Smith v. Security Bank & Trust Co.
Decision Date | 04 July 1938 |
Docket Number | No. 4-5139.,4-5139. |
Court | Arkansas Supreme Court |
Parties | SMITH et al. v. SECURITY BANK & TRUST CO. |
Appeal from Circuit Court, Greene County; Neil Killough, Judge.
Action by Mack Smith and others against the Security Bank & Trust Company to recover money allegedly belonging to plaintiffs and converted by defendant. Judgment for defendant, and plaintiffs appeal.
Reversed and remanded with directions.
Cecil Grooms and W. W. Bandy, both of Paragould, for appellants.
Rhine & Rhine, of Paragould, for appellee.
Harry Kupper, doing business under the trade name of Paragould Auction Sales and Commission Company, engaged in selling cattle at auction during the year 1936 at Paragould, Arkansas. Persons having cattle for sale would carry them to Paragould and turn them over to Kupper for sale at auction, paying him 4% of the sales price as commission for his services. The sales were held once each week and continued practically throughout the year of 1936.
Kupper carried an account in the trade name with the appellee, The Security Bank and Trust Company. He had an arrangement with appellee, whereby he would deposit on each auction sales day the amount of money he received as the purchase price of the cattle he sold at auction. He had an agreement with appellee, whereby appellee agreed to cash all checks drawn on said account and made payable to the owners of the cattle sold at auction. These checks represented the full sales price of the cattle, less 4%, said 4% being the commission deducted by Kupper for his services in selling the cattle.
As stated, these auction sales continued during the year 1936 until the latter part of December. A few days prior to December 30th at a conference between Kupper's representative and the officials of the bank, it was ascertained that Kupper, because of his own private transactions, had become indebted to different persons in the sum of $1800, for which he had drawn checks on the account carried with the bank in the name of said Paragould Auction Sales and Commission Company. At the time of this conference, there was a balance of only $280 on deposit in the bank to the credit of said account. At the time of said conference, the bank agreed to loan Kupper $500 and did loan him this amount, taking his personal note for same. The last auction sale was to be held on December 30th. At the time of this conference, it was agreed between the bank and Kupper that whatever Kupper owed the bank should be paid out of the funds arising from the last auction sale. Between the time of the conference and the day following the auction sale, the bank cashed $1020 of the personal checks of Kupper, issued and dated several days prior to the date of said last auction sale. The amount of money received by Kupper for the sale of stock at said auction sale on December 30, 1936, was $3400. He carried said amount to the appellee bank and deposited same in the account carried in the name of Paragould Auction Sales and Commission Company. When this was done, the bank appropriated a sufficient amount of said account to pay its $500 note and the $1020 which it had paid out on the checks given by Kupper in the transaction of his private business. This was in accordance with the agreement had with Kupper a few days prior to the last auction sale. The bank knew all along that the funds being deposited in this account were funds derived from the sale of cattle which did not belong to Kupper but which he sold at auction for others. The bank, throughout the time said auction sales company had been doing business, had cashed all the checks that said company had drawn on its account in payment of the amounts due the owners of the cattle which said auction sales company had sold. As stated, it knew all along that the funds deposited in said account were trust funds, that is, that they were funds which had been derived from the sale of the property of others sold at auction. Furthermore, it knew that the $3400 deposited to the credit of said account, being the last deposit made to said account, were funds derived from the sale of cattle and that said cattle did not belong to Kupper, but that he, under his trade name had sold same for others, charging a commission of 4% therefor.
It is true that the payment of the note and the amount due the bank for having taken up these personal checks of Kupper to the extent of $1020 was in accord with the agreement which Kupper had with the bank several days prior to the date of the last auction sale. But, the question here is, did the bank and Kupper have any right to make such agreement with reference to the funds arising from the auction sale, both knowing that the funds did not belong to Kupper, but were trust funds arising from the sale of cattle owned by others? When the cattle were sold, the practice was to give the owners of the cattle checks drawn by Kupper on the account carried in the name of his auction sales company, instead of paying them in cash. Parties to whom the checks were given would then go to the appellee bank and cash their checks. The owners of all stock sold at auction on December 30th were given these checks for the price at which their cattle sold, less 4%. Some of them did not go to the bank immediately to cash their checks; and when a few days later they presented their checks at the bank they were turned down, the bank having appropriated in the meantime a sufficient amount of the last deposit of said auction sales company to pay the $500 note due it and $1020 which had been used to take up the personal checks of Kupper issued and dated several days prior to the date of said last deposit.
Those whose checks were not paid and who have brought the suit resulting in this appeal held checks in the sum of $1080. Suit was filed in the Greene Circuit Court for this amount. The court, sitting as a jury, made certain findings of fact. Said findings of fact are here set out in full:
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