German National Bank v. Moore

Hart, J., (after stating the .facts). (1) Equity was the proper forum in which to institute this action. The loss or destruction of a written instrument in no way affects the liabilities of the parties to it or changes the nature of the demand. 25 Cyc. 1608. In an extensive case note to 48 L. R. A. (N. S.) 648, the jurisdiction of courts of law and equity in actions on 'lost instruments is discussed. In some of the States courts of law have enlarged their jurisdiction by their own acts and in other States such jurisdiction has been conferred by statute. Article 7, section 15, of the Constitution of 1874, provides that until the General Assembly shall deem it expedient to establish courts of chancery, the circuit courts shall have jurisdiction in matters of equity. By this is meant such jurisdiction as a court of chancery properly exercised at the time of the adoption of the Constitution. The jurisdiction of courts of equity under our Constitution is fixed and permanent and its jurisdiction oan not be enlarged or diminished. Gladish v. Lovewell, 95 Ark. 618; Hester v. Bourland, 80 Ark. 145; Walls v. Brundidge, 109 Ark. 250. (2) It has long been settled that courts of equity have jurisdiction of suits brought to recover the amount due on lost instruments. Pomeroy’s Equity Jurisprudence (3 ed.), vol. 2, § § 831-2. Inasmuch, as courts of equity originally had jurisdiction in actions on lost instruments, even if courts of law were given jurisdiction in such cases by statute or otherwise, such action would not deprive courts of equity of .the jurisdiction which they originally had. Our courts and the courts of many other States have held that a negotiable instrument payable to the order of a particular perspn but not endorsed can not be made the issue of an action against the maker except in the right of the payee. Case note to 48 L. R. A. (N. S.) at page 655, and in Lewis Mercantile Co. v. Harris, 101 Ark. 4, this court held that the' drawee of a draft payable to o‘rder who pays upon a forged or unauthorized endorsement does so at his peril. It is, therefore, insisted'by counsel for plaintiff that the instrument sued on, being payable to the 'order of the plaintiff, and not having been endorsed, by him at the time it was lost, only the plaintiff could sue on it and, such being the case, no indemnity is needed. . Hence they contend that in all cases where the. lost instrument, though negotiable, is payable to the order of the payee and unendorsed it does not come within the rule requiring indemnity to be furnished. On the other hand, it is contended by counsel for the defendant that the maker upon payment of the instrument has a right to its possession as a voucher of its payment and that this right should not be taken from him without an equivalent. Again, they contend that it piay be subsequently ascertained, that the instrument had, been endorsed by the plaintiff and that it had passed into the hands of an innocent purchaser before maturity and that it would thus be forced to pay the instrument again because the holder thereof, not being a party to the action, would not be concluded by the judgment. (3) The decisions bearing upon both sides of the question have been ably discussed by counsel in their respective briefs and many of them are reviewed in the case note above referred to. No useful purpose could be served by again citing them in this opinion. The case is one of first impression in this State and, after a careful consideration of the question we have concluded not to adopt either rule in its severity. We are of the opinion that the rule which will be most conducive to justice in all cases and which will be in accord with the principles of equity, is 'that in cases of this kind the question of whether the plaintiff should have judgment without furnishing the defendant a reasonable indemnity is addressed to the sound discretion' of the court, to be determined by the facts of each particular case. . (4)1 This brings us to the .question of whether the chancellor abused his discretion by rendering judgment for the plaintiff on the lost instrument without requiring him to furnish bond of indemnity. In the case before us the plaintiff had been a customer of the bank for the cotton season before he deposited the $4,000 with the bank. The deposit was made on the 14th day of January, 1913, and was payable to the plaintiff’s order twelve months after date with interest to maturity at the rate of 4 per cent per annum. The plaintiff put his deposit certificate in the safety vaults of the defendant and took it out and placed it in an envelope with other valuable papers a,t the time he started .south for his health. According to the .statement of facts, which need not be repeated here, he lost it in a perfectly’natural manner and there is no testimony whatever tending to show that he intended to practice any fraud upon the defendant. He immediately notified the defendant of his loss and of the way in which it occurred. He went back to the place where he lost it and made a diligent effort to locate it. After the instrument became due he went to the defendant and rqade demand for the payment of it in the usual course of business. The defendant refused to pay him until it had been furnished indemnity. The plaintiff endeavored to comply with this demand but was unable to do so. He then did not institute this action until the 14th day of October, 1914, which was ten months after the amount represented by the certificate of deposit became due. These facts are undisputed. There is not a particle of testimony in tihe record tending to show that the plaintiff endeavored to practice any fraud upon the defendant and there is nothing tending to impeach his integrity and good faith in the whole transaction. He was not a stranger at the bank at the time he made the deposit with it, but had been a customer of the bank. So far as the record discloses, his character was above reproach and under these circumstances we do not think the chancellor abused his discretion in rendering judgment for the plaintiff without requiring him to furnish indemnity to the defendant. It follows that the decree will be affirmed.