Caledonia Nat. Bank of Danville v. McPherson

• Decision Date: 03 October 1950
• Docket Number: No. 217,217
• Citation: 75 A.2d 685,116 Vt. 328
• Court: Vermont Supreme Court
• Parties: CALEDONIA NAT. BANK OF DANVILLE v. McPHERSON.

Page 685

75 A.2d 685

116 Vt. 328

CALEDONIA NAT. BANK OF DANVILLE v. McPHERSON.

No. 217.

Supreme Court of Vermont.

Oct. 3, 1950.

Arthur L. Graves, Frederick G. Mehlman, and Kyle T. Brown, Jr., all of St. Johnsbury, for plaintiff.

Hubert S. Pierce, Newport, A. Pearley Feen, Burlington, for defendant.

Before SHERBURNE, C. J., and JEFFORDS, CLEARY, ADAMS and BLACKMER, JJ.

ADAMS, Justice.

This is an action of contract to recover on a check drawn by the defendant. Trial was by court without a jury. Findings of fact were made and judgment was rendered for the plaintiff. The case is here on defendant's exceptions. The ones relied upon are to the failure to find as requested by defendant's request number 13 and an exception to the judgment.

We first consider the exception to the judgment. The question here is whether it is supported by the findings of fact. Colby's Executor v. Poor et al., 115 Vt. 147, 154, 55 A.2d 605 and cases cited.

The findings show the following material facts;--That the defendant of Holliston, Mass. signed and delivered to one Philo Lang, a regular customer and depositor in the plaintiff bank, a check for $5,000 dated November 29th, 1948, drawn on the Milford National Bank & Trust Co. of Milford, Mass.; that the check was to be used by Lang to purchase cows for the defendant; that on December 1st Lang endorsed the check and deposited it along with other checks and notes in the plaintiff bank and his checking account was credited with the amount thereof; that the plaintiff took the check as a deposit in the usual and ordinary course of business for full value and in good faith without notice of any infirmity in it or defect in the title of Lang to it; that it was complete and regular on its face; that the balance on Lang's checking account on the morning of December 1st was $3,652.20 and the amount of the deposit credited that day including the check in question was $13,603.10; that on December 1st the plaintiff paid and charged to Lang's checking account 4 checks amounting to $4,641.50 drawn by him on the account; that on December 2nd the plaintiff paid and charged to Lang's checking account 4 checks amounting to $2,190.12 drawn by him on the account; that on December 3rd the plaintiff paid and charged to Lang's checking account 6 checks amounting to $4,804 drawn by him on the account; that on the same day it paid and charged to the account two other checks drawn by Lang on the account; that on the same day the plaintiff charged back to the account a check of one Gendron which Lang had previously deposited and had credit for on the account, on which payment had been refused, the charge back being $1,547.70; that on December 4th the plaintiff paid and charged to Lang's checking account 7 checks amounting to $1,486.56 drawn by him on the account; that Lang died very suddenly shortly after noon on December 3rd; that the defendant stopped payment on the check in question at the bank in Milford when he had notice of Lang's death and it was protested on December 6th and the plaintiff received notice on December 7th that it had been protested because payment had been stopped; that on December 9th the plaintiff paid and charged to Lang's checking account a check in the amount of $3.98 drawn by him on the account; that after the foregoing transactions the balance on the checking account was $521.19 and the plaintiff used this balance to apply on the $5,000 check in question which had then been returned to it unpaid. The judgment here excepted to is for the amount of the check less the credit thereon of the $521.19.

Money deposited in a bank without special arrangement becomes the property of the bank and the depositor becomes the creditor of the bank to the amount of the deposit. State v. Clement National Bank, 84 Vt. 167, 180, 78 A. 944, Ann.Cas.1912D, 22. It is a fundamental rule of banking law that in case of a general deposit of money in a bank, the moment the money is deposited it becomes the property of the bank and the bank and the depositor assume the relation of debtor and creditor. The same rule obtains in the case of deposits of checks, drafts and promissory notes, wherever, under the circumstances of the case, the bank becomes the owner of the commercial paper and the customer acquires the unconditional right to draw for the proceeds. 7 Am.Jur., Banks, Par. 444.

According to the majority of cases, where there is no definite understanding between the depositor and the bank as to the ownership of the paper, but it is endorsed by an unrestricted endorsement and deposited in the usual course of business with the bank, which gives credit to the depositor for the amount thereof with the right to draw thereon, the title, prima facie, passes to the bank. 7 Am.Jur., Banks, Par. 452; 9 C.J.S., Banks and Banking, § 221. The right of the bank to charge back the dishonored paper is in no wise inconsistent with the rule that it acquires title by such deposit. 7 Am.Jur., Banks, Par. 453; 9 C.J.S., Banks and Banking, § 281. This Court has so held. Walker & Brock v. D. W. Ranlett Co. et al., 89 Vt. 71, 74, 76, 93 A. 1054. See also City of Douglas v. Federal Reserve Bank, 271 U.S. 489, 46 S.Ct. 554, 70 L.Ed. 1051. The exercise of such right to charge back is no more than enforcing the depositor's liability as endorser of the dishonored paper. Bassett v. Mechanics' Bank, 117 Conn. 407, 168 A. 12; Annotations 11 A.L.R. 1067; 16 A.L.R. 1084; 42 A.L.R. 501; 68 A.L.R. 734; 99 A.L.R. 495.

The defendant claims that the check in question did not represent money or funds in the possession of the plaintiff until the check was certified or accepted by the bank upon which it was drawn. He bases this theory upon V.S.1947, § 5637, a part of the Uniform Negotiable Instruments Act. It provides, 'A check of itself does not operate as an assignment of any part of the funds to the credit of the drawer with the bank, and the bank is not liable to the holder unless and until it accepts or certifies the check.' The argument is ingenious but not convincing. If it were so no bank could safely take a deposit of checks and the depositor have funds against which the bank would allow checks to be drawn until the bank had forwarded the checks to be accepted or certified or had received notice that they had been paid by the bank upon which they were drawn unless the depositary bank in giving general credit for the checks relied solely upon the financial responsibility of the depositor-endorser. The section has to do with the relationship between the depositary bank and the bank upon which the check is drawn and not between the bank and the depositor or the bank and the drawer of the check. Here the suit is against the drawer of the check to enforce his obligation as the maker thereof. It is not a suit against the bank upon which the check was drawn which is the subject matter with which the section of the statute deals. In revoking or countermanding a check the drawer takes upon himself all the consequences of his act. 7 Am.Jur., Banks, Par. 602.

This section of the Uniform Act has no application here and is not inconsistent with the fact that the plaintiff acquired title to the check when it received it as a deposit in the manner found by the court. What is now V.S.1947, § 5637 was in force when Walker & Brock v. D. W. Ranlett Co. et al., supra, was decided. Paraphrasing the discussion of this section of the Uniform Act in 7 Am.Jur., Banks, Pars. 532 and 545, a majority of the courts held prior to the adoption of the Act that a check did not operate as an assignment of the drawer's funds as there was no privity of contract between the bank and the holder of the check until it was certified or accepted. The minority view was that the drawing and delivery of a check was in effect an assignment to the holder of the check of so much of the fund as the check called for. The act brought the law into harmony with the majority view and since its adoption the remedy of the holder is against the drawer or endorsers of the check as it was according to the majority view before its adoption. See also 9 C.J.S., Banks and Banking, § 366. Here the plaintiff is proceeding against the drawer as it may do under the act.

It remains to determine from...