Bossuyt v. Osage Farmers Nat. Bank

• Decision Date: 16 January 1985
• Docket Number: No. 69588,69588
• Citation: 360 N.W.2d 769
• Parties: Robert BOSSUYT, Appellee, v. OSAGE FARMERS NATIONAL BANK, Appellant, and Gordon L. Anderson, Appellee. OSAGE FARMERS NATIONAL BANK, Third-Party Appellee, v. Pat THEILEN d/b/a/ Calf Haven, Third-Party Appellant.
• Court: Iowa Supreme Court

Page 769

360 N.W.2d 769

Robert BOSSUYT, Appellee, v. OSAGE FARMERS NATIONAL BANK, Appellant and Gordon L. Anderson, Appellee OSAGE FARMERS NATIONAL BANK, Third-Party Appellee, v. Pat THEILEN d/b/a/ Calf Haven, Third-Party Appellant.

No. 69588.

Supreme Court of Iowa.

Jan. 16, 1985.

Jerry H. Folkers of Dunkelberg, McKinley & Folkers, Osage, for appellant bank and appellee Anderson.

Walter C. Schroeder, Mason City, for appellee Bossuyt.

James M. Stanton of Boyle, Schuler, Stanton, Grabinski & Sorensen, Clear Lake, for third-party appellant.

Considered by UHLENHOPP, P.J., and HARRIS, McCORMICK, McGIVERIN, and SCHULTZ, JJ.

UHLENHOPP, Justice.

This appeal involves legal questions which arose out of a transaction involving a cashier's check. We view the evidence in the light most favorable to plaintiff Robert Bossuyt, who prevailed before the jury.

Pat Theilen of Osage, Iowa, is a commission buyer of livestock; she maintains her checking account at the Osage Farmers National Bank (bank). John Nerison of Wisconsin, a sale barn operator, provided Theilen with his check for $43,000 to buy livestock for him on commission. Theilen placed the check in the night depository of the bank on January 3, 1980. The next day the bank had the check but had not yet collected it from Nerison's bank in Wisconsin. Theilen desired a cashier's check from the Osage bank to take with her in buying cattle, but the time was too late in the day for Nerison's bank to wire the money to the Osage bank and the Osage bank did not issue a cashier's check to Theilen.

The following day Theilen went to the farm of Darrell Christian in Minnesota to look for bred Holstein heifers. Christian drove with Theilen to Bossuyt's farm; Bossuyt had a herd of such heifers. Theilen told Bossuyt she was buying Holstein heifers to ship to Idaho. She sorted out a number of heifers, and she and Bossuyt agreed on a price of $25,100 for them.

Bossuyt called a veterinarian, who examined the heifers for pregnancy. He also examined them for brucellosis as required by Idaho law, in order to certify them for shipment into that state. Bossuyt would not accept Theilen's personal check and would not let her remove the heifers until she paid for them. Theilen and Bossuyt then called the Osage bank by telephone and talked to Gordon L. Anderson, a bank officer. Bossuyt testified: "I asked him, Mr. Anderson, if Pat's personal check would be good and he said, yeah, he didn't see no problem, that the check was good, would be good, you know, no problem, go ahead and take it if I wanted to." Bossuyt then took Theilen's check and Theilen removed the heifers by truck.

Theilen was unable to make up a full load to ship to Idaho. That evening she went to the veterinarian's office and told the secretary to make the destination Wisconsin on the health papers, and the secretary did so. The veterinarian was examining livestock at a local sale barn, but Theilen needed the papers to take with the shipment. The veterinarian was called to his office to sign the papers and did not notice that the destination for the heifers was Wisconsin. He signed the papers, and Theilen transported the heifers to Nerison's sale barn in Wisconsin.

Nerison would not accept the heifers. He said they were smaller than he wanted. In addition, Theilen did not have proper Wisconsin health papers for them. This meant that they had to be quarantined at Nerison's sale barn until tested, or be shipped back. Nerison told Theilen he was stopping payment on his check of $43,000.

Theilen called Bossuyt and told him that the cattle had to be returned to him because they lacked proper Wisconsin health papers, and that Nerison was stopping payment on his check and she therefore had insufficient funds to cover her own check. Bossuyt was astonished that the heifers were in Wisconsin, and told her in substance that if the heifers had to be shipped back he would have to take them.

Bossuyt then talked with Christian who had introduced Theilen to him. The jury could find the two men concluded that the heifers did not have to be returned; they could be quarantined and tested in Wisconsin; Bossuyt did not have to take them back. The men decided to cash Theilen's check for $25,100.

