Taylor v. Holmes

• Decision Date: 28 March 1932
• Docket Number: 227
• Citation: 47 S.W.2d 799,185 Ark. 498
• Parties: TAYLOR v. HOLMES
• Court: Arkansas Supreme Court

47 S.W.2d 799

185 Ark. 498

TAYLOR v. HOLMES

No. 227

Supreme Court of Arkansas

March 28, 1932

Appeal from Boone Chancery Court; Sam Williams, Chancellor reversed.

Decree reversed and cause remanded.

M A. Hathcoat, for appellant.

Cotton & Murray, for appellee.

OPINION

BUTLER, J.

This case was submitted to the trial court upon the following agreed statement of facts:

"That on the 29th day of August, 1931, the intervener, C. C Holmes, received a draft for $ 600, indorsed by Fred Mahler, to him, the said draft drawn by the Farmers' National Bank of Sparta, Wisconsin, on the Federal Reserve Bank of Chicago, in favor of the said Fred Mahler. That on the same day, August 29, 1931, the said C. C. Holmes deposited said draft in the People's Savings Bank at Harrison, Arkansas, and that said bank issued to him a deposit slip, which is here exhibited and made a part of this agreement as exhibit A thereto.

"At the close of business on August 28, 1931, the said C. C. Holmes had on checking account in said bank the sum of only $ 9.47. That the said C. C. Holmes was a regular customer of said People's Savings Bank. That on the said 29th day of August, 1931, he drew his certain check on said bank for $ 175, due to a third party, out of the proceeds of said $ 600 draft, which said check was presented to the bank on the same day and prior to the time when said draft was deposited and was cashed by said People's Savings Bank. That the said C. C. Holmes had previously been permitted to overdraw his account in said bank.

"That the said draft for $ 600 was immediately forwarded by the said People's Savings Bank to the Bankers' Trust Company of Little Rock, Arkansas, for deposit, and same was credited to the account of People's Savings Bank of Harrison, and said item was sent in the regular course of business by the Bankers' Trust Company to the Federal Reserve Bank of Chicago, where it was paid September 2, 1931, and the proceeds remitted to the Bankers' Trust Company, aforesaid.

"That the intervention herein is made for the purpose of having said sum of $ 600 established as a preferred claim against the said Walter E. Taylor.

"It is further agreed that, on the 31st day of August, 1930, another check of C. C. Holmes for $ 7.50 was presented to the bank for payment and was paid by said bank, leaving a balance of only $ 426.97, to the credit of this intervener in said bank at close of business on August 31, 1931. That no deposit was made by the said C. C. Holmes in said bank subsequent to August 29, 1931, and no other checks were paid and charged to his account except as herein set forth; and the amount of his account in said bank when said bank closed was only $ 426.97."

The court declared the law to be that the deposit slip issued by the People's Savings Bank to C. C. Holmes constituted a contract between Holmes and said bank, and that by its terms the draft for $ 600 was accepted for collection by said bank, the proceeds of which the bank held as a preferred claim under subdivision 6 of § 1 of act No. 107 of the Acts of 1927, and that the balance, after deducting the checks mentioned in the agreed statement of facts, to-wit, the sum of $ 426.97, should be allowed as a preferred claim. From that finding and decree is this appeal.

It is well settled that the owner of the proceeds of a collection made by an insolvent bank is entitled to have his claim for such preferred to that of general creditors on the theory that the collecting bank is the agent of such owner and the title to the proceeds of the collection remains in the depositor. Act No. 107, § 1, subdivision 6, Acts of 1927; Taylor v. Corning Bank & Trust Co., 183 Ark. 757, 38 S.W.2d 557; Taylor v. Dermott Grocery & Commission Co., ante p. 7; Taylor v. First Nat. Bank of DeQueen, 184 Ark. 947, 43 S.W.2d 1078. Where checks or drafts are indorsed and deposited in the usual course of business, and the bank credits the depositor with the proceeds thereof, the relationship of debtor and creditor arises, in the absence of an agreement to the contrary, even where the right on the part of the bank exists to charge back the check if it proves uncollectable. Taft v. Quinsigamond Nat. Bk., 172 Mass. 363, 52 N.E. 387; Downey v. Nat. Exchange Bank, 52 Ind.App. 672, 96 N.E. 403; Sears v. Emerson, 182 Ill.App. 522; Brusegaard v. Ueland, 72 Minn. 283, 75 N.W. 228; Mudd v. Farmers' etc., Bank, 175 Mo.App. 398, 162 S.W. 314; Covey v. Cannon, 104 Ark. 550, 149 S.W. 514; Calhoun v. Sharkey, 120 Ark. 616, 180...