*1 958 CONSTRUCTION, INC. STARKEY ELCON, INC., v. CO.
MARYLAND CASUALTY in Little Rock State Bank First National First Co., Conway, Bank and Trust Co., Inc. Electric 509 S. W. 2d 5-5199 15, 1970 Opinion delivered June September 1970.] [Rehearing denied *2 appel- Brown, for & Stratton, & and Patten Jones cross-appellees. lants and appellees Bowen, Friday Williams, & Smith, for cross-appellants. and Construc- Chief Harris, Justice. Carleton appellants
tion, Inc., herein, one hereafter called Starkey, general low was bidder as for contractor two Light Company projects, Arkansas Power and one a Arkadelphia building service center in bondsman, an and one office Conway. Maryland Casualty Company, Starkey’s appellant. given Eicon, Inc.,
is the other was jobs, being required a subcontract on both to furnish electrical, labor, and mechanical materials for the Ar- kadelphia job, and to furnish electrical and labor for Conway project. Arkadelphia The subcontract for 10, 1967, let plus on $79,882.00, October for $114.25 added; Conway 7, 1967, later on November subcon- $38,912 tract for acquire was let. Eicon was unable to payment performance and contract, bond for either hav- ing bonding jobs. reached its on limit other purchased compa- Eicon materials from various jobs, nies, and labor furnished for the two and these paid Eicon, materials and labor were to which periodic progress payments required by as received progress payment-was computed pay contract. Each “completed for 90% of the work and materials stored progress on site” as of the each month. The 25th first Arkadelphia job was received on De- progress payments 5, cember at and thereafter were made thirty days approximate 26, intervals of until June totalling payments $96,748.89. such All except $1,661.00, joint payee one checks i. were checks e., the checks were made to Eicon out and some of suppliers, many including some of the checks as varying rest payees, numbers. Star- six key’s Bank and Trust Com- the First State bank was Conway, pany the First Na- and Eicon’s bank was joint payee When the Bank in Little Rock. tional against Starkey’s presented honored checks Bank, all bore one or more in the First State account job, Arkadelphia forged Relative to endorsements. $70,339.25 in bore checks unauthorized progress forged endorsements, $22,994.00 of total Conway payments totalling job $26,305.00 bore progress pay- on the the various endorsements. When Manager Jerry Lee, received ments were Eicon at the time of the execution of General contracts, *3 president February (subsequently 1968), elected he en- suppliers’ names to the checks more of one dorsed before taking National Bank. How- them to the First except Company supplier ever, Electric each paid by bank had was previously penses, the amount due Eicon. The job operating
made loans to Eicon for ex- by assignment and had secured said loans of progress payment -in When the invoices most instances. checks presented cashed, at the bank and Lee proceeds apply part of the to the indebtedness by company. The due the bank his records reflect that full, after some of were satisfied in addi- the loans made, tional and these were handled loans would given by Starkey in the same manner. The final check litigation, progress pay- which is involved this was a Conway job was in the ment made on the and amount being 26, $6,287.00, said check dated This of instrument 1968. June forged signature, that of likewise bore a presented Matula, Mike and when it was to First Na- applied by tional, due the latter to indebtedness it Starkey, just had Eicon. who found out about forgeries progress payment learning checks, on the forged, name that Matula’s had also been notified his Conwa-y, Company bank, Bank and Trust of First State stopping payment that he was on this check. Follow- ing operations, event,- and the com- this Eicon ceased (as pletion job of was taken over July 1968), appellant expending 1, $38,948.60 to com- plete amount, the Eicon contracts. Of $22,000 if the would have owed Eicon pleted latter com- job; accordingly spent $16,948.60 completion. its own in the 1968, November, after In notice an intent file Light Company properties 8c liens on Arkansas-Power by Graybar, Starkey instituted suit the Faulkner County Chancery naming Eicon, banks, Court both and possible unpaid sup- all known labor and material pliers seeking Eicon, accounting adjudica- an rights parties. tion of between judgments Consent were entered for all material- Graybar, except men Loren Co.1 and these Cook by Starkey. filing judgments were satisfied After pleadings, the court heard evidence behalf numerous of all on parties, 4, 1969, and entered its decree June pertinent findings appeal being us, now before follows; is, therefore, considered, “It ordered and decreed (1) pleadings that: conform That amended to are proof. (2) Company judg- Electric have against Starkey Maryland Construction, Inc., ment Casualty Company together $19,648.17 in the sum of per August interest thereon at 6% annum from *4 paid: (3) Starkey Company 1968 until Construction judgment against have Conway the First State Bank in (4) $7,244.18: the amount Bank, that First State Conway, judgment against have the First National Bank $7,244.18: in Little for Rock the First Na- judgment tional Bank in against Little Rock have Starkey Construction, $5,428.52: Inc. in the amount of (6) among Starkey Gray- Construction, other claims bar, First State Bank and First National are dismissed: (7) judgment Construction, That Inc. have against Eicon, $23,827.40, Inc. in -the amount of upon payment by Starkey Mary- Construction,- Inc. or Casualty land judgment Graybar Co. awarded Company jurisdiction herein, Electric is retained for judgment against Eicon, over paid:” for the Inc. sums over, judgment was likewise the trial the Cook satisfied. 