State Bank of Siloam Springs v. Marshall

• Decision Date: 14 April 1924
• Docket Number: 304
• Parties: STATE BANK OF SILOAM SPRINGS v. MARSHALL
• Court: Arkansas Supreme Court

260 S.W. 431

163 Ark. 566

STATE BANK OF SILOAM SPRINGS v. MARSHALL

No. 304

Supreme Court of Arkansas

April 14, 1924

Appeal from Benton Circuit Court; W. A. Dickson, Judge; reversed.

STATEMENT OF FACTS.

This is an action by Charlotte Marshall against State Bank of Siloam Springs, to recover damages for the refusal by the defendant to honor certain checks drawn on it by the plaintiff, against a deposit subject to checking which she had with the defendant, and which was more than sufficient to meet the checks so drawn when presented.

It appears from the record that, during the period of time involved in this lawsuit and for several years prior thereto Charlotte Marshall was engaged in operating a rooming and boarding-house in Siloam Springs, Arkansas. On the 19th day of November, 1921, she had on deposit, subject to check, in the State Bank of Siloam Springs the sum of $ 245.27. On November 23, 1921, she gave a check on the bank for $ 10 for goods purchased at a drugstore. On November 26, 1921, the plaintiff gave a check upon the bank to a mercantile company for $ 30.25 in payment of merchandise which she had bought. On the same day she gave another merchant a check on the bank for $ 20 for merchandise bought from him. On November 25 1921, she gave a lumber company a check on the bank for $ 10 for lumber bought from it. Each of these checks was returned marked "no funds," and the bank refused payment on the checks because it had applied the amount on deposit to the credit of the plaintiff in payment of a debt due in the future from the plaintiff to the defendant. It also appears from the evidence of the plaintiff that she was not insolvent at this time. Other facts will be stated or referred to in the opinion.

The jury returned a verdict in favor of the plaintiff against the defendant in the sum of $ 250; and from the judgment rendered the defendant has duly prosecuted an appeal to this court.

Judgment reversed, and cause remanded.

A L. Smith, for appellant.

1. The demurrer to the amended complaint in its entirety should have been sustained. Since the enactment of the statute prescribing the rule of pleading in suits of depositors against banks for wrongfully dishonoring their check, Acts 1921, p. 522, § 10, the bare allegation of wrong refusal to pay plaintiff's checks, and the statement that by reason thereof the credit of the plaintiff was injured in a certain amount, is not sufficient.

2. The plaintiff has wholly failed to prove any special damages, or any damages whatever, by reason of the refusal to pay her checks. N.Y.S. 236, 59 N.Y.S. 71; 56 N.Y.S. 380; 75 Id. 861; 35 Hun (N. Y.) 16; 52 N.Y.S. 638; 28 Conn 201; 43 Conn. 562; 81 Mich. 227; 24 P. 188; 63 P. 812, 23 Utah 199; 31 S.W. 260; 51 Mo. 319; 42 Mo.App. 542; 12 S.W. 655; 63 F. 62; 11 C. C. A. 27; 73 U. S. (6 Wall.) 578; 87 F. 135; 46 S.W. 554; 101 Tenn. 1.

Tom Williams, for appellee.

Section 10 of the act of March 26, 1921, is unconstitutional and invalid; but, even if valid, the complaint stated a cause of action.

OPINION

HART, J., (after stating the facts).

At the time the plaintiff drew the checks in question on the defendant bank she had on deposit there a sum subject to her check which was greater than the amount of the four checks drawn by her upon which the bank refused payment. The ground upon which the bank dishonored the checks was that it had applied the deposit of the plaintiff towards the payment of a debt which she owed the bank, but which was not then due. It was also shown by the plaintiff that she was not at the time insolvent, and that the bank had no lien on her deposit.

The general rule is that a bank is bound to honor checks drawn on it by a depositor, if it has sufficient funds belonging to the depositor when the check is presented, and the funds are not subject to any lien or claim, and for its refusal or neglect to do so it is liable in an action by the depositor. This rule is so well settled in this State, as well as elsewhere, that a citation of authorities in support of it is not necessary.

In McFall v. First National Bank, 138 Ark. 370, 211 S.W. 919, and First National Bank v. McFall & Co., 144 Ark. 149, 222 S.W. 40, this court held that, in case a bank wrongfully dishonors, through mistake or otherwise, a merchant's or trader's check, injury to his credit may be inferred from the fact that he is a merchant or trader, and substantial damages may be awarded upon proof of that fact without anything more.

The reason is that the act of the banker in refusing to honor the cheek imputes insolvency or bad faith to the drawer of the check, and has the effect of slandering the merchant or trader in his business. The refusal to pay the check injures the credit of the merchant or trader, and because this element of damages is difficult to prove and estimate, temperate damages are allowed. They are more than nominal damages, and are such as would be a reasonable compensation for the injury to the credit of the merchant or trader.

Subsequent to the rendition of these decisions, the Legislature of 1921 passed act 496, whereby the act of the General Assembly of 1913,...