Opinion
No. 4-2797
Opinion delivered January 9, 1933.
1. EVIDENCE — PAROL EVIDENCE RULE. — A receipt of a bank which stated that it held certain notes "for collection" is both a receipt and a contract, and it cannot be contradicted by parol proof showing that the bank was authorized to substitute other securities for the notes. 2. BANKS AND BANKING — COLLECTION OF NOTES. — When a bank acknowledged that it received notes for collection, it assumed the obligations of a collecting agent as fully as if the obligation had been set out in detail. 3. BANKS AND BANKING — COLLECTION OF NOTES. — A bank which substituted other securities for notes deposited for collection has the burden of showing its authority for such substitution. 4. BANKS AND BANKING — COLLECTION OF NOTES. — One who deposited notes for collection in a bank which subsequently became insolvent is entitled to a prior claim for the amount which the bank collected on the notes and to a return of notes still in the Bank Commissioner's possession.
Appeal from Jefferson Chancery Court; Harvey R. Lucas, Chancellor; reversed.
Buzbee, Pugh Harrison, for appellant.
Robinson, House Moses and Bridges, McGaughy Bridges, for appellee.
STATEMENT BY THE COURT.
Appellant life insurance company filed its intervention in the matter of Merchants' Planters' Bank Trust Company, in charge of Walter E. Taylor, Bank Commissioner, alleging that it was an Arkansas corporation, and prior to October 1, 1930, it purchased from the Merchants' Planters' Bank Trust Company certain notes aggregating the sum of $200,000, and paid the Merchants' Planters' Bank Trust Company the sum of $200,000 therefor. That on October 1, 1930, it delivered the said notes to the Merchants' Planters' Bank Trust Company for collection, receiving therefrom the receipt of said bank, executed by its vice president, showing the notes were held for collection and containing a list thereof, a copy of same being filed as an exhibit herein. That it was informed that the bank had collected a large amount of said notes, but that it had failed to pay any of said amount to the intervener. That it had made demand upon the Deputy Bank Commissioner in charge thereof for the return of said notes still in the possession of the said bank and an allowance as a prior claim of the amount collected on said notes, which demand had been refused.
The intervention prayed that the court make an order directing the Deputy Bank Commissioner to show what amount had been collected and the dates thereof, that same be allowed as a prior claim against the assets of the bank, and that the Commissioner be directed to return the notes which had not been collected to the intervener.
The exhibit, containing the list of the notes, reads:
"Pine Bluff, Arkansas, "October 1, 1930.
"Home Life Insurance Company, "Fordyce, Arkansas.
"Gentlemen: We hold for collection notes listed herein belonging to you: (Here are listed the notes)
"Yours very truly, "Merchants' Planters' Bank Trust Company of Pine Bluff, "By (signed) J. P. Jordan, Vice-Pres."
The Commissioner replied, alleging that, when the notes were delivered for collection, W. P. Gulley, representing the Home Life Insurance Company in that transaction, "agreed with the Bank Trust Company that said Bank Trust Company might, at any time it desired, substitute other notes for any number or all of said notes so placed with said Bank Trust Company for collection, and use in its business any notes for which any other notes owned or possessed by the bank might be so substituted"; that, in pursuance with said agreement and understanding, the Bank Trust Company, before its affairs were placed in the hands of the Bank Commissioner, did substitute and place in the stead of a certain number of notes so left with the Bank Trust Company for collection seven other notes, which the Bank Trust Company from that time held for the collection of said Home Life Insurance Company.
That, after said substitution was made, and when the Bank Commissioner took charge of the bank, the said notes so substituted were not collected, and are held in his possession for the account of said insurance company; and that of the notes originally left with the Bank Trust Company for collection, a portion thereof had been paid, the payments amounting in the aggregate to $35,194.29.
The Bank Commissioner filed a reply in response to a motion to make more specific, saying that the agreement made with Gulley, agent of the insurance company, was oral; that the substitution of the notes referred to was made in the latter part of 1930, and specified the amount of the collections made on the original notes.
By amended intervention, it was alleged that the interest of the Home Life Insurance Company had been assigned and transferred to the Central States Life Insurance Company, under a reinsurance agreement, a copy of which was shown, and that the assets of the Home Life Insurance Company were to be administered and used by the Central States Life Insurance Company for the benefit of the policyholders of the Home Life Insurance Company.
A reply was also filed denying that Gulley made any agreement with the Merchants' Planters' Bank Trust Company as alleged in the answer of the Bank Commissioner. It was further denied that Gulley had authority to make such agreement on behalf of the Home Life Insurance Company, and that the Home Life Insurance Company had any authority under its charter to make any such agreement.
The Bank Commissioner replied, denying the allegations made by the intervener to its reply.
The testimony shows that appellant company deposited on October 1 1930, with the Merchants' Planters' Bank Trust Company of Pine Bluff, for collection, the notes which it had purchased and paid for from said Bank Trust Company, aggregating $200,000. Said bank collected part of the notes, but did not remit or account for their collection to the insurance company, and, on November 15, 1930, closed its doors and was taken charge of by the Bank Commissioner, who refused, upon demand of the insurance company, to pay the proceeds collected on the notes held for collection to the insurance company, alleging that it had substituted other notes for those delivered for collection, and none of same had been collected.