1After judgments at the bore interest rate of Each of per decree the date of and the court 6% annum from Graybar, Starkey equally by be borne ordered costs entered, Bank. From the decree so and First National bring appeal. appellants this The two banks have cross- judgments against appealed from the entered them points, respectively. appellants reversal, assert four For as follows:
I awarding judgment erred in not The Court against $93,337.89. Bank for First State
II Alternatively, declaring -the court erred not First $31,604.29 to be trustee for National Bank for constructive of materialmen. III awarding The erred in Electric Com- court pany against judgment Appellants. $19,648.17
IV holding erred in The court holder $6,287.00. First National Bank to be a 26, 1968, in due course check of June cross-appeal point three, The relates to the banks contending awarding Starkey judg- Court erred against judgment being $6,814.41, ment based them for
upon payee. checks wherein was a We proceed point. each to a discussion of
I *5 upon provisions This contention is based the of Addendum). 1(c) Ark. provides Ann. Subsection Stat. 85-3-419 paid that an instrument is converted when it is forged (2) provides on a endorsement. Subsection that against drawee, in an action the measure of the liability drawee’s the face the is amount of instrument. Appellants point out the comment on these two sub- sections, as follows: (1) (c) adopts pre-
“3. Subsection It is new. vailing holding view of decisions on a forged acceptance, indorsement is not an but that even though good made in faith it is an exercise of dominion and control over the instrument inconsistent with the rights liability owner, of the and results in for con- version. (2) adopts
“4. Subsection is new. It the rule generally applied negotiable to the conversion of in- obligation any struments, party that the on the in- presumed, strument is in the sense that the term is (Section 1-201), defined in this Act to be worth its face value. Evidence is admissible to show that insolvency reason such as or the existence of a defense obligation less, is in fact worth or even that it is without value. presumption drawee, however, In the case of the replaced by
is a rule of absolute liabil- ity.”2 appellants’ argument
It is thus en- payees Starkey’s upon dorsements of one or more (totaling $93,337.89) destroyed negotiability, checks their 85-3-419, 2Counsel for give banks their version of the intent Sec. as follows: problem addressing themselves “The drafters of the Code instrument, the fact placed in view of of the value to be on a converted inability obligor many of the instruments are worthless because good been converted. Because the instrument even if it had not to make difficulty obligor establishing would have been able that an lost, wisely provides in- pay not been the Code had the instrument may be intro- 'presumed’ be its face value. Evidence strument worth duced, however, 85-1-201) (Ark. In the case to show otherwise. Stats. § endorsement) the meas- (payment unauthorized conversion a drawee on an liability the instru- be the face amount of ure of the drawee’s is stated to argue Certainly the instrument ment. a bank should not able charged account the full face it has the customer’s was worthless when Code, point have obvious. been value of the check. Without did not Negotiable Instruments Law It was so obvious that Uniform point.” even deal with the *6 964 wrongfully Starkey’s drawee-payor debited the bank
and account. We agreed contention, in for it is find no merit suppliers the whose names were Graybar, except paid forged checks, the on the proceeds money progress the each due them from notwithstanding they payment, the did not fact endorse the checks. themselves that he endorsed the names of Lee testified various payees only expedite cashing in order checks; instance, $500.00, on checks in excess of payee, where was a it would have been neces- sary to obtain the endorsement from St. Louis office. it
We cannot believe intent- of the (the Assembly bank) a to hold drawee liable General -money actually parties where the reached the intended by the the check. drawer of Chancery holding
The which denied re- covery against money the bank to the extent ac- tually payees appears general reached the to be the rule country, 2d, in this is so stated 10 Am. Jur. Banks as § follows: generally precluded held that a drawer
It is will from-recovering paying from drawee bank for his notwithstanding where, check a endorsement forgery, proceeds actually the the the check reached person whom the drawer intended to receive them.” (Our emphasis) appears in The same statement 9 C. S. Banks J. Banking, (c): Sec.
