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Commercial Law Keyed to Whaley
First American National Bank v. Christian Foundation Life Insurance Co.
Citation:
242 Ark. 678, 420 S.W.2d 912 (1967)Facts
On January 19, 1964, Mena church adopted a resolution authorizing a $90,000 bond issue for the construction of a new church and employing Institutional Finance Company as its fiscal agent to market the bonds. Lawrence Hayes, although deceased at the time of the suit, was the president of Institutional Finance at the time and directly handled the bond issue. Mena church’s treasurer, Bettie Jean Montgomery signed a blank sheet of paper that was delivered to Institutional Finance for use as a facsimile signature upon the bonds. Later, 188 bonds were printed with Montgomery’s facsimile signature as well as the signature of Institutional Finance’s executive vice-president. The bonds had no provision for an authenticating manual signature. On July 3, 1964, Hayes personally borrowed $25,000 from First American National Bank and pledged as collateral $28,800 of the Mena church bonds. First American had a good faith belief that Hayes owned the bonds and was unaware that he had only been tasked with selling them on behalf of Mena church. On February 1, 1965, Hayes fraudulently ordered the bond printer to print $25,000 of numbered bonds that included duplicates of some of those pledged to First American. Later in the month, Hayes ordered additional bonds to be printed in order to complete a sale to Christian Foundation, the company that would later initiate this lawsuit seeking a declaratory judgment after Mena church refused to pay on the bonds.
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