First Nat. Bank of Trinity, Texas v. McKay

Decision Date20 March 1975
Docket NumberNo. 16476,16476
Citation16 UCCRep.Serv. 1294,521 S.W.2d 661
Parties16 UCC Rep.Serv. 1294 FIRST NATIONAL BANK OF TRINITY, TEXAS, Appellant, v. Frank J. McKAY, Appellee. (1st Dist.)
CourtTexas Court of Appeals

Joe J. Newman, Houston, for appellant.

Douglas P. Allen, Cleveland, for appellee.

COLEMAN, Chief Justice.

This is a suit to recover the amount of a post-dated check from its maker. The bank on which it was drawn refused payment because of a stop payment order. The plaintiff contends that it was an innocent purchaser for value. The case was tried to the jury and judgment was rendered for the defendant on the verdict.

On March 26, 1973 Frank J. McKay, the defendant, issued his check in the amount of $756.00 to H. V. Petro in connection with a building contract. While the check was dated March 29, 1973, the plaintiff, First National Bank of Trinity, Texas, accepted it for deposit on March 26, 1973, and permitted its depositor, Petro, to withdraw the funds prior to the collection of the check. The check was forwarded for collection through normal banking channels by the plaintiff, and when it was returned with a stop payment notation, the bank charged it back against Petro's account. Since the balance in the account at that time was $40.00, the bank tried to contact Mr . Petro to collect the difference, but was unable to locate him. On or about June 13, 1973, the bank demanded payment from Dr. McKay. Prior thereto, on April 15, Dr. McKay had settled his differences over the building contract with Mr. Petro, and had given him a release. In connection with this settlement Dr. McKay did not require that Mr. Petro return the check to him.

In answer to issues submitted, the jury found that the First National Bank of Trinity, Texas, was negligent in cashing the check in question without making further investigation of the fact that the check was dated March 29, 1973, and was presented for payment on March 26, 1973, and that such failure was the proximate cause of the bank's loss of $716.00. The jury failed to find that the bank was a holder in due course of the check in question. It found that the bank was guilty of laches as to Frank J. McKay. The term 'laches' was defined as 'a delay in enforcing rights not taken until the condition of the other party has become so changed that he cannot be restored to his former state, and thus such a delay as works a disadvantage to another.'

At the conclusion of the testimony plaintiff moved for an instructed verdict, and after the verdict of the jury was returned, moved for a judgment notwithstanding the verdict. The plaintiff contends on appeal that the trial court was in error in refusing to sustain both motions for the reason that the evidence established as a matter of law that the bank was an innocent purchaser for value of the check in question, and that there is no evidence to raise an issue as to any defense authorized by law to the maker of a negotiable instrument as against a purchaser in good faith.

The disposition of this case is largely governed by the provisions of the Uniform Commercial Code, which has been adopted in Texas and may be found in Vernon's Texas Codes Annotated, Business and Commerce. Section 3.114(a), Uniform Commercial Code, provides: 'The negotiability of an instrument is not affected by the fact that it is undated, antedated or postdated.' The check in question is a negotiable instrument. Section 3.104, Uniform Commercial Code. Aetna Life and Casualty Co. v. Hampton State Bank, 497 S.W.2d 80 (Tex.Civ.App.--Dallas 1973, writ ref'd n.r.e.); Shotts v. Pardi, 483 S.W.2d 879 (Tex.Civ.App.--Corpus Christi 1972, writ dism'd); Roland v . Republic National Bank of Dallas, 463 S.W.2d 747 (Tex.Civ.App.--Waco 1971, writ ref'd n.r.e.).

A holder in due course is defined in Section 3.302 of the Uniform Commercial Code as being a holder who takes the instrument for value, in good faith, and without notice that it is overdue or has been dishonored or of any defense against or claim to it on the part of any person. Section 3.304(d) of the Code provides that knowledge that the instrument is ante-dated or post-dated does not of itself give the purchaser notice of a defense or claim. It is not contended in this case that the plaintiff had notice of any claim or defense on the part of the defendant unless it was put on notice of some infirmity in the instrument by reason of the fact that it was post-dated. Section 4.208, supra, provides that a bank has a security interest in an item deposited in an account to the extent to which credit given for the item has been withdrawn or applied. Section 4.209, supra, provides that for the purposes of determining its status as a holder in due course, the bank has given value to the extent that it has a security interest in an item provided that the bank otherwise complies with the requirements of Section 3.302 on what constitutes a holder in due course.

As between a bank on which a check is drawn and the maker of the check, Section 4.403, supra, authorizes a stop payment order. Section 3.413, supra provides:

'(a) The maker or accepter engages that he will pay the instrument according to its tenor at the time of his engagement or as completed pursuant to Section 3.115 on incomplete instruments.

'(b) The drawer engages that upon dishonor of the draft and any necessary notice of dishonor or protest he will pay the amount of the draft to the holder or any indorser who takes it up. . . .'

The stop payment order, therefore, is effective to forbid the bank on which a check is drawn from paying the check, but it does not affect the liability of the maker of a check to its holder.

Section 3.307, supra, provides that unless specifically denied in the pleadings each signature on an instrument is admitted. It further provides that when signatures are admitted or established, production of the instrument entitles a holder to recover on it unless the defendant establishes a defense. After it is shown that a defense exists a person claiming the rights of a holder in...

To continue reading

Request your trial
9 cases
  • Carnival Leisure Industries, Ltd. v. Aubin, Civ. A. H-87-1754.
    • United States
    • United States District Courts. 5th Circuit. United States District Courts. 5th Circuit. Southern District of Texas
    • August 20, 1993
    ...as his gambling. A negotiable instrument that is not dated is payable on demand. Tex.Bus. & Com.Code Ann. § 3.108; First Nat'l Bank v. McKay, 521 S.W.2d 661, 662 (Tex.Civ. App. — Houston 1st Dist. 1975, no writ); Gill v. Commonwealth Nat'l Bank of Dallas, 504 S.W.2d 521, 523 (Tex.Civ.App. —......
  • Esecson v. Bushnell, 82CA0239
    • United States
    • Court of Appeals of Colorado
    • February 3, 1983
    ...payee or endorser, the maker remains liable on the instrument. Sections 4-3-413(2) and 4-4-403, C.R.S.1973; see First National Bank v. McKay, 521 S.W.2d 661 (Tex.Civ.App.1975). Consequently, we hold that a post-dated check constitutes valid consideration for a contract. II. We also agree wi......
  • Vail Nat. Bank v. J. Wheeler Const. Corp., 82CA0959
    • United States
    • Court of Appeals of Colorado
    • July 21, 1983
    ...Wells Equipment Co., Inc. v. Citizens National Bank of Southern Maryland, 263 Md. 133, 282 A.2d 109 (1971); First National Bank of Trinity v. McKay, 521 S.W.2d 661 (Tex.Civ.App.1975). Defendant also contends that the check could not have been cashed in good faith because the bank officers k......
  • RR Maloan Invs., Inc. v. New Hge, Inc.
    • United States
    • Court of Appeals of Texas
    • May 1, 2014
    ...because the negotiability of a check is not affected by post-dating. SeeTex. Bus. & Com.Code Ann. § 3.113; First Nat'l Bank of Trinity, Tex. v. McKay, 521 S.W.2d 661, 664 (Tex.Civ.App.-Houston [1st Dist.] 1975, no writ). 1 A holder is presumed to be a holder in due course unless there is ev......
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT