First Wyoming Bank v. Cabinet Craft Distributors, Inc.

• Decision Date: 18 February 1981
• Docket Number: No. 5366,5366
• Citation: 624 P.2d 227
• Parties: 30 UCC Rep.Serv. 1194 FIRST WYOMING BANK, N.A. Sheridan, a Wyoming Corporation, Appellant (Defendant), v. CABINET CRAFT DISTRIBUTORS, INC., a Montana Corporation, Appellee (Plaintiff).
• Court: Wyoming Supreme Court

Page 227

624 P.2d 227

30 UCC Rep.Serv. 1194

FIRST WYOMING BANK, N.A. Sheridan, a Wyoming Corporation, Appellant (Defendant), v. CABINET CRAFT DISTRIBUTORS, INC., a Montana Corporation, Appellee (Plaintiff).

No. 5366.

Supreme Court of Wyoming.

Feb. 18, 1981.

Michael K. Shoumaker, Badley, Rasmussen & Shoumaker, Sheridan, for appellant.

Kim D. Cannon, Burgess & Davis, Sheridan, for appellee.

Before ROSE, C. J., ^* and McCLINTOCK, RAPER, ^** THOMAS and ROONEY, JJ.

ROSE, Chief Justice.

The Uniform Commercial Code provides that except in certain circumstances a bank is liable for the amount of a check which it fails to timely dishonor. Section 34-21-451, W.S.1977 (U.C.C. § 4-302). In this case, the appellee presented a check payable to itself to the appellant bank. The payor had insufficient funds on deposit with the bank to cover the check. The bank dishonored the check but failed to do so within the time mandated by the Uniform Commercial Code.

Appellee then sued in district court for the face amount of the check, interest and costs. The district court agreed with the appellee that the bank was liable under the Code and gave judgment accordingly. The bank has appealed and argues that its "excuse" for failing to timely dishonor the check is sufficient under the Code to enable it to escape liability. Section 34-21-408(b), W.S.1977 (U.C.C. § 4-108(2)).

We shall affirm the trial court.

The case was tried on stipulated facts. However, before presenting the stipulation, it is appropriate to reproduce the controlling Code provisions.

THE STATUTES

Section 34-21-451 (U.C.C. § 4-302), supra, provides:

"(a) In the absence of a valid defense such as breach of a presentment warranty (subsection (1) of section 4-207 (§ 34-21-426(a))), 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:

"(i) A demand item other than a documentary draft 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, regardless of whether it is also the depository bank, does not pay or return the item or send notice of dishonor until after its midnight deadline; or

"(ii) Any other properly payable item unless within the time allowed for acceptance or payment of that item the bank either accepts or pays the item or returns it and accompanying documents."

The term "midnight deadline" is defined in § 34-21-404(a)(viii), W.S.1977 (U.C.C. § 4-104(1)(h)):

"(viii) 'Midnight deadline' with respect to a bank is midnight on its next banking day following the banking day on which it receives the relevant item or notice or from which the time for taking action commences to run, whichever is later;"

Section 34-21-408(b) (U.C.C. § 4-108(2)), supra, provides:

"(b) Delay by a collecting bank or payor bank beyond time limits prescribed or permitted by this act or by instructions is excused if caused by interruption of communication facilities, suspension of payments by another bank, war, emergency conditions or other circumstances beyond the control of the bank provided it exercises such diligence as the circumstances required." (Emphasis added.) ¹

In arguing that the delay in dishonoring the check was excusable, appellant bank also relies on 12 Code of Federal Regulations 210.14 which provides:

"If, because of interruption of communication facilities, suspension of payments by another bank, war, emergency conditions or other circumstances beyond its control, any bank (including a Federal Reserve bank) shall be delayed beyond the time limits provided in this part or the operating letters of the Federal Reserve banks, or prescribed by the applicable law of any State in taking any action with respect to a cash item or a noncash item, including forwarding such item, presenting it or sending it for presentment and payment, paying or remitting for it, returning it or sending notice of dishonor or nonpayment or making or providing for any necessary protest, the time of such bank, as limited by this part or the operating letters of the Federal Reserve banks, or by the applicable law of any State, for taking or completing the action thereby delayed shall be extended for such time after the cause of the delay ceases to operate as shall be necessary to take or complete the action, provided the bank exercises such diligence as the circumstances require."

The bank points out that under § 34-21-403, W.S.1977 (U.C.C. § 4-103), if not under the supremacy clause of the Federal Constitution, the above regulation is controlling law in Wyoming. We agree that the regulation controls but fail to see how it adds anything to § 34-21-408(b) (U.C.C. § 4-108(2)), supra. In light of the stipulated facts to be presented immediately below, it appears that either under the statute or the regulation the bank must show that its delay in dishonoring the check was due to circumstances beyond its control and that the bank exercised such diligence as the circumstances required.

