Court Opinion

ID: 9643826
Source: CourtListenerOpinion
Date Created: 2023-08-22 20:41:08.501846+00
Date Added: 2024-06-11T18:11:04.241926
License: Public Domain

M. Steele Hays, Judge, dissenting. I respectfully dissent to the decision of the majority on both counts. I would reverse as to First National Bank and affirm in part as to the judgment in behalf of Canal against International. I believe that the majority is overlooking a long-standing and recognized practice, particularly with the insurance industry, of issuing drafts bearing the words “upon acceptance” and “payable through” a specific bank and that such instruments are not treated as negotiable until actually accepted by the issuer. The reasons for this treatment of such drafts are practical to the problems of covering drafts in settlement of claims being issued at many separate branches across the country and providing efficiently, at the paying end, the necessary funds to cover the drafts being processed. I believe the Uniform Commercial Code framers recognized the custom and made allowance for it by the language of and comment to § 85-3-120. The record is silent, but I suspect this matter is before us only because appellee inadvertently treated the draft deposited by Marler as a cash item and immediately credited the account, rather than treating it conditionally. Its normal practice, I believe, would be to forward the draft for collection before crediting the account. The effect of the majority opinion is to invalidate a practice I consider to be widespread and of near universal acceptance, with nothing to replace it — all for no good reason. I recognize that there are decisions from other jurisdictions, which the majority cites, that reach a different conclusion; however, the opinions of Pennsylvania and New York are not binding upon us and, in this instance, are not even persuasive, where they contain nothing to commend them except that they exist. Nor am I willing to impose what I hold to be an extreme alteration of a custom and practice of commerce on the strength of an arcane decision handed down half a century ago, more than forty years before the adoption of the Uniform Commercial Code and decades before it was even conceived of. I refer to the case of First National Bank of Huttig v. Rhode Island Insurance Company, 184 Ark. 812, decided in 1931. As I interpret the majority opinion, the determining fact- or is that where the drawer and drawee are the same person (as in the case before us) the words “upon acceptance” have no meaning and the issuer of such a draft is immediately liable upon the instrument to a holder in due course. Yet the opinion cites dicta from decisions, including an early decision of this state, which permit the same result by using different words, i.e., “without recourse.” Thus a drawer and drawee can be identical and accomplish the same result if different words are used. I believe that in practice the words “upon acceptance” have been treated as having the same effect. If this is so, why insist on substituting two words more to our own liking, when those involved in this area of commercial dealing have come to recognize two different words as achieving the same result, and the practice is not objectionable under the U.C.C.? As to the agreement to hold harmless, I believe that both Canal and International Harvester had full awareness of the circumstances when the agreement was demanded by Canal as . a condition to immediate payment to International Harvester as a single payee. It was to protect itself from precisely the eventuality with which it was later confronted that Canal insisted on the agreement and International Harvester simply bought the risk, foregoing its option to file suit. The rule that ambiguous language in an agreement is to be construed most favorably to the party who did not draft the agreement is not intended to apply to the situation presented in the case before us. I am authorized to state that Judge Newbern joins in this dissent.