Holloway v. First Nat. Bank

• Decision Date: 13 March 1928
• Docket Number: 4756
• Citation: 265 P. 699,45 Idaho 746
• Parties: GENE H. HOLLOWAY, Whose True Name is E. H. HOLLOWAY, Respondent, v. FIRST NATIONAL BANK OF POCATELLO, IDAHO, a Corporation, Appellant
• Court: Idaho Supreme Court

265 P. 699

45 Idaho 746

GENE H. HOLLOWAY, Whose True Name is E. H. HOLLOWAY, Respondent, v. FIRST NATIONAL BANK OF POCATELLO, IDAHO, a Corporation, Appellant

No. 4756

Supreme Court of Idaho

March 13, 1928

BANKS AND BANKING-BANK CHECKS-RIGHTS OF HOLDER AS AGAINST BANK.

1. As against depositor, bank has right at any time before actual payment to him to apply deposit to payment of his matured debts or obligations held by bank.

2. Garnishee bank has right to set off against indebtedness owing from it to depositor, a defendant in an attachment suit, any indebtedness due from defendant to bank, and lien of garnishment reaches only the excess.

3. That plaintiff was holder of check did not empower him to sue drawee bank, in absence of acceptance or certification by it.

4. Payee of check could not recover against drawee bank refusing payment because of alleged misrepresentation regarding sufficiency of drawer's deposit, where if bank had not made alleged misrepresentation he could not have reached deposit in bank's hands by garnishment proceeding because depositor owed bank more than amount of deposit, and therefore payee sustained no damage because of alleged misrepresentation.

APPEAL from the District Court of the Fifth Judicial District, for Bannock County. Hon. Robert M. Terrell, Judge.

Action for damages. Judgment for plaintiff. Reversed, with instructions to dismiss.

Judgment reversed, with instructions.

Merrill & Merrill, for Appellant.

A check does not of itself operate as an assignment of any part of the funds to the credit of the drawer with a bank, and the bank is not liable to the holder unless and until it accepts or certifies the check. (C. S., sec. 6056.)

Unless the bank accepts or certifies the check it is under no liability whatever to the payee for refusing to pay a check. (Kaesemeyer v. Smith, 22 Idaho 1, 123 P. 943, 43 L R. A., N. S., 100; Elyria Savings & Banking Co. v. Walker Bin Co., 92 Ohio St. 406, Ann. Cas. 1917D, 1055, 111 N.E. 147, L. R. A. 1916D, 433; John Marbel Co. v Merchants' National Bank of Los Angeles, 15 Cal.App. 347 115 P. 59.)

A bank has a lien on a customer's deposit for indebtedness owing it by the depositor. (C. S., sec. 6415.)

It has a right to charge off a deposit against a past due indebtedness. (Aurora Nat. Bank v. Dils, 18 Ind.App. 319, 48 N.E. 19; Citizens Savings Bank v. Vaughan, 115 Mich. 156, 73 N.W. 143; People's Bank & Trust Co. v. Tufts, 59 N.J.L. 380, 35 A. 792; Durkee v. National Bank, 102 F. 845, 42 C. C. A. 674; Irish v. Citizens' Trust Co., 163 F. 880.)

B. W. Davis, for Respondent.

C. S., sec. 6056, is only intended as a protection to banks so long as they act in good faith, lawfully and not with the intent to prefer themselves and others. (Kaesemeyer v. Smith, 22 Idaho 1, 123 P. 943, 43 L. R. A., N. S., 100; McClain & Norvet v. Torkelson, 187 Iowa 202, 5 A. L. R. 1665, 174 N.W. 42; Edwards v. Guaranty Trust & Savings Bank, 48 Cal.App. 787, 192 P. 324, 21 L. R. A. 440 (note on banking customs).

There is an implied promise on part of banks to cash checks of parties holding the same. (1 Michie on Banks and Banking, p. 10; 7 C. J., pp. 475-477; U. S. Rev. Stats., sec. 3407; Barnes' Federal Code 1919, sec. 5383; Fogarties & Stillman v. State Bank, 12 Rich. L. 518, 78 Am. Dec. 468; Robinson v. Bank of Pikeville, 146 Ky. 538, 142 S.W. 1065, 37 L. R. A., N. S., 1186.)

BAKER, District Judge. Wm. E. Lee, C. J., Taylor, T. Bailey Lee, JJ., and GIVENS, J. concur. Budge, J., deeming himself disqualified, took no part in the decision.

OPINION

BAKER, District Judge.--

The amended complaint of the plaintiff, E. H. Holloway, the respondent in this court, is to the effect that on November 3, 1924, the check of the House of North, dated November 1st of that year, for the sum of $ 739.34, drawn upon a sufficient deposit, payable to the plaintiff, was presented to the defendant, the drawee bank, the appellant in this court, for payment. The plaintiff charged that the bank, for the express purpose and with the intent of deceiving him and of assisting and preferring itself and others, but excluding plaintiff, in collecting for their own benefit the deposit to the credit of the House of North and properly payable on the check presented for him, wrongfully, fraudulently and without right refused to pay his check and, for the same purpose, falsely assigned as the reason for nonpayment the insufficiency of the deposit to the credit of the drawer. Plaintiff alleged that he was deceived by the act of the bank "to his damage in the sum of $ 739.34," the amount of the check. Plaintiff charged that after the presentation of his check, defendant paid from the deposit to the credit of the drawer checks in favor of itself and others and exercised its lien and applied a part of the deposit to the payment of the matured indebtedness held by the defendant against the House of North.

The defendant, by its answer, denied generally the material allegations of the amended complaint but admitted the application of part of the deposit to the payment of indebtedness alleged to exceed $ 10,000 of which a part was then overdue.

The evidence shows that the House of North during the month of October, 1924, gave to the plaintiff its check for the sum of $ 739.34, dated November 1st. The plaintiff indorsed the check, waived protest and deposited it in a Salt Lake City bank. The check reached the bank of the defendant through the mails on the morning of November 3d. At the time the check was presented, throughout the whole of that day and until some time during the following business day, the account of the drawer, as shown by the records of the bank, was sufficient to warrant a payment of the check. The bank, however, returned the check with a notation to the effect that it was not paid by reason of the insufficiency of the deposit to the credit of the drawer. On November 3d, and after plaintiff's check reached the bank, other checks, including one to defendant, were cashed. On the following business day $ 500 of the deposit was applied to the payment of overdue indebtedness, a check for a like sum was likewise applied and other checks were cashed. Thereafter and until the account of the drawer was closed, during the latter part of the month, other checks were cashed but the deposit was never sufficient at the close of business on any day to make payment of the check. The bank had not accepted or certified the check or promise to make payment and did not know of its existence until presented. The plaintiff took no further action and the check was never paid. About December 1st a receiver took charge of the drawer's business.

The judgment appealed from followed verdict for the full amount claimed.

The defendant assigns several reasons for reversal, but not all will be considered.

We do not deem it necessary to decide whether conditions may exist to warrant suit by the holder of an uncertified or unaccepted check against the bank on which the check is drawn, or to determine what duty, if any, is imposed upon a drawee bank by the presentation of a check, or whether a bank can render itself answerable for the damages sustained by the holder of a...