Title: France v. Ford Motor Credit Co.

State: arkansas

Issuer: Arkansas Supreme Court

Document:

Harold L. FRANCE v. FORD MOTOR CREDIT COMPANY

95-612                                             ___ S.W.2d ___

                    Supreme Court of Arkansas
               Opinion delivered January 22, 1996


1.   Replevin -- effect of uncertified check issued in payment of
     underlying obligation -- suspension continues until dishonor
     of check or until paid or certified. -- Under Ark. Code Ann.
      4-3-310(b)(1) (Repl. 1991), where an uncertified check is
     taken for an obligation, the obligation is suspended to the
     same extent that the obligation would be discharged if an
     amount of money equal to the amount of the instrument were
     taken, and suspension of the obligation continues until
     dishonor of the check or until it is paid or certified.

2.   Replevin -- effect of uncertified check issued in payment of
     underlying obligation -- statute provided no defense to
     replevin action. -- Arkansas Code Annotated  4-3-310 does no
     more than recognize the uncertainty attendant upon an
     uncertified and unpaid check and suspends the obligation until
     that uncertainty is resolved; in the present case, where the
     two checks submitted to appellee had been paid but in amounts
     less than the amount owed, the suspension was over, and all
     were aware of the amount of appellant's obligation to appellee
     that was yet to be satisfied; the supreme court held that the
     statute provided no defense to the replevin action.

3.   Banks & banking -- statute providing encoding and retention
     warranties to collecting banks and payors did not apply to
     appellee. -- Where appellant contended that Ark. Code Ann. 
     4-4-209 (Repl. 1991) provided appellee a remedy against the
     party responsible for check-encoding errors, which should have
     been pursued instead of the replevin action against him, the
     supreme court held that the statute provides encoding and
     retention warranties to collecting banks and payors but not to
     a payee such as appellee.

4.   Appeal & error -- no citation of authority or convincing
     argument -- argument not considered. -- Where the record did
     not show how the "guarantee" appeared on the check or who
     placed it there, and appellant neither cited any authority for
     his contention that the "guarantee" limited appellee's
     remedies against him nor cited any authority or made
     convincing argument that the "guarantee" resolved the conflict
     between the written and figure amounts on the check, the
     supreme court held that it would not consider the argument. 


     Appeal from Carroll Circuit Court; David S. Clinger, Judge;
affirmed.
     Lingle & Corley, by:  James G. Lingle, for appellant.
     Griffin Smith, for appellee.

     David Newbern, Justice.*ARKREP5*   1/22/95    Justice David Newbern



HAROLD L. FRANCE                        NO. 95-612
                                        Opinion Delivered:
          
          Appellant

     v.                                 Appeal from Carroll
                                        Circuit Court (CIV-
                                        94-56-1)      
                              
FORD MOTOR CREDIT COMPANY               Honorable David S.        
                                        Clinger, Circuit Judge