THE FACTS

The stipulated facts are quoted below. As we understand the facts, both parties to this suit have acted in good faith and the plaintiff-appellee has made no showing that it was prejudiced by the untimely dishonor of the check. The untimely dishonor of the check was due to delay in delivering checks from a computer center in Billings, Montana, to the bank in Sheridan. Normally, the same courier delivering the checks to the Montana computer center from Sheridan would have driven them back to Sheridan after the center had processed them. However, after the check in issue had been taken to Billings, the main road between Billings and Sheridan became flooded. Although the courier could have taken an alternate route back to Sheridan, the check was instead given to Western Airlines by the computer center to be placed on the next morning's flight to Sheridan. For unknown reasons Western Airlines failed to deliver the check to Sheridan although it made its usual flight. Western Airline's failure to deliver the check to Sheridan as planned caused the bank to miss its Uniform Commercial Code deadline for dishonoring the check.

STIPULATION OF FACTS BY LITIGANTS

"The parties, Cabinet Craft Distributors, Inc., a Montana Corporation, and First Wyoming Bank, N. A. Sheridan, Wyoming, a Wyoming Corporation, by and through their undersigned attorneys enter into the following Stipulations and Admission of Facts for the purpose of simplifying the factual issues to expedite the litigation.

"I.

"The Defendant, First Wyoming Bank, is the payor bank on a check drawn on account # 01-209-2 of Quality Kitchens, a division of Flynn's Inc., for Ten Thousand Dollars ($10,000.00). That check is Plaintiff's Exhibit '1' and is dated May 6, 1978. Plaintiff, Cabinet Craft Distributors, Inc., is the payee pursuant to that check. The parties stipulate that said check shall be admitted in evidence as Plaintiff's Exhibit '1' for all purposes.

"II.

"Plaintiff's Exhibit '1' was delivered to Jerry Franz of of (sic) Cabinet Craft Distributors, Inc., on May 6, 1978, as partial payment for cabinets and other related kitchen ware sold by Cabinet Craft Distributors, Inc., to Quality Kitchens prior to that date.

"III.

"Plaintiff's Exhibit '1' was then deposited in the account of Cabinet Craft Distributors, Inc., in the Security Bank of Billings on May 8th, 1978. Security Bank as the depository bank then credited the account of Cabinet Craft Distributors, Inc., in the amount of Ten Thousand Dollars ($10,000.00) and proceeded to send the check throught (sic) the bank collection system.

"IV.

"Plaintiff's Exhibit '1' was mailed from the Denver Federal Reserve Bank on May 20, 1978, to the Defendant, First Wyoming Bank of Sheridan, for payment.

"V.

"Plaintiff's Exhibit '1' was received by the First Wyoming Bank of Sheridan, at the office of the bank as a cash item for payment on Monday, May 22, 1978, prior to 3:00 o'clock P.M. On May 22, 1978, the check was sent from the First Wyoming Bank Sheridan, to a computer center in Billings, Montana, run by Data Share, Incorporated, which the First Wyoming Bank uses to process its checks in the normal course of business. The check was taken by Jack Burns, an employee of Robert Collins, who contracts for the First Wyoming Bank as a courier to transport checks to the computer center in Billings. The courier would have left Sheridan (at) approximately 6:00 P.M. on May 22 and arrived in Billings between 8 and 10 P.M. The material would have been processed within an hour or two after its arrival in Billings.

"VI.

"The computer center printed Plaintiff's Exhibit '2' admitted in evidence for all purposes by stipulation of the parties, which Exhibit is entitled 'Unposted Transaction Journal' and dated May 22, 1978.

"VII.

"In the Unposted Transaction Journal the catagory (sic) for Reason Not Posted was labeled Non Sufficient Funds due to a hold.

"VIII.

"In the normal course of business the courier would wait at the computer center until the checks have been processed and then return immediately with the checks and a computer print out to Sheridan showing all the checks processed by the computer center. On May 22, 1978, after the courier had gone through toward Billings, the main road between Sheridan, Wyoming, and Billings, was closed due to flooding for a period of several days. If the courier had delivered the checks through Lovell, Wyoming, and come across the Big Horn Mountains it would have been possible to have provided the checks to the First Wyoming Bank during the banking day of May 23, 1978.

"IX.

"Since the courier did not drive back to Sheridan, Wyoming, from Billings, the checks were placed by Data Share, Incorporated on Western Airlines, which was the normal procedure when the courier could not travel or when for computer reasons it took longer to run the checks than the courier could...