Gaita v. Windsor Bank

• Decision Date: 28 May 1929
• Citation: 251 N.Y. 152,167 N.E. 203
• Parties: GAITA v. WINDSOR BANK.
• Court: New York Court of Appeals Court of Appeals

251 N.Y. 152

167 N.E. 203

GAITA

v.WINDSOR BANK.

Court of Appeals of New York.

May 28, 1929.

Action by Arthur Gaita, doing business under the firm name and style of the Palm Garage, against the Windsor Bank. From a judgment (225 App. Div. 750, 232 N. Y. S. 748) affirming a judgment of the Appellate Term, which affirmed a judgment of the Municipal Court of the City of New York in favor of plaintiff, defendant appeals.

Reversed, and new trial granted.

Appeal from Supreme Court, Appellate Division, First Department.

Walter M. Hinkle, of New York City, and Irving I. Goldsmith, of Saratoga Springs, for appellant.

Henry E. Stohldreier, of New York City, and Gordon Miller, of North Pelham, for respondent.

HUBBS, J.

The plaintiff was a depositor in the defendant bank. He drew and delivered to the payee a check on his account. The next morning, before the check had been presented for payment, he executed and delivered to the teller of the defendant bank a ‘stop payment notice,’ which reads: ‘Please stop payment on Check No. 220 for $500.00 dated July 1st, drawn by me to the order of Philip Bernstein atty. for E. Schneider & Son Garage Corp. and I hereby agree to indemnify The Windsor Bank against any loss resulting from nonpayment of said check. Should you pay this check through inadvertency, or oversight, it is expressly understood that you will in no way be held responsible.’ Five days later the check was paid by the defendant bank and the amount charged against the plaintiff's account.

This action is to recover from the defendant bank the amount paid by it and charged against the plaintiff. Thus far the plaintiff has succeeded upon the ground that the check was negligently paid by the bank and that such negligent payment made the bank absolutely liable to its depositor, without regard to the terms of the ‘stop payment notice.’ The courts below have refused to give any effect to the words, ‘Should you [bank] pay this check through inadvertency, or oversight, it is expressly understood that you will in no way be held responsible.’

Undoubtedly the drawer of a check which has not been certified has a legal right to stop the payment thereof by giving a seasonable stop payment notice to the bank upon which it is drawn, and, if the bank thereafter pays such check, it is liable to the drawer therefor. That is the bank's common-law liability. Such liability grows out of the relationship of the parties, which is that of debtor and creditor. After the receipt of an unequivocal notice to stop payment, a bank pays at its peril. American Defense Soc. v. Sherman Nat. Bank of New York, 225 N. Y. 506, 122 N. E. 695;Florence Min. Co. v. Brown, 124 U. S. 385, 8 S. Ct. 531, 31 L. Ed. 424;Usher v. A. S. Tucker Co., 217 Mass. 441, 105 N. E. 360, L. R. A. 1916F, 826.

The common-law liability of a bank in regard to a specific transaction may be limited provided the limitationhas the assent of the depositor. In such a situation the clearly expressed...