          Appellee                      Affirmed


     This is a replevin case.  The appellant, Harold L. France,
bought a used tractor and entered an installment contract to pay
the appellee, Ford Motor Credit Company (Ford Credit), for it.  Mr.
France tried on two occasions to prepay the full obligation, as
permitted by the contract, by personal check.  Because of errors
which occurred in the encoding of the first check and in drawing
the second one, Mr. France's account was debited for only small
portions of the amount due.  Mr. France thereafter refused to pay
the balance.  Ford Credit sought to replevy the tractor.  Mr.
France claimed, and argues on appeal, that the obligation was
"suspended" according to Ark. Code Ann.  4-3-310 (Repl. 1991) and,
therefore, Ford Credit was not entitled to replevin.  Mr. France
also contended, and now argues, that Ford Credit's remedy is
against its agent which made the encoding error and not against Mr.
France.  The Trial Court held replevin was proper, and we affirm.
     The purchase price of the tractor was $10,035.  Mr. France
paid $2,000 down.  The amount that remained, including finance
charges, was $9,845.76.  Mr. France was to make 47 monthly payments
of $205.12 beginning on September 23, 1993.
     Prior to the date that the first installment was due, Mr.
France elected to pay the balance in full.  After deducting items
such as unearned interest and insurance cancellation rebate, the
outstanding balance was $8,506.19.  On August 11, 1993, Mr.
France's spouse Connie S. France, an attorney, drew check #2224 on
their joint account at the Bank of Eureka Springs to the order of
Ford Credit for that amount.  As directed by the contract, the
check was sent to a Dallas, Texas, address.
     The address was that of a box monitored by Mellon Financial
Services (Mellon).  Under agreement with Ford Credit, Mellon
encoded the amount of the check, using magnetic ink, in the lower
right-hand corner and forwarded it to Ford Credit's depositary bank
in Dallas, Texas Commerce Bank.  The encoding was done incorrectly
in the amount of $506.19 rather than $8,506.19  The magnetic ink
encoding enables the next bank in the chain of collection to
process the check mechanically.  
     Texas Commerce Bank processed the check mechanically,
crediting Mr. France with $506.19.  Mr. France's check was then
forwarded to the Bank of Eureka Springs, the bank upon which it was
drawn.  The Bank of Eureka Springs debited the France account
$506.19.
     The encoding error was discovered, and on September 13, 1993,
Ms. France attempted to draw a second check, #2313, for the
remaining $8,000 balance.  In the place on the check where the
amount is shown numerically, the figure "$8,000.00" appeared;
however, on the line where the amount is written out Ms. France
wrote "Eight dollars and 00/100."  
     Check #2313 was sent through the same channels as the previous
check.  Mellon made another error and encoded the check, not for
$8,000 or for $8, but for $800.  These words appear to have been
stamped on the front of the check: "AMOUNT GUARANTEED TO BE," and
immediately below appears the handwritten figure "8,000." 
     Texas Commerce Bank credited $800 to the France account with
Ford Credit and sent #2313 on to the Bank of Eureka Springs.  As
words prevail over numbers, Ark. Code Ann.  4-3-114 (Repl. 1991),
the Bank of Eureka Springs debited the France account $8.00, and
notified Texas Commerce Bank which reversed the $800.00 credit and
substituted $8.00.  Ford Credit thus was paid $8.00.  Mr. France's
account has been charged, and Ford Credit has received, a total of
$514.19, leaving a balance of $7992.  Ford Credit filed its
complaint for replevin of the tractor on October 12, 1994.  The
"guarantee" was apparently ignored in the collection process.

                           1. Replevin
     Section 4-3-310 deals with the effect of an uncertified check
issued in payment of an underlying obligation such as the contract
in this case.  The statute, in pertinent part, provides:

     
4-3-310. Effect of instrument on obligation for which
taken.
     (a) Unless otherwise agreed, if a certified check,
cashier's check, or teller's check is taken for an
obligation, the obligation is discharged to the same
extent discharge would result if an amount of money equal
to the amount of the instrument were taken in payment of
the obligation.  Discharge of the obligation does not
affect any liability that the obligor may have as an
indorser of the instrument.

     (b) Unless otherwise agreed and except as provided
in subsection (a), if a note or an uncertified check is
taken for an obligation, the obligation is suspended to
the same extent the obligation would be discharged if an
amount of money equal to the amount of the instrument
were taken, and the following rules apply:

     (1) In the case of an uncertified check, suspension
of the obligation continues until dishonor of the check
or until it is paid or certified.  Payment or
certification of the check results in discharge of the
obligation to the extent of the amount of the check.
                              * * *

     As Mr. France does not contend his obligation has been
discharged, the first sentence of  4-3-310(b)(1) providing for
"suspension of the obligation" is all that is at issue.  We have
found no case or other authority which addresses the facts
presented here, but the language of the statute leaves us with
little doubt as to the proper resolution of this case.  It does no
more than recognize the uncertainty attendant upon an uncertified
and unpaid check and suspends the obligation until that uncertainty
is resolved.  See Cornwell v. Bank of America Nat. Trust and Sav.
Ass'n,