“Generally bank is liable to the drawer of a paying forged indorsement, it check for on a in the estoppel, contributory negligence, absence of or rati- money fication, or unless has reached the intended person.” (Our emphasis) find no reference in
We the statute heretofore instant presented to the situation mentioned case, party actually reached e., where i. by the drawer. intended attempting by appellees, pointed course, out
Of *7 impossible large body codify law it is almost a of to to may anticipate that arise. the factual situations adopted have the that courts And it is for reason statutory principle, a statute will that of construction principle a of estab- be construed so as to overrule not plain by law, the act lished common unless it is made change in the established law is such intended. that Ark. State, v. 108 S. W. Ives In Barrentine said, 784, we 2d long rule in this state that
“It has been the ‘A derogation of com- statute will not be taken in mon law unless the act itself shows such to have been the legislature.’ object (citing of intention and the the cases). reading the act fails to convince A careful of object Legisla- intention and of the that was the such ture.” agree the unauthorized endorsements also
We persons companies the whose names were ratified payees accepted payments had been when the proceeds checks, of the due them from 3-404 Ark. Stat. Ann. Section 85-
(1961 Addendum) provides wholly any signature inoperative is unauthorized person signed that of the whose name is unless that person precluded denying it or is from it.3 ratifies Starkey, contending course, it is somewhat in Of payees subrogee names whose position of a position any possibly forged, better cannot payees the check. than the signatures they unquestionably ratified Since transaction, is
by retaining of the the benefits say Appellants position. same likewise issue of pleadings in the raised was not ratification rights person does not of itself affect 3Such a ratification signer. ratifying against the actual finding however, banks; the initial filed Court pleadings in its was that the were amend- decree proof. ed conform We reiterate that merit. contention without
II disagree We likewise this contention contains Starkey, course, merit. could have refused to make progress payments if to Eicon found that money. receiving ap- materialmen were not their This pellant due, under its contract with Arkansas Light, Power & to first ascertain that Eicon was en- progress payment before same titled to each was made. Certainly, duty payments, there was a each check application Starkey, progess and Truman Manager President and General Company of- the construction *8 job that his testified brother call the superintendent verify percentages completed and for approval month; he would of the then obtain sup- architect that Eicon was entitled to an advance for plies contract, and labor under the and would make progress payment. He said that he called the ma- suppliers, nearly every month, and terial talking called manager Lanigan, with F. C. financial Company, -Electrical to determine how much Graybar, being Eicon owed and- if the account was paid satisfactorily. Lanigan witness stated The Starkey “Q.K.”, would answer wise until and did- not know other- by at which time he was told Lani- June gan by that the latter had not received checks issued Starkey. Appellant forging then learned that Lee was payees. the names of knew,
Starkey testified, that as far as he First information than the Bank had-no better con- National paying bills, its relative to whether Eicon was tractor Fikes( request he Robert and he said that did not Fikes, and a loan officer of the Vice-President Assistant bank) anyone go at the bank else to examine payees if to determine the latter books on each of the accepted-one had received-their before bank The stated that he was checks. witness aware lending money Eicon, that the bank was to of the fact good, signature-s suppliers been and the if the had paid, right been it would have been all for First apply pay- proceeds from the checks to National to Eicon. loans it had made ment of obligated previously stated, was under As power company its contract with the to determine that going job, material, bills, labor, and into the were paid progress applied was before-each Starkey. compliance duty with It in investigation, that Star- key mentioned, made the heretofore being paid. suppliers if In determine Eicon’s addi- job superintendent help tion- to a architect making determination, his also had the name every supplier which had been furnished to it contending did Eicon. not do what it is now require e., the the have First National Bank should done i. suppliers company paid to furnish the in- placed voices for the materials known to have been job hand, the site of each month. On the other duty First National had no contractual to conduct such