ARK.] • BANK OF CONWAY V HIEGEL. 313 BANK OF CONWAY V. HIEGEL. 4-2967 Opinion delivered April 24, 1933-.1 - BILLS AND NOTES—INSOLVENCY . OF DRAWEE BANK.—Where a check was presented by a collecting bank to the drawee bank, not for collection but for payment, and, upon the check being presented, the collecting bank accepted foreign exchange, the check was paid, though the exchange was not paid by reason of the drawee bank's insolvency. Appeal from Faulkner Chancery Court; W . E. At-kinson, Chancellor ; affirmed. STATEMENT BY THE COURT. , On November 20, 1931, the appellant, the Bank of Conway, Conway, Arkansas, received for collection a draft in the Sum of $473.65, drawn by the Rea-Patterson Milling Company against appellees, a partnership trad- ing asHiegel-TheSsing Grocery Company, Conway, Ark-ansas, with a bill of lading. for a carload of flour attached to the draft. Appellant bank presented this draft to the appellees, who drew• their check on the Farmers' State Bank of Conway for the amount of the draft, and thereupon the Bank of Conway delivered the bill of lading. to the appellees and remitted to the Rea-Patteison Milling Company for the' amount of the draft.: Appellant bank then took the check for. $473.65 drawn on the Farmers' State Bank, along with other checks that appellant held 'against them, in the- total amonnt Of $2;929.34, and presented same for clearance. • The Farmers' State Bank had checks against appellant drawn by its depositors against it amounting to $750.69, which were turned over to appellant, leaving a difference of $2,178.65 due to the appellant from the Farmers, State Bank . on the .checks involved in this sclearance. The Farmers' State Bank thereupon dtew its draft in favor of the appellant bank in the sum of $2,178:65 on its correspondent bank in New York City, and said draft -was duly presented by appellant to the said correspondent hank and payment.thereon was refused because the Farmers' State Bank in the meantime closed its doors and failed to Open on Monday, November 23, 1931. .The . State Bank Commissioner took
314 BANK. OF CONWAY V. HIEGEL. [187 charge on the • sarae 'day and found the check for $473.65, which had been drawn by the appellees against their account in the Farmers' 'State Bank in the files of said bank, and the . Bank Commissioner caused the records of the Farmers' State, Bank.showing , payment of said check to be -reversed and returned . this . check to the appellant, the Bank of Conway, .wherein the appellees had an account also,' and- thereupon the appellant charged up to this account the amonnt of this-check,.$473.65. • • This suit was instituted by appellees against the State: Bank • Commissioner in. icharge .. of the insolvent Farmers' State Bank and against the-appellant; the Bank of Conway, praying judgment against the Bank of Con-way.for the amount of .said :cheek,. $473.6.5, .and for the eourt to:determine the legal status on . apconnt . of the aboye-mentioned check, giyen by appellees in payment of the draft,, and that the, claim,be . ,allowed and classified .against tbe assets .. of . the ,Farrners , State . - Bank: ....The appellant, answered; allegin.g-that*the check,was not taken, in payment of the draft, -but with the right to call on appellees to make ,said check go.od, if it, could not be cellected: :, That itpaid, off, for . appellees . said. draft, ana that they thereby, bebana&indebted to, appellant in the , sum of it, and that it Was not paid TOrthe reason they Tailed to .collect it: -. That they acted . with all proper diligence in'handling the check, which had-never been paid. That• the Farmer's' State Bank gave appellant its . said check; .a &aft. on, its correspondent bank in New :York City, which proved-Worthless on account .of the failure of . the . Farmers i ' Statel3ank before the draft could be presented there: . . . . The cause : Was-heard onan agreed Statement 'of facts, showing the facts' as ! alleged , in. the pleadings, that . the Officers ofthe banking dePartment i 'when taking charge of the - Farmers' -State Bank . of' ' Conway on 'November •23, found 'many of the :aforesaid .checks . against --the bank received in the- clearance--transaction . on the: .previbus Saturday remaining undelivered to its depOsitor‘makers in said -` baiik,'- reVerSed • the' charges-upon 'the 'records thereof showing the paYment of said cheCks and returned said checks, the One 'of, : appellees' 'involVed herein to the
ARK.] BANK OF CONWAY v.. HIEGEL. 315. Bank. of Conway, -which Was . charged; by the latter, bank• against the a,cconnt. Of appellees in: said hank ment of the. draft with bill of Jading! -attache& which it. had paid upon receipt of appellees' check on. theiFarw. ers', State :Bank. -.That the . said check of , appellees was not accepted -by . the -Bank • of Conway; as :unconditional: payment, but with the right to collect same,back :from the. drawer in the event it .could not:be:collected bY the Bank of Conway . but, within a . reasonable time. • The . Bank . of. Conway - in handling the,matter did nothing.out , of the usual, custom in handling. such .matters.,.. A,.•demurrer,...answer . !and.cross-complaint ,was .. filecl • by. appellant: .• • :7 • -f • • • .-.. The chancellor. found :that .appellant was indebted, to appellees .in the sum, of..$473:,6,5„, thc amount . ,of the check ; ,, and that appellant Was entitled.to . a:general .claim, against the , :assets. of . the., Farmers." State Bank in. the. sum bf $2,178.65,, the clearance .balance, , and decreed .acT. cordingly, ordering that the records , of ;the. Farmers' State Bank be COrrected so far as to show the payMent Of all checks involved in the clearance, and this' aipPeal is prosecuted by the Bank of Conway from such decree. R. W. Robins, for appellant. Clark cE Clark, for appellee. KIRBY, J., (after stating- the. faCts). In Taylor v. First National Bank of De Queen, 184 Ark. 947, 43 S. W. - (2d) 1078, this court held that, where checks received in the ordinary 'ebtirse of business betWeen rek p ectiVe banks, not for. collection . but. for, payment -whici,. they , attempted to effect.by . charging thenartOt thq accounts, of . the depositors who had drawn them i , and ;by-delivery. of the• draft for the differencelJetween the 7 reSpective a.raounts•-of the checks, the relation of debtor and Creditbraros6heNieen th6 two banks and not an akeST'Vr „It has been held, where the . drawers . .of an . orderhad funds in the hands of the:draweel:on . its presentation, a waiver by the payee of_ a cash payment-and an acceptance-of a 'bill of exchange instead extingUisli'' the .debt; although the exchange proVes • Vorthle§s. — Ldth ir.Alothner, 53 Ark. •1:16, 13 S. W.. 594. • See :also. Johnson First Rank, 144 Minn. 363, 175 N, W, .61.2!7!9
eral Reserve Bank v. MalloY, 264 U. S. 160, 44 S. Ct. 296,- 31 A. L. R. 261 ; Missouri Pac. Rd. Co. v. Taylor, 185 Ark. 211, 46 S. W. (2d) 642 ; vol. 1, Paton's Digest, -page 257, § 1566. From these cases it will be seen that only the relation of debtor and creditor arose between the two banks upon the clearance of checks and giving the bill of exchange in payment of the difference, and not an agency-or trust relationship ; and, the check being presented to the bank, not for collection, but for payment, the transaction amounted to a payment, so far as the drawers of the check, appellees, were concerned; and they are discharged, the drawer having funds in the bank to its credit, the. check in effect having been paid by the drawee upon presentation, it being conclusively presumed that he did not accept something in lieu thereof for which it-had not been drawn—could not 'accept at the drawer's risk a checic of the drawee upon some other bank. No error therefore was committed in the decree of the chancellor, and it is affirmed.
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.