American Nat. Bank of Powell v. Foodbasket

• Decision Date: 01 February 1972
• Docket Number: No. 4031,4031
• Citation: 493 P.2d 403
• Parties: 10 UCC Rep.Serv. 428 AMERICAN NATIONAL BANK OF POWELL, Wyoming, Appellant (Defendant and Third Party Plaintiff below), v. FOODBASKET, a partnership, Appellee (Plaintiff below).
• Court: Wyoming Supreme Court

Page 403

493 P.2d 403

10 UCC Rep.Serv. 428

AMERICAN NATIONAL BANK OF POWELL, Wyoming, Appellant (Defendant and Third Party Plaintiff below), v. FOODBASKET, a partnership, Appellee (Plaintiff below).

No. 4031.

Supreme Court of Wyoming.

Feb. 1, 1972. Opinion Withdrawn 497 P.2d 546.

Ross D. Copenhaver, of Copenhaver & Castberg, Powell, for appellant.

Joseph E. Darrah, Powell, for appellee.

Before McINTYRE, C. J., and PARKER and McEWAN, JJ.

McINTYRE, Chief Justice.

Foodbasket, a partnership, sued American National Bank of Powell, Wyoming, alleging two checks had been wrongfully returned by it for 'insufficient funds'; and that the checks were charged back to plaintiff. Liability was claimed against the defendant bank under the provisions of § 34-4-302, W.S.1957, 1971 Cum.Supp.

From a summary judgment in favor of plaintiff and against the bank, defendant has appealed.

Before applying the particular facts of this case to § 34-4-302, we think it will be helpful to briefly analyze some of the principles involved. Suppose A gives B a check and has adequate funds in the bank to cover the check. If the bank unreasonably delays action on the check after it has come to the bank, and if the delay proves to be the cause of permitting the funds to be attached so that they are lost to the check payee (B), it might be proper to make the bank accountable to B for the amount of his check.

However, if A had no money in the bank at any time, the bank should not be accountable to B unless its delay in acting on the check causes some loss to B which B would not otherwise have suffered. In other words, the bank's delay would not be sufficient to cause the bank to become liable to B for what A had swindled B out of-if B is left in no worse position by the bank's delay.

If we were to interpret § 34-4-302 as having the effect of transferring to the bank liability for A's obligation to B, when the bank's delay did not leave B in any worse position, we would be confronted with the question of whether the section was constitutional. Not only would such a statute result in a gross miscarriage of justice, but it would probably be a denial of due process of law.

In the case we are concerned with, Pat McPherson was an employee of the plaintiff, Foodbasket. She had worked part time for several years, earning approximately $54 a week. Her duties included checking the cash receipts and making deposits for the firm. During the week when she was to quit working, she prepared two separate deposits. Both deposits were made on Friday, the last day of her employment.

One of the two deposits included a check on the defendant bank in the amount of $2,900. It was payable to Foodbasket and drawn by Pat McPherson. She had endorsed the check for Foodbasket. The other deposit included a check on the defendant bank in the amount of $5,500. It also was payable to Foodbasket and drawn by Pat McPherson. She had likewise endorsed it for Foodbasket. The deposits were made at the First National Bank in Powell.

Pat McPherson had never had on deposit at any time, with American National Bank, sufficient money to cover either of the checks included in the aforementioned deposits. The checks were at least one day belatedly returned for 'insufficient funds.' According to the explanation of counsel for appellant, considering the method of doing business between the First National Bank and American National Bank of Powell and the effect of a Labor Day holiday, American National Bank delayed one day longer than it should have in returning the checks. Counsel for appellee has not shown that this explanation is incorrect. However, it would not matter if more days were involved.

While Foodbasket has concerned itself with what the Uniform Commercial Code makes the payor bank accountable for, it has failed to consider its own accountability to the payor bank as an endorser and guarantor of the checks involved.

It is of course common knowledge that an endorser of a check or note guarantees the instrument if it is not endorsed without recourse. In keeping with this principle, § 34-4-207(2), W.S.1957, 1971 Cum.Supp., makes it clear a transferer of an item engages that upon dishonor he will take up the item. Subsection (4) of the same section indicates, where an unreasonable delay is involved, the guarantor is discharged to the extent of any loss caused by the delay.

This principle is in keeping with the hypothesis we related above concerning a check given by A to B. With respect to the checks involved in this case, Foodbasket was left in no worse position on account of the one-day delay of defendant. Plaintiff had already been cheated by its own employee and there is no showing that the delay of American National Bank caused it to be in any worse position.

Since, as we have heretofore indicated, liability against American National Bank is claimed under the provisions of § 34-4-302, we will examine this section in some detail. Its provisions, insofar as pertinent to our decision, are these:

'In the absence of a valid defense such as breach of a presentment warranty (subsection (1) of section 34-4-207), a settlement effected or the like, if an item is presented on and received by a payor bank the bank is accountable for the amount of

(a) a demand item * * * whether properly payable or not if the bank, in any case where it is not also the depositary bank, retains the item beyond midnight of the banking day of receipt without settling for it or * * *...