investigation an of Eicon to determine that all labor being paid; fact, and material bills were it was not suppliers. even aware of the names of all of these It job superintendent disposal, had no or architect at its testimony customary and the reflected that it is not banking business to make check on each contractor progress who desires to cash checks at the bank to first *9 paid ascertain if he has all labor and material bills. Starkey fact, In testified he had no reason to believe if even First National had conducted such an in- vestigation, gotten any it would have -different answer suppliers given Starkey. Also, the from than was should Starkey’s knowledge not that Eicon was unable to fur- payment performance jobs nish bonds the for two particularly him have made careful to see that Eicon’s suppliers paid? had been circumstances,
It under seem that al- rely upon bank the determination was entitled to ready by Starkey being made that Eicon’s bills were paid contemplated; actually, appear as it would Starkey position contending now in is of that the Bank First is liable to for National its mis- that, takes. think We evidence rather clear even payees forged, if the of names not been still position, would be the same -for its troubles stem suppliers from the fact that not it did make-sure paid being issuing progress payment were before new checks. It must also be remembered that the loans made by “operating capital”, the bank to Eicon were for proceeds e., i. of these loans were to used for labor, materials, and various overhead expenses completion job others,4 for on this as well as payments progress designed to cover overhead profit as well as cost materials and labor. In words, other by the first monies received Eicon to be applied Starkey job to the costs of the came from the bank.
Ill point pertains Arkadelphia job only, This Graybar payee since was not listed given Conway job. checks on The trial court found that, using of the month 25th as cut-off date Graybar’s estimate, billings each the amount of to Eicon (Arkadelphia which were included in all of the checks job) $14,697.21 amounted to proper payments longer
After credits for three no litigation, involved in this the Court held that $6,818.41 progress pay- was due to receive because of made, payee, ments wherein was a but where money, being it did receive by not its its name repay First National used 4Some the funds which wore Eicon interesting jobs. to note other It is Bank loans were monies received from 1967, 1, 1, period July during December deposits total made amount, $180,729.82, only and of this to the Eicon account were $83,980.93 $96,748.89 funds; deposited came from the balance sources, $42,000 being deposited in the ac last amount from other of this count First National Bank. *10 Graybar’s judg- Eicon.5 This amount was included given judgment Starkey, against was and ment Conway; against of State Bank First sum for said given judgment for the Bank was turn First State against Bank of Little Rock. First National amount The course, judgment was, fact of that basis forged. Graybar’s been had endorsement deprived agree Graybar its We that if had been money forgery, appellee this would be because of the think, find, judgment, we and but entitled preponderence evidence reflects of the progress payment forging on of its name checks Graybar’s nothing paid be do failure to to with had monthly. contrary, Lanigan appears To the it that Mr. Graybar voluntarily extended to Eicon credit progress payment knowledge checks frill by Starkey. being issued to Eicon Jerry he had done business with testified that Lee Graybar he stated that and further since 1961 endorsing Gray- always practice of had followed the he any company was on check in which that bar’s name Lanigan prac- payee. He Mr. knew that said that a being followed, the reason for not and tice was company getting was to endorse the check sent to St. Louis for checks days require endorsement; this would a week or ten returned, could be endorsed and before a check Lee said that length just he wait could not his check. wit- time to receive own from a The Lanigan told him ness testified that that he could not sign checks, give but that what authorization was his own business. The Lee did with checks president said that he had endorsed such checks Eicon (on occasions) Lanigan’s presence more than in once. Lee other Lanigan permit him also testified that pay Graybar less than the amount due under provided arrearage check, particular did that the Eicon Casualty Maryland judgment against Starkey 5The total $19,648.17, $11,199.51 being admittedly ma the amount of duo for $8,448.56 Conway job, Arkadelphia job. terials furnished on *11 970 ninety days. said that He $5,000.00 for over
