in the statute of frauds requiring that the contract, or some memorandum of it, must be in writing signed by the party sought to be charged. The reason in each case is that sound policy requires some substantial and tangible evidence of the contract, and more reliable in its nature than the statements or recollection of witnesses. It is, however, well established that a telegram satisfies the requirement of the statute of frauds. 20 Cyc. p. 255; Ryan v. United States, 136 U.S. 68, 10 S.Ct. 913, 34 L.Ed. 447; Bibb v. Allen, 149 U.S. 481, 13 S.Ct. 950, 37 L.Ed. 819; Brewer v. Horst Lachmund Co., 127 Cal. 643, 60 P. 418, 50 L.R.A. 240; Leesley Bros. v. A. Rebori Fruit Co., 162 Mo.App. 203, 144 S.W. 138. This rule is sustained by both reason and authority.

In Howley v. Whipple, 48 N.H. 487, the court said:

"When a contract is made by telegraph, which must be in writing by the statute of frauds, if the parties authorize their agents either in writing or by parol, to make a proposition on one side and the other party accepts it through the telegraph that constitutes a contract in writing under the statute of frauds, because each party authorizes his agents, the company or the company's operator, to write for him; and it makes no difference whether that operator writes the offer or the acceptance in the presence of his principal and by his express direction, with a steel pen an inch long attached to an ordinary penholder, or whether his pen be a copper wire a thousand miles long. In either case the thought is communicated to the paper by the use of the finger resting upon...