Spencer & Company v. Bank of Hickory Ridge

• Decision Date: 23 November 1914
• Docket Number: 9
• Citation: 171 S.W. 128,115 Ark. 326
• Parties: SPENCER & COMPANY v. BANK OF HICKORY RIDGE
• Court: Arkansas Supreme Court

171 S.W. 128

115 Ark. 326

SPENCER & COMPANY v. BANK OF HICKORY RIDGE

No. 9

Supreme Court of Arkansas

November 23, 1914

Appeal from Cross Circuit Court; W. J. Driver, Judge; reversed.

STATEMENT BY THE COURT.

Appellants sued to recover $ 718.07, the amount of a certain draft which had been drawn on, and paid by, them. To this draft there were attached bills of lading for three carloads of corn which bills of lading proved to be forgeries, and appellants testified that the circumstances under which they paid the draft were as follows: That one F. F. Farrin called at the offices of appellants, Spencer & Co., in the city of Jonesboro, late in January or early in February, 1912, and stated that the purpose of his visit was to buy some corn with the shuck on, but they were unable to agree on the price, and Farrin stated that he thought he could do better by going to southern Illinois; and that he returned again to their office early in February and said that he had bought ten cars at forty-four cents per bushel, f. o. b. points in southern Illinois, and offered to sell Spencer & Co. four of these cars at forty-six cents per bushel; Farrin said that his brother was in Illinois and would attend to loading out the corn. This offer was accepted, and it was agreed that Farrin should draw on them for 75 per cent of the invoice value of the corn, and that if Spencer & Co. decided to ship any of this corn to a prepay station, that Farrin should prepay the freight and add the freight charges to the draft and that after the corn was delivered and unloaded, they were to pay him the 25 per cent balance. H. J. Spencer, of this firm, testified that he next saw Farrin about the middle of February, and was asked by him if the corn had been received and he was told that it had not been. That Farrin stated he had heard from his brother in Illinois, and was satisfied the corn had been loaded out, but that he would telegraph his brother right away and ascertain the cause of the delay. That after a short absence Farrin returned to their office, and stated that he had just heard from his brother, who had misunderstood the shipping directions, and that his brother had mailed the bills of lading to Hickory Ridge, instead of to Jonesboro, the explanation being made that Farrin was at Hickory Ridge when he wired the shipping directions, which had been given him by Spencer & Co. Farrin stated that he would go to Hickory Ridge and get these bills of lading, and as it was about train time he left at once for that purpose. That later in the day, about the time when Farrin would have arrived at Hickory Ridge, there was a telephone call from that place which proved to be from a Mr. Thompson, the cashier of the appellee bank, and in the conversation which ensued, Mr. Thompson stated that Farrin was present and had certain bills of lading and wanted to draw on Spencer & Co. The witness further testified that he talked with both Mr Thompson and Mr. Farrin, and that one or the other of them gave the car numbers and the weights of the corn, but he was not certain which of them gave him this information, but that it was Mr. Thompson who asked about the money and that Thompson said, in effect, that Farrin wanted to draw for this money, and Thompson asked if the draft would be paid, and that Thompson was told that Spencer & Co. did not owe Farrin any money, but had bought some corn from him and would pay the draft if the amounts were correct, and if the draft was attached to the bills of lading. That during the conversation with Thompson, they took down the weight of each car and the number of pounds of corn, and figured so as to have it correct, and that they did this while they held him on the wire. They had to estimate the amount of freight charges, but as nearly as they could tell the draft was made out for the correct amount, providing the corn had been shipped, and having made this calculation, they told Mr. Thompson that they would honor the drafts if they were attached to the bills of lading for the three cars of corn. This draft was drawn by Farrin in favor of the Bank of Hickory Ridge on Spencer & Co., at Jonesboro, Arkansas, and attached to it were three Cotton Belt bills of lading, dated at Gale, Illinois, February 8, 1913, signed by E. L. Smith, agent for that railroad. The bill of lading was in the usual form, and showed Spencer & Co. to be both the consignor and consignee. The other two bills of lading were the same except the difference in car numbers and weights. The draft was endorsed by the Bank of Hickory Ridge, by W. A. Thompson, cashier, but the bills of lading were not endorsed. There was nothing about the bills of lading to indicate that they were forgeries, and he admitted that if they had been presented to him personally by Farrin, he would have paid the attached draft. S. C. Spencer, the other member of the firm of Spencer & Co., testified, and substantially corroborated the testimony of H. J. Spencer; and it was shown by them that they sold the corn in the usual course of their business to customers residing at Little Rock and other points, and that they had no notice of the fact that the bills of lading were forged until these customers complained of the nondelivery of the corn. Whereupon they proceeded to investigate, and found that Gale was not a station upon the line of the Cotton Belt railroad, and that no corn had been shipped by Farrin from that point, and that the bills of lading were consequently worthless. This information was obtained on the 14th of March, and Spencer & Co. immediately wrote the Bank of Hickory Ridge advising them of that fact and requesting the bank to refund the money which had been paid on this draft. The bank declined to pay this money, and this suit resulted.