not exceed Lanigan days that Eicon each time a few knew within al- check; had conversations the two that received a weekly, the matter was that the crux of and that most kept $5,000.00 had to be within the within his account ninety day period. a Lanigan any progress pay- denied that he knew being April 12, ments were made to until Eicon when payable Lee came to his office with a check made to Graybar, suppliers. Lanigan Eicon, and three other said that him Lee asked to endorse that check since the payroll day, latter had to have it to meet his that but (Lanigan) the witness testified that he told Lee that he authority had no to endorse the check. He said that it progress carry job was not unusual accounts payments days, times, to, for from at 60 and that always category the Eicon account was because working capital, of a lack of but toward the end of a job, up, Eicon would it catch since would receive its retainage 10% at that time. He said that he had made inquiry progress payments no if to see denying any knowledge been made. After first that Lee previous Graybar’s had, occasions, on some endorsed check, name to a the witness admitted that about four years previously, happened, Lanigan this had but said quarrel he did not about the matter after Lee made the good. Lanigan agreed check for a also it was unusual
job progress to have been in since October with- progress payments being out made. He concurred with testimony Graybar policy required Lee a separate report if New York an account totaled over days. $5,000.00 for more than 90 separate report York, “We have to make a to New up get to that time I decided if I could that and get making report, just out from this extra it was a get down, lot of work and that was the main figures.” we arrived reason at these Lanigan authority said that he had the without consulting anyone else to make the decision whether to accept payments on an account rather than testimony Graybar’s Lee answer in full. forger”, principally “admitted but latter is an that the fact, irrespective we think the evidence sub- appellees. bank of the two the contentions stantiates support facts which this contention? What are the Arkadelphia separate opened account for the *12 charge 23, 1967, job made and the first was on October 25, Lanigan October any Eicon on that date. On before wrote made, had been progress payments handling Starkey company that his was Construction the electrical on the Arkansas Power 8c materials stating Eicon, “we Light Arkadelphia building for at you co-payable appreciate if it make checks covering Graybar the material as billed. 8c Eicon Lanigan you,”6 apparent knew It is thus Thank way, he job be noted that and it will was under job, upon completion request a check did not course, upon “as billed”. Of material rather but purpose payment paid progress request in the to be included of a supplier it be that will is to checks assure job job supplies as the furnished on for its progresses. correctly the dates banks- list for the
Counsel payment of Eicon’s progress the status checks and corresponding Graybar dates. on the- with account Starkey payment progress issued checks were Seven on the payee, including Graybar Arkadelphia job as a continuing-monthly December, 1967, beginning in and through was is- The first check 1968. thereafter June, estimate, 5, 1967, the November for on December sued and payees $3,895.00; were in the amount of was Graybar The Supply, Electric. Eicon, Plumbers monthly Graybar, cut- as of the with Eicon account Gray- month) preceding (25th was $106.04. off money requested from this received nor neither bar check, First National or did it advise nor money not en- it had or not received its it had check, progress The second the check. dorsed 13, Starkey by Lanigan 6A similar letter was sent to on November Conway job. reference to the January estimate, 12, the December was issued Again, $16,478.00. Eicon, in the amount Plumb- Graybar Supply, payees. Electric, ers were listed as Graybar requested any neither nor received amount again, check, from did not advise or money-, bank that it had not received its or its signature placed had not been on the check. The third progress payment January check, estimate, for the was February 12, 1968, $4,633.00. issued on in the amount of Again, payees time, the same three were listed. At that Graybar account, date, as of the $3,- cut-off Here, it 005.35. will observed that the account days ninety however, greater old; more than it is not request, $5,000. did not nor did it re- than Again, ceive, from amount this check.
the bank was not advised that re- not its ceived The fourth estimate, and had not endorsed this check.
progress payment February check, for the 11, 1968, was issued on March in the amount Payees $8,866.12. previously *13 of ed, the same three list- together with Barber-Coleman. The amount of -the $5,810.14, account had now risen to more than and $106.04 was days ninety point old. At this it becomes necessary testimony to other discuss that was offered.
