State National Bank v. Hyatt

Riddick, J., {after stating the facts.) This is an action by the holder of a negotiable promissory note, to whom the note had been transferred for value in the usual course of business, against the maker to recover the amount of the note. The first contention on the part of the defendants is that, as the note was made payable at the Howard County Bank, and as defendant, without notice of the transfer, delivered the money to the bank at the place of payment, and it was lost by reason of the failure of the plaintiff to present the note for payment, the loss should fall upon the plaintiff who failed to present the note. There is an authority for this contention in an opinion by Mr. Justice Scott in the case of Pryor v. Wright, 14 Ark. 189. But the question was not involved in the decision of that case, and must be regarded as only the expression of the judge who wrote the opinion. If the question was a new one, much might be said in support of the dictum of Judge ScoTT, for there are decisions that support it; but it seems now to be settled by the decided weight of authority in this country that the loss in such a case does not fall on the holder of the note unless the party to whom the money was paid had authority from the holder to receive the payment, or, what would be in effect the same thing, unless the circumstances under which the payment was made were.such as to estop the holder from denying that the party receiving the money was its agent for that purpose. The fact that a note is made payable at a particular bank does not, of itself, make the bank the agent of the payee or holder to receive payment, and payment to a bank of the amount due on the note made payable there, when the bank does not have possession of the note or authority to collect it, does not discharge the maker; for under such circumstances the bank will be treated as the agent of the maker and not of the holder. Jenkins v. Shinn, 55 Ark. 347; Adams v. Hackensack Improvement Co., 44 N. J. L. 638; Glatt v. Fortman, 120 Ind. 385; Bank of Montreal v. Ingerson, 105 Ia. 349; Grissom v. German National Bank, 87 Tenn. 350; Cheney v. Libby, 134 U. S. 68; 3 Am. & Eng. Enc. Law, (2d Ed.), 803; 7 Cyc. 1035; 2 Randolph on Commercial Paper, 1119; 1 Daniel on Negotiable Instruments, § 326. It follows from what we have said that in our opinion the circuit court erred both in 'refusing to give the instructions asked by the plaintiff and in giving the one asked by the defendant, which are set out in the statement of facts. The next contention is that the Howard County Bank had authority to receive the money for the plaintiff, and that the payment of the' money to it was a satisfaction of the note; and further that if the Howard County Bank had no such authority in fact, under the circumstances in proof, the plaintiff is estopped to deny that the Ploward County Bank had authority. But the proof is conclusive that the Howard County Bank had no authority to collect or receive payment of the note. Nor do we see anything in the proof to estop the plaintiff from asserting that the Howard County Bank had no such authority. The evidence shows that the Howard County Bank had been borrowing money from the St. Louis bank from time to time during several years, and that to secure such loans it deposited the notes of its customers who had borrowed money from it as collateral for the security of the loans from the St. Louis bank. The St. Louis bank never at any time permitted it to have any control over the notes deposited as collateral, or authorized it to collect the same, but kept the notes in St. Louis until they were paid or other- notes deposited in their place. It was the custom of the Howard County Bank, when any of the notes which it had deposited as collateral were paid, to send the money to the St. Louis bank, which, upon the receipt of the money, would then return the note. But the bookkeeper and assistant cashier of the Howard County .Bank, who was the only witness that testified on that point, said that they never notified the St. Louis bank how the money sent to the St. Louis bank to redeem the collateral was obtained, or whether in fact such collateral note had been paid, but would simply send them the face value of the note and ask them to return it. The defendants knew nothing of this method of dealing between the two banks, and when they paid the money to the Howard County Bank, or rather when they sent them an order to charge the note to their account and return the same to them, they supposed that the Howard County Bank was still the owner and holder of the note, so they could not have been misled by this method of dealing between the two banks. But if they had known of it, there was nothing in it to justify them in supposing that the Howard County Bank was the agent of the St. Louis bank, for the only thing the St. Louis bank did in reference thereto was to hold the notes until they were paid and then to return them to the other bank, and there was nothing in this to show any authority on the part of the Howard County Bank to act as agent for the St. Louis bank. The defendants have been badly treated; but the party to blame was the Howard County Bank, which received the money of these parties without informing them that it no longer held the note and without paying the note. On the whole case, the judgment must be reversed, and the cause remanded for a new trial. It is so ordered.