That evening the two men drove south as far as Albert Lea, Minnesota, where they stayed overnight. The next day, Monday, they arose early and drove to Osage, Iowa, arriving at the bank shortly after 8:00 a.m. The bank lobby did not open until nine o'clock, but the drive-up window was open. Bossuyt tendered Theilen's check and asked for cash. The teller relayed Bossuyt's request to Anderson. The bank had the required money on hand, but Anderson said the men should not travel with that much cash. He suggested a cashier's check, which he said in effect was the equivalent of cash. Bossuyt took $100 in cash for travel expense and a cashier's check for $25,000, and left the bank.

Within a few minutes Nerison called the bank from Wisconsin and told Anderson he was stopping payment on his check for $43,000 because of the quarantine. A few minutes later Theilen arrived at the bank, stated that Nerison was stopping payment and she had insufficient funds to cover her check for $25,100, and learned that Bossuyt had cashed her check.

The same day Bossuyt called Theilen from another place in Osage and told her he had cashed her check. Later he also talked with Anderson, who told him of the intervening circumstances and that the bank would not pay the cashier's check. Bossuyt eventually delivered that check to his local Production Credit Association as a payment on his indebtedness there. The check went through channels, the Osage bank refused to honor it, the check returned through channels, and PCA reversed its payment entry on Bossuyt's debt and returned the check to him.

Nerison's check for $43,000 was not honored by his bank, and was returned to the Osage bank which reversed the entry in Theilen's account and returned the check to her. This resulted in an overdraft of $25,074.72 in Theilen's account.

Theilen shipped the heifers to her place of business near Osage, placed them in quarantine, and eventually sold them at a loss.

Bossuyt brought this action against the bank and Anderson asking for $25,000 damages on the cashier's check, for compensatory damages, for damages for mental anguish, and for punitive damages. The bank counterclaimed for $100 which it paid Bossuyt in cash. The bank also cross petitioned against Theilen, asking for $25,074.72 in the event Bossuyt prevailed against the bank. Theilen counterclaimed against Bossuyt asking compensatory and punitive damages.

At trial the court directed a verdict against Bossuyt on his claim against Anderson. The jury found for Bossuyt against the bank for $25,000 on the cashier's check, for $30,000 as consequential damages, and for $50,000 as damages for mental anguish; found against the bank on its counterclaim against Bossuyt; found for the bank on its cross petition against Theilen; and found against Theilen on her counterclaim against Bossuyt.

The trial court entered judgment on September 27, 1982. The bank moved for a new trial, but the court denied the motion on condition that Bossuyt reduce his compensatory damage award from $30,000 to $8000. Bossuyt filed a remittitur accordingly. The court assessed Anderson's costs against Bossuyt, and assessed the other costs in the action three-fourths against the bank and one-fourth against Theilen. The bank and Theilen appealed and Bossuyt cross appealed.

I. In its appeal the bank advances four propositions but we combine them into two, as they involve two basic issues in the case. The first basic issue relates to the bank's defenses against its cashier's check.

A. The bank contends that a bank may defend against its own cashier's check on the ground of fraud by the holder of the check; that when Bossuyt presented Theilen's check to the bank he knew Theilen would have insufficient funds to pay it; that Bossuyt did not disclose this fact to the bank and instead let it issue its cashier's check to him and pay him $100 in cash; and that Bossuyt's nondisclosure constituted fraud which relieved the bank from liability on its cashier's check and entitled it to $100 from Bossuyt. On the other side, Bossuyt's argument against the bank's charge of fraud is that his heifers were not diseased; he did not know Theilen intended to ship them to Wisconsin; getting the cattle cleared by Wisconsin authorities was Theilen's problem; and that Theilen's check was enforceable by him.

A "cashier's check" is a check drawn by a bank on itself and made payable to someone else; the bank is both the drawer and the drawee. It is different from a certified check, where a customer is the drawer, the bank is the drawee, a third person is the payee, and the drawee bank certifies that the check is good for its amount. It is also different from a bank draft. With the usual draft, the bank is the drawer, another bank is the drawee, and the draft is payable to a third person. 10 Am.Jur.2d Banks § 545 (1963); 9 C.J.S. Banks and Banking § 371 (1938). As a general rule a bank cannot refuse payment of its cashier's check when the check is presented by the payee or a subsequent holder. Munson v. American National Bank & Trust Co., 484 F.2d 620 (7th Cir.1973) (Illinois law); Kaufman v. Chase Manhattan Bank, 370 F.Supp. 276 (S.D.N.Y.1973) (New York law); Citizens & Southern National Bank v. Youngblood, 135 Ga.App. 638, 219 S.E.2d 172 (1975); 10 Am.Jur.2d Banks § 643 (1963).

The general rule is subject to exceptions. Cashier's checks may be issued in a variety of situations. In the present case the purchaser of the check was the payee himself, Bossuyt. He bought the cashier's check of the Osage bank with the personal check of one of the bank's own depositors, Theilen. In this situation, if Bossuyt was in fact guilty of fraud in obtaining the cashier's check, the bank could defend...