Haman v. First Nat. Bank in Sioux Falls, 9935

• Decision Date: 19 June 1962
• Docket Number: No. 9935,9935
• Citation: 79 S.D. 565,115 N.W.2d 883
• Parties: Henry HAMAN, Plaintiff and Appellant, v. The FIRST NATIONAL BANK IN SIOUX FALLS, a Corporation, Defendant and Respondent.
• Court: South Dakota Supreme Court

Page 883

115 N.W.2d 883

79 S.D. 565

Henry HAMAN, Plaintiff and Appellant, v. The FIRST NATIONAL BANK IN SIOUX FALLS, a Corporation Defendant and Respondent.

No. 9935.

Supreme Court of South Dakota.

June 19, 1962.

Rehearing Denied Sept. 14, 1962.

Dana, Golden, Moore & Rasmussen, Sioux Falls, for plaintiff and appellant.

Jones & Matthews, Sioux Falls, for defendant and respondent.

ROBERTS, Judge.

This is an action by the drawer of a check against the drawee bank seeking judgment in the amount of $1,000 being the amount of the check charged to plaintiff's account after request to stop payment was made by the drawer. The trial court granted defendant's motion for judgment notwithstanding the verdict. Plaintiff has appealed.

Plaintiff drew and delivered the check in Minneapolis, Minnesota, on November 14, 1956, payable to the order of the Calhoun Realty Company for the purpose of making a down payment on purchase of a bowling alley. The conflicting evidence was sufficient to present a question of fact as to whether a request to stop payment had been made before the check had been accepted, certified or paid. The jury could reasonably have found that plaintiff the day the check was written and delivered telephoned defendant bank in Sioux Falls and talked to assistant vice president R. M. Hahn and stated that he wanted to stop payment on the check. Mr. Hahn told plaintiff to make his request in writing. Plaintiff made such a request in a letter mailed on November 14, 1956. Plaintiff's check was received by defendant bank and charged to his account on November 17, 1956.

The check in question was returned to the plaintiff on December 18, 1956, together with other canceled checks and bank statement for the month of November, showing that the check had been charged to plaintiff's account. At the time the account was opened plaintiff signed a card on which among other provisions were printed the following: 'This bank will not be liable for any amount paid on any forged * * * check, nor for any difference of account, unless written notice thereof is delivered to this bank within 10 days after date of mailing or delivering the depositor's statement' and 'Any request for stop payment must be in writing on a form prescribed by this bank, and this bank will not be liable * * * for paying the item through accident or oversight'. We hereinafter refer to this instrument as the deposit contract. Plaintiff did not report or give notice of any claimed error in the statement of his account until the latter part of January, 1957, at which time he complained of the failure of the bank to stop payment as requested. Plaintiff testified that Mr. Hahn suggested that he bring to the bank the copy of the letter requesting the bank to stop payment and any records that he might have pertaining to the check and that an attempt would be made to adjust the matter. Mr. Hahn testified that he knew of no claim of error in the account until a short time before the present action was instituted in October, 1959.

In his memorandum decision the learned trial judge reviewed the evidence at length and concisely stated the reasons that compelled him to grant defendant's motion for judgment notwithstanding the verdict as follows: 'At the time the account was opened the plaintiff signed an agreement therefor which was received in evidence without objection. * * * As I construe the term 'difference of account' it includes not only mathematical errors or mistakes in accounting, but also any difference in the account as kept or claimed by the customer and as made by the bank. This would include differences caused by the payment by mistake from the account of any check or item. In the latter category would necessarily be included a check which was mistakenly paid after a stop payment order had been made. * * * In case of a difference of account the agreement requires that notice thereof be given to the bank. Plaintiff urges that a notice was not necessary for the reason that the bank had actual knowledge of the claimed difference and that the law does not require a useless act. It can be said that the bank had knowledge of its own act but the purpose of the notice is not only to inform the bank of the fact of improper payment but of plaintiff's claims and intentions. * * * Perhaps as the jury found defendant was at fault but the point is if the notice had been given it might have been able to have shown the contrary. At any rate, it appears to be a reasonable construction of the contract to conclude that notice should be given in such cases so that a bank with multiple transactions is forewarned in sufficient time so that it may ascertain the facts and protect itself against unjust claims. * * * The court's decision that defendant's motion should be granted is based on the belief the contractual provision discussed is valid, that the bank did not waive compliance therewith and that it was prejudiced by plaintiff's failure to do so.'

