Case Title: Gordon v. Planters & Merchants Bancshares, Inc.

Citation: 

Docket Number: 95-1058

State: arkansas

Court: Arkansas Supreme Court

Date: 1996-12-23T00:00:00Z

Document:
Ashel GORDON v. PLANTERS & MERCHANTS
BANKSHARES, INC., d/b/a Planters & Merchants
Bank

95-1058                                            ___ S.W.2d ___

                    Supreme Court of Arkansas
               Opinion delivered December 23, 1996


1.   Banks & banking -- punitive damages -- when allowed under
     Uniform Commercial Code. -- Punitive damages are allowable
     under the Uniform Commercial Code (UCC) whenever a wrongdoer
     acts in a willful or malicious manner.   

2.   Banks & banking -- UCC general provision on damages --
     provision made for imposition of other damages. -- 
     Article 4 of the UCC, codified as Ark. Code Ann.  4-4-103 
     (Repl. 1991), the general provision on damages, provides for
     the imposition of "other" damages when a bank acts in bad
     faith when dealing with its customers.  

3.   Banks & banking -- punitive damages -- allowed in wrongful-
     dishonor cases. -- The imposition of punitive damages has been
     recognized in wrongful-dishonor cases which, like wrongful
     charge-back cases, are governed by Article 4 of the UCC. 

4.   Banks & banking -- punitive damages allowed when pertinent
     wrongful-dishonor provision did not specifically provide for
     them -- clear that court has not adopted narrow interpretation 
     of Ark. Code Ann.  4-1-106 (Repl. 1991). -- Because the
     supreme court has allowed the imposition of punitive damages
     when the pertinent wrongful-dishonor provision did not
     specifically provide for them, it was clear that a narrow
     interpretation of Section 1-106 has not been adopted in
     determining damages allowable under the UCC.

5.   Banks & banking -- punitive damages are allowable for Article
     4 violations -- appellant's failure to assert claim for
     conversion not fatal to his claim for punitive damages. --
     Because the supreme court has indicated that punitive damages
     can be awarded for Article 4 violations where the statute does
     not specifically prohibit them, without the necessity that an
     alternative, common-law tort be pleaded, appellant's failure
     to assert a claim for conversion was not fatal to his claim
     for punitive damages.

6.   Banks & banking -- contracts impose duty of good-faith dealing
     -- appellee's breach of this duty could be construed as an
     exercise of bad faith. -- Arkansas Code Annotated  4-1-203
     (Repl. 1991) imposes a clear duty of good faith in the
     performance of every contract or duty within the subtitle;
     here, appellee had a clear duty under Ark. Code Ann.  4-4-215
     to refrain from charging-back the check against appellant's
     account once payment had become final; the breach of this
     duty, under the circumstances, could have been construed to be
     an exercise of bad faith which is strictly prohibited by
     Section 1-203.   

7.   Banks & banking -- punitive damages are recoverable for breach
     of duty of good faith -- appellant's right to punitive damages
     not defeated. -- Punitive damages are recoverable for a breach
     of the duty of good faith under Section 1-203 of the UCC;
     consequently, appellees' argument that punitive damages may
     not be allowed because appellant's case was based in contract,
     as opposed to negligence or intentional tort, did not defeat
     appellant's right to punitive damages pursuant to the duty of
     good faith imposed by Section 1-203 of the UCC.    

8.   Damages -- punitive damages -- proof required to go to jury. -
     - In order to avoid a directed verdict and reach the jury on
     the issue of punitive damages, a party must present
     substantial evidence that the defendant acted "wantonly in
     causing the injury or with such conscious indifference to the
     consequences that malice may be inferred."  

9.   Evidence -- substantial evidence of bank employee's
     intentional and malicious purpose -- evidence sufficient to
     present issue of punitive damages to jury. -- There was
     substantial evidence that the bank employee knew the effect of
     his actions and intentionally did them to achieve his personal
     ends; thus, there was substantial evidence that it was that
     employee's intentional and malicious purpose to have the
     check, in which he had a personal, pecuniary interest,
     charged-back against appellant's account; hence, there was
     sufficient evidence to present the issue of punitive damages
     to the jury.

10.  Damages -- doctrine of respondeat superior defined and
     discussed. -- Under the doctrine of respondeat superior, an
     employer may be held liable for punitive damages for the acts
     of his employee if the employee was acting within the scope of
     his or her employment at the time of the incident; whether the
     employee's action is within the scope of the employment is not
     necessarily dependent upon the situs of the occurrence, but on
     whether the individual is carrying out the "object and purpose
     of the enterprise," as opposed to acting exclusively in his
     own interest.   

11.  Master & servant -- employee's actions motivated by personal,
     pecuniary interest -- employee acting within scope of
     employment when he caused charge-back to appellant's account.
     -- The bank employee's personal, pecuniary interest motivated
     him to cause the charge-back of appellant's check; however,
     the employee utilized his position at the bank to achieve this
     purpose and to start the charge-back procedure; he was clearly
     acting within his supervisory capacity when he instructed the
     bank's bookkeeper to charge-back appellant's check;
     consequently, the employee was found to be acting within the
     scope of his employment when he caused the charge-back of the
     account.

12.  Banks & banking -- punitive liability also applicable due to
     bank president's actions -- president acted with conscious
     indifference to appellant's problem. -- Appellee bank could
     also be held liable for punitive damages based on the conduct
     of the bank's president; his refusal to assist appellant with
     the charge-back to his account, and his instruction to
     appellant to resolve the matter with the clearly biased
     employee, demonstrated his awareness of the employee's actions
     and, more importantly, his "conscious indifference" to the
     charge-back on appellant's account; appellee may be held
     liable for punitive damages based on the employee's and/or the
     bank president's conduct.

13.  Master & servant -- ratification of employee's actions --
     ratification discussed. -- When the principal has knowledge of
     the unauthorized acts of his agent and remains silent, he
     cannot thereafter be heard to deny the agency but will be held
     to have ratified the unauthorized acts; the affirmance of an
     unauthorized transaction may be inferred from the failure to
     repudiate it or from receipt or retention of benefits of the
     transaction with knowledge of the facts; the principle of
     ratification also applies when the agent's actions are
     tortious, and ratification may bind the principal for punitive
     damages.

14.  Appeal & error -- evidence sufficient to go to jury on issue
     of punitive damages -- directed verdict reversed and case
     remanded for retrial. -- Because there was sufficient evidence
     to allow the jury to decide whether appellant was entitled to
     punitive damages based on the bank employee or bank
     president's conduct, the directed verdict was reversed and the
     case remanded for retrial.
                                
     Appeal from Arkansas Circuit Court; Russell Rogers, Judge;
reversed and remanded.
     Thomas D. Deen, for appellant.
     Russell D. Berry, and Arnold, Grobmyer & Haley, by: Robert R.
Ross, for appellee. 

     Andree Layton Roaf, Justice.
     The appellant, Ashel Gordon, sued his bank, the appellee,
Planters & Merchants Bancshares, Inc. ("Planters"), for wrongful
charge-back of a check he deposited into his account. Gordon
alleged that Planters violated Ark. Code Ann.  4-4-213 (1987) and 
acted maliciously, intentionally, and in bad faith; he sued for the
amount of the check, plus interest and punitive damages.  This
court reversed the trial court's previous dismissal of Gordon's
action under Ark. R. Civ. P. 12(b)(6) in Gordon v. Planters &
Merchants Bancshares, Inc., 310 Ark. 11,