Sternberg v. City National Bank of Fort Smith

• Decision Date: 04 July 1921
• Docket Number: 81
• Citation: 233 S.W. 691,149 Ark. 432
• Parties: STERNBERG v. CITY NATIONAL BANK OF FORT SMITH
• Court: Arkansas Supreme Court

233 S.W. 691

149 Ark. 432

STERNBERG v. CITY NATIONAL BANK OF FORT SMITH

No. 81

Supreme Court of Arkansas

July 4, 1921

Appeal from Sebastian Chancery Court, Fort Smith District; J. V Bourland, Chancellor; affirmed.

STATEMENT OF FACTS.

On application of a creditor, the chancery court at Fort Smith Arkansas, appointed a receiver to take charge of the property of the Adams- Cooper Sales Company as an insolvent corporation. The company was engaged in selling automobiles at retail in the city of Fort Smith at the time the receiver was appointed. The receiver took charge of certain automobiles owned by the company and sold them under direction of the court and held the money subject to the further orders of the court.

Subsequently the Adams-Cooper Sales Company was adjudged a bankrupt in the Federal court and M. Sternberg, trustee in bankruptcy, filed an intervention in the chancery court claiming the money derived from the sale of the automobiles by the receiver.

The City National Bank of Fort Smith, Ark., also filed an intervention claiming said money. The issue raised by this appeal is as to which of said parties is entitled to the proceeds of the sale of the automobiles by the receiver.

I. H Nakdimen, president of the City National Bank of Fort Smith was a witness for the bank. According to his testimony, the Adams-Cooper Sales Company was engaged in selling automobiles by retail in the city of Fort Smith. The company bought its cars from the manufacturers. According to an agreement with the manufacturers, the sales company and the bank, whenever a car of automobiles was ordered, the bill of lading with the draft for the purchase money attached was sent to the bank. The sales company was notified when the car arrived. Before delivering the bill of lading to the sales company, the bank required the company to make a note for each car, giving the description of the car and everything. The bank did not let the sales company pay for the bill of lading, but the bank itself paid the cost of the automobiles to the manufacturer. The note given to the bank by the sales company specified the number of the car, the engine and so on, and when the car is sold the company brings the money to the bank and pays the note off.

One of the notes in question is as follows:

"Fort Smith, Ark., Oct. 2, 1918.

"No 18941.

Thirty days after date, without grace, we or either of us, promise to pay to the order of The City National Bank of Fort Smith, Fort Smith, Arkansas, five hundred dollars, at the City National Bank of Fort Smith, with interest at ten per cent. per annum, payable annually, from maturity, until paid. Value received. Having deposited herewith, as collateral security for payment of this, or any other liabilities of __ to said bank due, or to become due, or which may be hereafter contracted, the following property, viz:

"One Chevrolet touring car No. 43641, which I hereby authorize the holder of this note to sell at public or private sale, without demanding payment of this note or debt due thereon and without further notice by advertising or otherwise, and apply proceeds, or as much thereof as may be necessary, to the payment of this note, and all expenses and charges, together with ten per cent. commission on all sales, holding myself responsible for any deficiency. Should there be any depreciation in value of said security prior to the maturity of this note, such an amount of additional security shall be furnished as will be satisfactory to said The City National Bank, and if the additional security is not furnished within two days after demand is made, either in person or by written notice put in postoffice, said bank may proceed at once to sell security as above specified.

"Demand, notice and protest waived.

"Adams-Cooper Sales Co. Inc.

"Troy Adams."

Every other note was like this except as to date, amount and description of the car. In other words, they were all written on the same form. The company had an agreement with the bank that when it ordered a car of automobiles the automobiles should be shipped with a draft and bill of lading attached for the purchase money to the bank.

The draft was drawn by the factory against the sales company and sent to the bank. The bank had an understanding that the title of the cars should be in it. Nakdimen said: "I want to explain the entire circumstance. Adams & Cooper has borrowed money from us. He had an understanding with us whenever he orders a carload of cars that we should loan him money when the carload of cars comes in. They generally come all alike, no exceptions, they come with a bill of lading attached to a draft for the amount of the cars.