Lanigan admitted that at the time he called progress 28, issued, after checks had been June seeing any progress payment he had denied- checks. However, the witness admitted he that had seen the April check, although discussed, hereafter 12 he did not subsequently it, examine and he admitted that C. J. Burton, during March, 1968, estimator Eicon for came asking office his with the check to March that Lanigan really He endorse it. said he didn’t remember seeing check, if but- that testified Burton contrary, deny the witness wouldn’t it. Burton testified Lanigan it,- commented, that to refused endorse but Jerry “He told me that to knew how handle the check”. Lee Lanigan, that he testitfied discussed the matter with by told was latter that he needed apply accounts; to Eicon- to that on March $596.65 Gray- in a check that amount was issued Eicon to Lanigan company. know- denied cashed bar and according- Lee, ing payment, This of this check. portion more that was of account eliminated that payment April progress ninety days old.7 The than Graybar amount, from this $18,905.88, check was Graybar However, was $7,530.31;8 of received a total entitled to only supplies furnished on the $408.15 previous days. Arkadelphia job during the The banks only argue amount, entitled to this argument words, $5,810.14. rather than In other $7,122.16 should have been credited forward to subsequent billings permitting apply to rather than previous billings, Graybar apply to this amount having opportunity had the to receive that total previous progress payments, refusing amount in but it notifying Starkey. without
Concluding point, opinion of we are Graybar’s during a look at conduct the seven month period job (along of this with the testimonies of Lee), inequitable establishes that it would -be permit go Graybar to, effect, in back and collect each progress payment expense successive check at First State First National for and. the reason forgery Graybar’s Gray- name was not the cause progress bar’s to receive its failure from payment rather, checks; the cause was the conduct improvidently carrying Eicon’s account. Graybar’s judgment against Likewise, Starkey cannot present Starkey complied stand in the amount. Graybar’s request by including progress its name period checks. Not once of December *14 Lanigan 5, 1967, 26, 1968, to did advise June taking money. that it think was not its We this conduct operates estoppel, as an be not should is not at particular amount of this for 7The reason subsequent sold materials some included this Whether the record. clear in some partial payment 25, constituted the check February or whether to determination. difficult of job, Arkadelphia than account other Eicon $1,720.17, to another credited which included 8This the Eicon to be credited should amount job, held that this but the court Arkadelphia job. 974
permitted any op- had to recover amount which it portunity progress payments. receive from 1054, In Co., v. Ark. S. W. Acme 312 Brick Degen bearing similarity 2d, 194, a case some one at bar, we said: parties recognize the
“The fact that a materialman may estop asserting himself from the lien that would * * *” (citing case) be available otherwise to him. enumerating estop-
“Without the familiar elements of pel, enough appellants’ we think it to observe that the proof every requirement. company satisfies The Brick represented Degen that it would collect gave receipts indicating the title was delivered and practice being Although followed. the com- pany’s manager had stated in effect that no credit would delay Bell, be extended to the unreasonable in the depositing of the equivalent contractor’s checks was early Septem- to an extension If the credit. checks of presented promptly ber had been- and found to be evidently worthless, company’s it would have been the duty notify Degen, which could and should have long been done before he settled his account Bell in October.” holding general
This is in accord with rule Liens, stated in C. p. S. 229, Mechanics’ Section J. as follows: general person “As a rule a entitled to a me- may estopped chanic’s lien to assert or enforce it in any equity by inequitable act which will render it him to do so.”
