City Nat. Bk. v. Citizens' Bk. of Pettigrew

Hart, J., (after stating the facts). Michie, in his treatise on Banks and Banking, vol. 2, § 141 (1c), lays down the general rule governing cases of this sort as follows: “Where a check is offered and received by the drawee bank as a deposit, credited to the holder’s account, and charged to the account of the drawer, the transaction is irrevocably closed and cannot be rescinded or recalled by the bank or the drawer without the consent of the person to whom payment- was made, except for fraud or mistake ’ ’ The general rule proceeds upon the theory that, when a bank accepts a check or draft on itself, by depositing to the credit of the person presenting it the amount of the check, it is presumed to know whether the check at that time is good or not, and, if it unconditionally accepts it, it cannot thereafter repudiate it in this respect. The general rule has been recognized and followed by this court. Burns v. Yocum, 81 Ark. 127, 98 S. W. 956; and Sanders v. W. B. Worthen Co., 122 Ark. 104, 182 S. W. 549. In American National Bank v. Miller, 185 Fed. 338, the Circuit Court of Appeals, Sixth Circuit, lays down the rule to be that, where a check was offered and received by the drawee bank as a deposit, credited to the depositor’s account and charged to the account of the drawer, the transaction constituted complete payment of the check and could not be rescinded except for fraud or mutual mistake. This case was appealed to the Supreme Court of the United States and the judgment affirmed in 229 U. S. 517, under the style of the American National Bank v. Miller. Mr. Justice Lamar, who delivered the opinion of the court, in discussing the subject said: “There are some, disadvantages of sending a check for collection directly to the bank on which it is drawn, but, when such bank performs the dual function of collecting and crediting, the transaction is closed, and, in the absence of fraud or mutual mistake, is equivalent to payment in usual course. National Bank v. Burkhart, 100 U. S. 686, 689.” We are of the opinion that the exceptions recognized in the cases just cited are in accord with the holding of this court on the subject. In Arkansas Trust do Banking Co. v. Bishop, 119 Ark. 373, 178 S. W. 422, the court said: “The only question in this case for the decision of the jury was whether the bank accepted the cheek and became liable for the payment of the amount for which it issued its deposit slip to the drawee thereof. The intention of the parties to the transaction could properly have been shown for the determination of this question, and, the bank having issued its regular deposit slip or ticket for the amount of the check to the drawee thereof, the burden rested upon it to show that it was not in payment of the check.” Again, in Sanders v. W. B. Worthen Co., 122 Ark. 104, 182 S. W. 549, the court said: “When a check is taken to a bank and the bank receives it and places the amount to the credit of the customer, the title to the check is vested in the bank. The rule as stated is not an absolute rule, but it is prima facie merely, and yields to the intention of the parties, express or implied, from the circumstances.” It is a well recognized doctrine of equity jurisprudence that fraud or mistake vitiates every transaction. It is evident that, if the bank acted through a mistake of fact in making the acceptance, it should not be bound thereby, unless the other party suffered some loss on account of its act in making the acceptance. In the case at bar no loss was suffered by the Bank of Pettigrew. It knew that Conneway had drawn the draft in its favor in payment of an antecedent indebtedness and that he had no funds in the City National Bank at that time with which to meet it. It also knew that he intended to go to the City National Bank at Port Smith by the 12th of November and make arrangements for the payment of the draft. Conneway was in the bank when the postcard copied in our statement of facts was received. The Citizens’ Bank of Pettigrew did not ask hi-m if he had made arrangements to pay the draft with the City National Bank, but credited his account with the amount of the draft. In doing so, the Bank of Pettigrew treated the postcard as an absolute acceptance instead of a card advising it that the draft had been received by the City National Bank. It is true that the card, on its face, is an absolute acceptance, but, according to the testimony of the cashier of the City National Bank, it was not intended as such, hut was only intended to be a notification that the bank had received the draft. It is also true that the bookkeeper credited ¡the account of Conneway with the sum of $1,000, the face value of the draft, on the day that it was received, but, according to the testimony of the cashier of the bank, this was done through mistake. On account of the two previous days being holidays, an accumulation of business had come through the mails, and the routine work of the bank was being done hastily on Tuesday, which was the day the draft was received and on which the transactions with regard to it were had by the City National Bank. As soon as the cashier discovered that this had been done, he examined Conneway’s account to see if he had any funds on deposit with which to pay the draft. Finding that he had none, he directed the item to be charged off of the books of the bank and that the Bank of Pettigrew be notified that the draft was returned to it because the drawer had no funds with which to pay it. This was done during banking hours on the day of the 13th of November, the day it,was credited, although the letter notifying the Citizens ’ Bank of Pettigrew that the draft was returned for nonpayment for want of funds was dated November 15. The cashier of the City National Bank, however, testified that was due to a mistake of the stenographer, and that the letter was directed to be. sent on the 13th, although the mistake was discovered too late for it to be mailed on the train going to Pettigrew on that day. The City National Bank acted in the dual capacity of collecting agent of the Citizens’ Bank of Pettigrew, the holder of the draft, and as drawee. In such case there can be no acceptance by delivery until the draft passes through the books of the bank, charging the account of the drawer and crediting the account of the remitting bank, and making a complete transaction. First National Bank of Murfreesboro v. First National Bank of Nashville, 154 S. W. 965. Under the circumstances of this case, it is evident that the City National Bank charged the amount of the draft to the account of Conneway in the hurry of the day, which was caused by the accumulation of business on account of the two previous days being holidays, and that there was no intention to .treat the transaction as completed until the close of the day’s business. The postal card was not intended to be an absolute acceptance, but was only intended by the bank to be a card advising the Citizens’ Bank of Pettigrew that the draft had been received. No loss was. suffered by the Citizens’ Bank of Pettigrew on account of the transaction. The result of our views is that the City National ¡Bank never intended to treat the transaction as a completed one and that it had a right to correct the mistake when it discovered, on the same day, that Conneway had no funds in the bank with which to meet the draft. The Citizens’ Bank of Pettigrew, having been promptly notified and having suffered no loss on account of the mistake, is in no position to claim that the facts of this case did not bring it within the exception that the acceptance was made under a mistake of fact. It follows that the decree must be reversed, and, inasmuch as the case of the plaintiff seems to have been fully developed, its cause of action will be dismissed here.