"Q. Who was the draft on? A. The draft is drawn by the factory against the seller. Q. In this case? A. In this case Adams & Cooper. When the draft comes in, it is sent to us, before we paid for it, we have an understanding that the title of these cars goes to us.

"Mr. Dailey: I object to him saying before he pays for it. Mr. McDonough: That is a matter of cross-examination. The Court: Be a little more specific in your statement.

"A. Well, when the bill of lading and draft comes, and when the car arrives, the understanding is that we loan him money to take that up, advance him money on it, and we take a lien on the cars until they are sold. We pay the draft to the company, and we take notes for those cars, and when he sells the car the understanding is, when he sells the cars, he takes up one of the notes.

"Q. How did you do that? Mr. McDonough: I object to the cross- examination pending the statement. I think it is proper to let him get through. Q. Did you do that in each instance, Mr. Nakdimen? A. Yes, sir."

Again we quote from the testimony of Nakdimen the following:

"Q. What did you do with the bill of lading when you marked the draft paid? A. Gave it to them. Q. To whom? A. Adams-Cooper Sales Company. Q. Then after you gave them the bill of lading they went down to the railroad company and took the cars out? A. Yes, sir. Q. They unloaded them and took them to their place of business? A. Yes, sir. Q. And sold them there in the ordinary course of trade? A. I suppose so; I couldn't keep them in the vault in the bank. Q. But they took them out and sold them in the ordinary course of trade? A. Yes, sir. Q. They were in the automobile business? A. Yes, sir. Q. They were selling Chevrolet and Chalmers cars? A. Yes, sir."

Redirect examination by Mr. McDonough:

"Q. In your testimony you referred to the title to the property being in the bank, and about a lien. I wish you would explain exactly the agreement between you and the Adams-Cooper Sales Company in that matter? Mr. Dailey: I don't think he can explain an agreement. The Court: He can testify what he said and what they said was done. If you can't remember the exact language, give it as near as you can. Q. Just state what the facts are with reference to that agreement, the agreement relating to the method of handling cars? A. The agreement was just like the note says, and the only reason why the collateral in this case is not attached is because it is too bulky, and we have no room for it, and we give him the power to take it to his house and sell it, otherwise we would have had it attached to the note as collateral, because every car or cars we loaned money with the understanding we have got a lien on it until it is sold. The note shows for itself, and the only distinction is we can't take a car and keep it in the vault and put it in the note case."

Again we copy from the testimony of the witness the following:

"Q. Now did they make any contract with you with regard to helping them handle their business? If so, what was that contract? A. Well, they made a contract with us, whenever they buy a carload of cars, they are willing to give us a lien on it provided we pay for it, and when the car comes the contract was to make a note for each car. There was generally three or four cars in a car, and they make a note for it; and when they sell a car they come and pay the money, and in the meantime when the carload arrives they will come in the bank and make the notes and take credit for it, and then make a check for the draft, in order to have a record for all the transactions for their benefit, and as well for the bank. That was a standing contract. Q. Were they buying from the manufacturer of the cars? A. Yes, sir. Q. Who did the ordering, you or them? A. They ordered from them to be sent through us. Q. Was there anything in your contract, and if so state what it was, which induced the manufacturer to send the bill of lading and draft to your bank? Was there anything in the contract about that, that you know of? If so, state what it was? If there was anything in the contract what was it? A. That we have a lien upon the cars. Q. If there was anything in your contract to induce the bill of lading to be sent to your bank, rather than somebody else's bank. A. The inducement is the factory knows that we take care of it. Q. How do they know it? A. Every time that an automobile agent every time they order the car, the agent used to some down; the agent of the factory comes down frequently and visits them and visits the bank they do business with, so the factory is aware of the bank. Q. Did you have arrangements with this company whereby you or they one would notify the factory to send the bill of lading to your bank? A. Yes, sir. Q. Now when it came to your bank what was the contract with reference to how you discharged the thing, how would you pay it? A. By making notes for the car and we pay the factory. Q. Who would do that? A. Take the note and specifying the car, off the bill of lading and off the invoice. Every time, Judge, the factory sent a bill of lading there was an invoice...