## Facts

- A church authorized a bond issue to finance construction and retained a finance company as fiscal agent to market the bonds.
- The church treasurer provided her signature on a blank sheet to be used as a facsimile signature on the authorized bonds.
- The fiscal agent arranged printing and distribution of numbered bearer bonds bearing the treasurer’s facsimile signature and the fiscal agent representative’s signature.
- First American National Bank purchased and held $28,800 in bonds from the original authorized distribution.
- The fiscal agent’s president later caused additional bonds to be printed, including bonds duplicating numbers already sold.
- Christian Foundation Life Insurance Company and Charles R. Richards bought $20,000 and $5,000, respectively, in later-printed duplicate bonds.
- A declaratory judgment action was filed to determine the validity and priority of the competing bearer bonds.
- The chancery court ruled that First American’s bonds were void and that the later duplicate bonds were valid, and First American appealed.

## Issues

1. Whether bearer bonds printed and sold beyond the issuer’s authorized bond issue, including duplicates of outstanding bond numbers, are valid obligations enforceable against the issuer.
2. Whether the issuer’s use of a facsimile signature and entrustment of the signature specimen to its fiscal agent makes the issuer responsible for losses caused by the agent’s fraudulent over-issuance.

## Decision

- The Arkansas Supreme Court reversed the chancery court’s decree to the extent it invalidated First American’s bonds and validated the later duplicates.
- The court held First American’s bonds, acquired from the authorized issuance, were valid obligations of the church.
- The court held the later-printed duplicate bonds, created through the fiscal agent’s unauthorized and fraudulent over-issuance, were not enforceable against the church as against the prior lawful holders.
- The court rejected treating the treasurer’s facsimile-signature arrangement as granting unlimited authority to print additional bonds beyond the authorized issue.

## Legal Principles

- An issuer is bound only by securities issued within the scope of the issuer’s actual authorization.
- A fiscal agent’s fraudulent over-issuance of bonds, even using an authorized facsimile signature, does not create enforceable obligations of the issuer when the agent acted beyond conferred authority.
- Later purchasers of unauthorized duplicate instruments cannot obtain rights against the issuer superior to those represented by the original authorized issuance.
- Entrusting a facsimile signature for a defined authorized issue does not, by itself, expand an agent’s authority to create additional obligations outside that authorization.

## Conclusion

The court allocated the loss from the fiscal agent’s fraudulent duplicate bond printing to the purchasers of the unauthorized over-issue, preserving the validity of bonds that were issued and acquired within the church’s authorized bond program.


First Am. Nat’l Bank v. Christian Found. Life Ins. Co., 420 S.W.2d 912 (Ark. 1967)