Howard Bank v. Iron Kettle Restaurant of Bolton, Inc., 190-79

• Decision Date: 27 February 1981
• Docket Number: No. 190-79,190-79
• Citation: 139 Vt. 374,428 A.2d 1138
• Court: Vermont Supreme Court
• Parties: , 33 UCC Rep.Serv. 1734 The HOWARD BANK v. IRON KETTLE RESTAURANT OF BOLTON, INC., and Elsa M. Morse and Leigh Lacaillade, Executor of the Estate of Monroe M. Lacaillade.

Page 1138

428 A.2d 1138

139 Vt. 374, 33 UCC Rep.Serv. 1734

The HOWARD BANK v. IRON KETTLE RESTAURANT OF BOLTON, INC., and Elsa M. Morse and Leigh Lacaillade, Executor of the Estate of Monroe M. Lacaillade.

No. 190-79.

Supreme Court of Vermont.

Feb. 27, 1981.

Anthony B. Lamb of Paul, Frank & Collins, Inc., Burlington, for plaintiff.

Before BARNEY, C. J., and DALEY, LARROW, BILLINGS and HILL, JJ.

BARNEY, Chief Justice.

This is an appeal by the plaintiff, The Howard Bank, in an action brought against a corporate depositor and its two 50% shareholders. The corporation, The Iron Kettle Restaurant, maintained a checking account with the Bank on which either shareholder was empowered to write checks. After a disagreement, each went to a separate branch of the Bank and wrote a check for $1,000. Both checks were accepted and an overdraft of approximately $1,000 resulted. The Bank brought suit against the corporation and against both shareholders individually to recover the amount of the overdraft. The trial court rendered judgment against the corporation, but in favor of the individual shareholders. The plaintiff appeals that part of the judgment which was rendered in favor of the individual defendant Lacaillade.

Defendants Wells and Lacaillade each owned half of the outstanding shares of the defendant restaurant. Although both were authorized to write checks on the corporate account, Wells had the checkbook in her possession on the day of the withdrawals. Lacaillade reached a branch of the Bank first, however, and by means of a counter check, with the help of the teller, wrote a $1,000 draft on the account. The teller verified that there were sufficient funds to cover the check, and then, without putting a hold on those funds, gave Lacaillade a cashier's check in return.

Later that same morning, Wells presented a corporate check for the same amount to an officer of the Bank at a different branch. The available balance was again checked, and since the first teller did not earmark the funds necessary to cover the cashier's check, sufficient funds were once again indicated. Wells' check was therefore accepted and a corresponding amount was credited to her personal account. At Wells' request, a hold was placed on the funds necessary to cover this check. When accounts were reconciled that night, at the central office, the overdraft was discovered and the Bank decided to return Lacaillade's check for insufficient funds. His refusal to reimburse the bank for the cashier's check gave rise to this law suit.

Finding that an overdraft had occurred, the trial court held the restaurant liable under 9A V.S.A. § 4-401(1). Finding further that neither individual defendant knew of the withdrawal by the other, it found no fraud and concluded that the individual defendants had acted in their...