There is a great deal of testimony about the relation between the insurance company, of which A. B. Banks was president, showing also his interest in and relations to a number of other banks and various corporations, including appellant insurance company; that the latter part of September, 1930, a run started on the appellee bank, and, upon the cashier telephoning to Little Rock for help, W. P. Gulley, who looked after the banking interest of the so-called "Banks chain," and some parties connected with the American Exchange Trust Company of Little Rock, took $300,000 in cash to the bank at Pine Bluff for the purpose of taking care of the run. For that sum, the Merchants' Planters' Bank Trust Company gave the American Exchange Trust Company its note for $300,000. It was then decided by the parties in interest that it would be unwise for the bank to show a large amount of bills payable. Thereupon, W. P. Gulley arranged with the Home Life Insurance Company to purchase outright $200,000 worth of notes from the Pine Bluff bank. The notes were selected from the assets of the Pine Bluff bank, examined, properly indorsed and delivered to Gulley for the Home Life Insurance Company, the purchase completed and the $200,000 was paid over. The notes were taken to the home office of the insurance company and afterwards returned and delivered to the bank for collection, as specified in the writing or receipt executed therefor by the bank, containing a list of the notes.
The court found that the contract for the collection of the notes had been altered, permitting a substitution of certain of them: that appellant was only entitled to recover $7,326.74; directed the delivery of certain other notes claimed to have been substituted for those deposited for collection, and decreed accordingly, and from which this appeal comes.
(after stating the facts). It is undisputed that this writing specifying the purpose for which the notes were delivered to and received by the bank was duly executed, but appellees insist that other terms were agreed upon at the time of such delivery, not shown in the receipt, authorizing the bank to substitute other paper or notes for the ones specified therein at its own option.
Parol testimony was admitted, over the objection of appellant, to show such fact, and it is insisted that the court erred in allowing parol testimony adduced to contradict, vary or add to the terms of the contract or writing. This contention must be sustained.
Although the writing is a receipt for the notes specified therein, the purpose for which the notes were received and held by the bank is also set out therein as for collection, and there is nothing ambiguous about the instrument. It is a contract for the service to be performed as fully and completely as though it had been written out, and it is no less subject, so far as the purpose therein specified for collecting the notes is concerned, to the parol evidence rule than if the word "receipt" had not appeared therein, so far as it operates as a contract; there being no allegations of fraud or mistake in its procurement. When the bank acknowledged it received the notes for collection, such acknowledgment constituted a contract assuming all the obligations of a collecting agent as fully as if such obligations had been set out in detail, and the rule is that, where an instrument is both a receipt and a contract, as in this case, its terms cannot be varied by parol testimony. Second National Bank of Baltimore v. Bank of Alma, 99 Ark. 386, 138 S.W. 472; Cleveland-McLeod Lbr. Co. v. McLeod, 96 Ark. 405, 131 S.W. 878; Darragh Company v. Goodman, 124 Ark. 532, 187 S.W. 673; Huckins Hotel Co. v. Smith, 151 Ark. 167, 235 S.W. 787; Lister v. First National Bank, 181 Ark. 140, 25 S.W.2d 26, 10 R.C.L. 1926.
The execution of the receipt of the notes for collection by the bank through one of its vice presidents, not the official who testified about the agreement to change it, was not denied, and, although this official did testify that such an agreement was made, his statement being denied by the agent of the insurance company, this could not prove any such agreement as against the written terms of the contract contrary thereto. This official testified that he made the substitution of these notes with the knowledge and consent of the agent of the insurance company, and put the substituted notes in a separate envelope to be held by him for delivery to the company, depositing the notes for collection. This statement was contradicted by both the agent, whom he indicated had knowledge of the fact, and he, himself, in his own testimony admitted that he had never talked to the agent, Gulley, of the insurance company about the matter. In explaining his statement to strengthen it concerning the agreement for the substitution of the notes, he said that Gulley, the insurance company's representative, agreed to it because he thought the list showed too much of the paper of Banks, the president, held by the insurance company, and that it did not look well, but he further stated that the paper that he selected for the substitution was the very kind of paper the holding of which Gulley thought might be embarrassing to the company. He did not claim to have notified the owners of the notes deposited for collection that there was any agreement for substitution of other notes, or that any attempt had been made to substitute such other notes in accordance therewith, nor did he transfer or indorse any of the claimed substituted paper to the Home Life Insurance Company, owner of the paper deposited for collection. Under the circumstances, his testimony was not entitled to any great weight, being so contradictory, and his unwarranted action in attempting to make such substitution, if it had been successful, could only have resulted in benefiting the bank, whose agent he was.
The chancellor's finding that the agreement was made by Gulley for the insurance company for the substitution of other securities instead of the ones deposited for collection for the insurance company was contrary to the preponderance of the testimony; the parol evidence, as already said, was inadmissible to contradict the contract, and said testimony was not sufficient, if true, to have authorized the collecting agent, the bank, to take anything else in payment for the notes deposited for collection but money (Darragh Co. v. Goodwin, supra), and the burden devolved upon the bank to show that it had the right to make such substitution and the collection of the notes in other than (money, and it has failed to discharge this burden, and the court erred in holding otherwise.
The court correctly held that the interveners should recover from appellees the sum of $7,326.74, an amount collected on some of the notes deposited for collection, and that same was a prior claim against the bank.
It should have held also that all the money collected and realized from the collection of the notes deposited for collection was held in trust and should be paid to intervener as a prior claim, and directed the Bank Commissioner to surrender to the appellant company the remainder of the notes still in his possession originally delivered to the bank for collection.
The decree is accordingly reversed, and the cause remanded with directions to enter judgment for the full amount of the collections made on said notes deposited for collection as a prior claim, and direct the return of any of such original list of notes yet in the Bank Commissioner's possession to the interveners. It is so ordered.