Mr. Thompson, the bank cashier, testified that he had only a slight acquaintance with Farrin, who had opened a small account with his bank, and that when Farrin arrived at Hickory Ridge, he called at the bank and asked that the bank cash a draft which he had drawn on Spencer & Co., with bills of lading attached, but that this request was refused, whereupon Mr. Thompson stated that he would take the draft for collection, and that he would pay the money when notified by his correspondent at Jonesboro of the collection of the draft; but Farrin stated that this was not satisfactory, as he wanted the money at once. That thereupon Farrin called Spencer & Co. and had a conversation with them about the payment of this draft, a portion of which was heard by witness. That Farrin outlined to Spencer & Co. what he wanted, and described the bills of lading, and spoke to them about paying the draft, and that after Farrin finished his conversation, he was called to the phone and talked with Spencer & Co. himself. Spencer & Co. understood what Farrin wanted before he talked with them at all, and he was assured by them that they would pay the drafts. That he told Spencer & Co. that Farrin wanted the money on these drafts that day, and he asked them if they would protect the bank if it would pay Farrin the money, and he was told that they would do so, and, on the strength of this statement, he paid Farrin the money. That no charge was made for cashing the draft, and the bank was not interested in the transaction. That witness knew Spencer & Co. to be reliable and responsible, and upon their assurance that they would protect the bank in the transaction they let Farrin have the money, and that he did let Farrin have the money that day, and has not seen him since, and that it was nearly a month before he heard anything further about the transaction, and that the bank would not have advanced Farrin the money on the bills of lading but for Spencer & Co.'s statement that they would protect the bank in doing so. A. H. Evans, who was in charge of the telephone office at Hickory Ridge, testified and substantially corroborated Mr. Thompson. This witness testified that Farrin came into the telephone office and talked with Spencer & Co. about ten minutes before Thompson came in, but that Thompson came in before Farrin had finished his conversation, and that Farrin figured out the amount of the corn and told Spencer & Co. the amount for which he wished to draw; that the side phone was out of commission and the conversation occurred over the switch, and he heard that end of the conversation between Thompson and Spencer & Co., and heard Thompson inquire, "Will you protect us?" and inferred from the remainder of the conversation that an affirmative reply was given.

At the conclusion of the evidence the court gave various instructions which were as favorable to appellants as they could ask, the correctness of none of which is seriously questioned, except that appellants strongly insist that a verdict should have been directed in their favor, and except that the court erred in giving the instruction numbered 6, which reads as follows:

"No. 6. In this case, even if you should find that the bills of lading are a forgery, yet, if you further find that plaintiffs, after discovering such forgery, delayed an unusual time in giving notice of such fact to defendant, it will be your duty to find for defendant."

Judgment reversed and cause remanded.

E. L. Westbrooke, for appellant.

1. Where a loss, which must be borne by one of two parties alike innocent of a forgery, can be traced to the neglect or fault of either, it must be borne by him, even if innocent of intentional fraud, through whose means it has succeeded. The back's unqualified indorsement makes it liable. 54 S.E 204; 4 O. St. 628; 151 Mass. 280, 21 Am. St. Rep. 451; 106 Mass. 441; 56 L. R. A. 929; 57 Ark. 142; 17 Mass. 33; 108 N.W. 546; 10 Wheat. 333; 8 Am. Rep. 349; 22 Id. 104; 63 Tex. 610; 96 Am. Dec. 554; 88 Tenn. 299; 13 S.W. 716; 64...