IV agree We holding with the trial court in its stop payment was not entitled to on the June 26, 1968, $6,287.00. check of It will be remembered that given the bank value for the check without know- ing Starkey. defense Appellant’s available to *15 of Mike that name argument fact is based on the says appellant, forged and, had been Matula signature negotiability destroyed check. We of already under issue discussed this somewhat have I. Point generally true, name agree but the that that is We through placed check on this Matula been Mike had
of clearly fact, reflects, in almost mistake, and the record contradiction, not due Matula was that without job. Arkadelphia stated As from the at time 2d, Am. Section 321: in 11 Jur. joint payees rule that indorsement
“The negotiation inapplicable in has been held essential to mistakenly joint payee regard name had been to a whose paper, or to who refused left on the one or inserted by the drawer payee to who was treated be a it and to delivery parties, promisor both and other negotiation, transfer or and in its instrument Accordingly, having party it. interest in and as no no payees can transfer the owner- been held that real it has ship obtaining the indorse- without an instrument paper.” payee upon the name is thus of a whose ment Starkey stopped why actual reason course the Of just payment learned on the he had check paying had been its material bills and Eicon not issued, have and we the check should not been - position agree taken with the banks nothing endorsement had to do unauthorized check, stopping appellant on the cannot advantage permitted un- the immaterial take bank, endorsement to the detriment of authorized good purchased faith. the instrument which Summarizing, we affirm trial courts decree as point points holding III, our I, As II, IV. fully Starkey’s judgment against has been stated. First judgment against Bank and its State- First National hereby Bank, reversed, aside, are set and held for naught. However, it is difficult to ascertain from the *16 Graybar’s judgment the exact amount that briefs against be Starkey Certainly, should be reduced. it should by judgment as the reduced much amount of the against banks, e., $6,818.41, had obtained the i. appear proper that amount; and it would this the figures quite however, confusing the are and it is felt Chancery the case should be remanded to the purpose- properly determining Court the question amount, is, accordingly i. sole on remand op- “What amount of did have the- portunity payment) accept- (or but did receive not demand progress payment by
from checks issued Starkey, bearing the name of at its re- quest?” part; part in reversed in
Affirmed remanded. is so ordered. It J.,
Brown, concurs. J., part; Fogleman, dissents dissenting part. A. Justice, I Fogleman, John part, must dissent because I feel that the decision liability as to the of First State Bank to Con- (hereinafter struction, Starkey), Inc. referred to as- consequently that of First Bank National to First State contrary provisions Bank, is of the Al- UCC. though majority applicable provisions recite the at length, along appropriate comments, committee opinion justify it seems to me that by- then seeks passing governing by section resort to decisions predating ciples recognize I pre-existing prin- code. equity supplement
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It is not general controverted that there was a assignment rights by Eicon’s under the contract question Eicon to First National. The then arises rights whether First National could enforce Eicon’s having contract, under the been forced to assume its liability. First rights National could enforce Eicon’s under the judgment contract and would be entitled to against Starkey forged as to those checks which bore by payees endorsements but were ratified whose forged. endorsements were The unauthorized endorse- 1(Footnote mine.) speaks The presumption, committee here of the parties, as to other liability presumed the measure of to be the face amount of the except instrument. It adds that as to all the drawee evidence is admissible less, to show that the instrument is worth or is without value. The idea replace existing this section is clearly intended to expressed by law is designation pertinent new, the committee’s of the indicating subsection as change provisions Negotiable from the of the Uniform Instrument Law. purpose The put of the forged drafters to the burden of endorsements the bank necessity and to eliminate the for the drawer of a check to make just proof required majority opinion such as beyond seems to me to be doubt. companies persons whose or were ratified
merits names payees accepted forged these whenever had been proceeds of the checks. payments them from due action, purposes under Ark. Ann. Stat. of this For 1961) Comments, (Add. the endorsements 85-3-404 § enforce- and the instruments be treated as valid would perform did not the extent that Eicon able. To contract were not the- endorsements to the extent that ratified, entitled would not be First National assignee subject rights are since its to recover Starkey. Ark. the contract between Eicon terms of 1961). 85-9-318(l)(a) (Add. The effect of a Ann. § Stat. against Starkey payees recovery by unpaid proceeds or other any recovery by be to reduce Bank. First National
Starkey actually recognizes First National Bank’s by stating rights regard in its brief that in this whatever amount remained bank would be entitled to Starkey’s payment $93,337.89, of Eicon’s after out of the unpaid completion bills, cost of material Graybar. They job calculate this and the claim of any judgment $76,767.31, in favor of amount at Graybar. less *18 payees suppliers course, if all named as Of paid, there was no recoverable loss to had been Starkey by default, First reason of Eicon’s National probably be entitled to the face amount of the recovery by Starkey. checks, which would offset I would reverse the decree on Point I.