Bald Knob State Bank v. Bellville

Hart, J., (after stating the facts). The judgment against the Bald Knob State Bank was . correct. The undisputed evidence shows that the signature of Clint Bellville to the check for $3,000 was forged, and that the Bald Knob State Bank collected said check and credited the account of Eugene Moseley with the amount thereof. Under § 7789 of Crawford & Moses’ Digest, when a-signature to a check is forged, it is wholly inoperative, and no right to enforce payment thereof against any party thereto can be acquired under such signature, unless the party against whom it is sought to enforce such a right is precluded from setting up the forgery or want of authority. Bank of Black Rock v. B. Johnson & Son Tie Co., 148 Ark. 11. See also Bank of Hatfield v. Chatham, 160 Ark. 530; and Polk v. Garrison, 162 Ark. 624, and cases cited. The reason is that forgery can carry no title to the paper, even in the hands of a bona fide holder. This brings us to a consideration of what facts or circumstances will preclude the person whose signature has been forged from setting up the forgery or want of authority. Certainly, there is no testimony in the case at bar which would prevent Bellville from setting up the fact that Moseley had, no authority to indorse the check for him. Bellville testified that he made frequent trips to the bank to see if the check had arrived, and that the officials of the bank knew that the proceeds of the check were to be used in paying off a prior mortgage on his farm. The cashier of the bank expressly admits that he knew that Bellville was securing a loan through the Perkins Investment Company, of Oswego, Kansas, and giving a mortgage on his farm to secure the payment of the money for the express purpose of using the -money obtained in paying off a prior mortgage on his farm. Bellville had been doing business with the bank for seventeen or eighteen years, and his signature was known to the cashier. Notwithstanding these facts, the cashier of the bank permitted Moseley to indorse the check in his own name and in the name of Clint Bellville and to credit the proceeds to his own account. A part of the proceeds was used in paying off an overdraft of Moseley to the bank, and he «Was allowed to check out the balance in due course of business. Counsel for Fred and C. S. Perkins contend that the decree in favor of Clint Bellville should be reversed in so far as it adversely affects them. In making this contention, they rely upon the fact that Bellville, in his application for the loan, named Eugene Moseley as his agent to procure for him a loan of $3,000 from the Fred Perkins Investment Company, Oswego, Kansas,, and that this carried with it at least the apparent authority for Moseley to indorse his name to the check for the loan. Conceding this to be true, the application is not the controlling factor in the case. Bellville made a written contract with the Fred Perkins Investment Company, of Oswego, Kansas, to procure the loan of $3,000 for him. It is true that it was made on the same day as the application, but, in the very nature of things, it was executed after the application had been signed, and its terms must control the rights of the parties in the present controversy. The contract expressly provides that the Fred Perkins Investment Company'is authorized to pay off and discharge all existing liens on said, land out of the proceeds of the loan. Another clause of the contract provides that, after deducting the expenses and paying existing liens, “my said agent is authorized to pay the balance of the proceeds of this loan to Eugene Moseley of Judsonia, Ark., and the said Eugene Moseley is hereby authorized to receipt- for same for me.” This shows that the words, “my agent,” referred to the Fred Perkins Investment Company, and this clause expressly declares that Eugene Moseley is to receive the balance, after deducting expenses and paying the existing liens. The concluding part of the quoted clause shows the Eugene Moseley was not authorized to receipt for anything except the balance of the proceeds after deducting the expenses and paying the existing liens. J. A. Roetzel, who had a prior mortgage on the land, had executed a deed of release vdth the expectation of receiving the proceeds of thé loan, and all the parties knew that the money was being borrowed for the very purpose of paying' off the prior mortgage held by Roetzel. Under these circumstances, the defendants, Fred and C. S. Perkins, who are the Perkins Investment- Company, at their peril sent the check to Eugene Moseley and allowed him to cash the proceeds and apply them to his own use. It was their duty, under the contract, to see that the proceeds of the loan were applied to the discharge of the-prior mortgage of Roetzel, and they had no authority to turn over any part of the proceeds to Moseley except what remained after deducting the expenses of the loan and paying off the lien of Roetzel. On the cross-appeal but little need be said. On this branch of the case counsel for Bellville rely upon the well-known rule that, where the agent is guilty of fraud, dishonesty, or unfaithfulness in the transaction of his agency, such action is a bar to recovery by him of compensation. We do not think that the facts of this case show that Fred and C. S. Perkins were guilty of bad faith or gross misconduct in the premises. It is true that their contract with Bellville made it their duty to see that the prior liens on the land were paid off. They had, in good faith, secured the deed of release from Roetzel and had obtained a deed of trust from Clint Bellville and his wife to J. W. Halliburton as trustee. They then sold this deed of trust or mortgage to an Eastern client for the purpose of securing the money for Bellville. ¡When Fred and C. S. Perkins received the money, they made the check payable to Eugene Moseley and Clint Bellville. This was done because Moseley was the local agent of Bellville, and there is nothing to show that they were not acting in perfect good faith in the matter. They had no suspicion whatever that Moseley would forge the name of Bellville to the check and thereby convert the proceeds to his own use. On the other hand, their course of conduct in the matter shows that they intended for the money to be received jointly by Moseley and Bellville and to be applied in paying off the Roetzel mortgage. Under these circumstances, we do not think that they were guilty of such bad faith and fraudulent conduct as would require them to forfeit their right of compensation for their services. The result of our views is that the decree was correct, and it will therefore be affirmed.