The relationship between a bank and its depositor is that of debtor and creditor. Barbour v. First Citizens Nat. Bank of Watertown, 77 S.D. 106, 86 N.W.2d 526. A check is no more than an order on the bank to pay a stated amount to the named payee from the drawer's account and does not operate as an assignment of any part of the funds to the credit of the drawer. SDC 46.1602, 46.1606. The drawer of a check, before presentation to the bank and acceptance, certification or payment, may stop or delay payment. It is conceded that defendant bank owed plaintiff depositor the absolute duty to pay out his money only according to plaintiff's order. If there is a breach of a depositor's instruction to stop payment, a bank under accepted common law principles becomes obligated to pay the depositor the amount charged against his account. It is contended that the stipulations referred to limit liability on paying a check in disregard of a stop payment order and are valid and enforceable.

There can be no mistake in regard to the meaning of the words any 'difference of account' in the deposit contract. As we have stated the relation of a bank and depositor is simply that of debtor and creditor. The bank agrees with the depositor to receive and credit his deposits and to honor his checks to the amount of his credit when checks are presented. The term 'account' as used in such agreement is an account in the ordinary acceptation of that term, that is, a statement of debits and credits entered on the books of the bank during a stated period of time. In 103 A.L.R. 1147, there appears the following summary of the law with respect to the duty of a depositor, in the absence of an express agreement, to examine statement of his account and report discovered discrepancies: 'The later decisions support the general rule that it is the duty of a depositor in a bank to examine the balanced pass book, statement of account, or canceled checks returned to him by the bank, within a reasonable time after receiving them, and to report to the bank any forgeries, or other discrepancies in the amounts, which he may discover.' Under the general law and the terms of the deposit contract plaintiff was required to examine the statement and to report any discrepancy resulting from debiting the check in controversy.

The deposit contract limits the time within which to examine and give notice of 'difference of account' to ten days after date of mailing or delivery of bank statement to the depositor. A bank undoubtedly has the right to determine for itself whether or not it will accept a deposit and it may agree upon the terms and conditions on which the deposit will be accepted so long as they are not in conflict with a controlling statute or other rule of law. In McCormick v. Rapid City Nat. Bank, 67 S.D. 586, 297 N.W. 39, the deposit contract limited the time within which to examine and give notice to 15 days after receiving a monthly statement. There is here no claim that plaintiff did not have sufficient time and reasonable opportunity to examine the November statement and canceled checks and to report discrepancy, if any, within the 10 day period. More than that number of days elapsed before plaintiff called attention to the failure of the bank to stop payment of the check in controversy. Upon the authority of the McCormick case, provisions of the deposit contract whereby the depositor agreed to examine monthly statements and to report forgeries or other discrepancies in the amounts which he may discover became a part of the contract between the bank and the depositor and in the absence of waiver of other special circumstance are binding.

The deposit contract as we have indicated also includes the limitation that the bank shall not be liable for paying a stop payment item through 'accident or oversight'. Such stipulations relieving banks from liability for payment of checks in disregard of stop payment orders are usually contained in stop payment orders. The weight of authority supports the view that such a stipulation in a stop payment order constitutes a valid and enforceable contract. Gaita v. Windsor Bank, 251 N.Y. 152, 167 N.E. 203; Chase Nat. Bank of City of New York v. Battat, 297 N.Y. 185, 78 N.E.2d 465; Thomas v. First Nat. Bank of Scranton, 173 Pa.Super. 205, 96 A.2d 196; cf. Brunswick Corp. v. Northwestern Nat. Bank & Trust Co., 214 Minn. 370, 8 N.W.2d 333, 146 A.L.R. 833; see also cases collected in 175 A.L.R. 79, 1 A.L.R.2d 1155, and 60 A.L.R.2d 708. Other authorities are to the effect that such a stipulation in a stop payment order is invalid on the ground of want of consideration and as against public policy. Speroff v. First-Cent. Trust Co., 149 Ohio St. 415, 79 N.E.2d 119, 1 A.L.R.2d 1150, is illustrative of this view. These courts reason that a bank having money to the credit of a depositor is not at liberty to demand a waiver of liability before undertaking performance of the legal duty to honor a stop payment order. The instant...