Hunt v. Security State Bank

• Decision Date: 04 March 1919
• Parties: HUNT v. SECURITY STATE BANK.
• Court: Oregon Supreme Court

179 P. 248

91 Or. 362

HUNT v. SECURITY STATE BANK.

Supreme Court of Oregon

March 4, 1919

Department 2.

Appeal from Circuit Court, Marion County; Geo. G. Bingham, Judge.

Action by John P. Hunt against the Security State Bank. Judgment for plaintiff, and defendant appeals. Affirmed.

The defendant, the Security State Bank, is a corporation engaged in the banking business in Woodburn, Or. The plaintiff, John P. Hunt, opened a general deposit account in the bank; and afterwards, on January 24, 1917, he drew a check directing the bank to pay $90 to the order of E. Burdick, and delivered the check to the payee in Salem. On January 27, 1917, at about 8:30 a. m., the defendant received, through the mail from the United States National Bank of Portland, a "cash letter" and ten checks drawn on the Woodburn bank. The "cash letter" is dated January 26, 1917. It contains an itemized statement of the amounts of the accompanying checks, shows that the total amount of the checks is $671.95, and directs the Security State Bank to remit to the United States National Bank "in Portland Exchange." The Burdick check was among the 10 checks received with the "cash letter." When the Burdick check reached the plaintiff it bore on its back the indorsements of E. Burdick, Ashley & Rumelin, Bankers, and the United States National Bank. Immediately upon receipt of the "cash letter" and the 10 checks E. H. Hoff, the president of the Security State Bank, "footed the checks on the adding machine to see they would total right with the cash letter, then examined the checks as to their signatures and as to whether each account had sufficient funds to meet it"; and then each check, including the Burdick check was marked "Paid, Security State Bank Jan. 27 1917," with the bank's "Paid" stamp; and finally each check was "placed upon a three-cornered spindle that has a three-cornered cutting edge, and are there mutilated." Whenever the Woodburn bank received a check through the mail, and ascertained that there were not sufficient funds to pay it, or if the signature was not regular, the bank never marked the paper "Paid," but the check was always returned to the forwarding bank. The steps taken by the defendant with reference to the "cash letter" and checks received from the Portland bank followed the same course which the bank had always taken when it received checks through the mail from outside banks. Speaking of the practice of the bank when it cashed a check over the counter, E. H. Hoff stated that the check was stamped "Paid," and then placed on the spindle. E H. Hoff testified that all checks, including both those which were cashed over the counter and also those received through the mail, when stamped "Paid" and placed upon the spindle, were "from that time on" used as "charge slips." It was the custom of the bank, according to the testimony of Hoff, to leave the checks on the spindle until the afternoon, at which time the bookkeeper took the checks and sorted "them in alphabetical order," and, using them as "charge slips," entered the amounts of the checks on the books of the bank against the accounts of the makers. The entries were usually made in the afternoon, but sometimes, when the work was "not caught up," the entries were made in the books the next morning. The "actual act of charging" the Burdick check on the books of the bank did not occur until some time in the afternoon of January 27th.

At about 9:15 on the morning of January 27, 1917, but after the Burdick check had been stamped "Paid" and placed upon the spindle, Hunt appeared at the bank, and asked for a statement of his account "up to date." The statement was at once prepared and delivered to Hunt. This document is in evidence, and shows upon its face that it is a "statement of your account to Jan. 27, 1917"; and at the bottom of the statement we read as follows: "Balance Jan. 26 173.23." The Burdick check is not mentioned in this statement. Upon receiving the statement of his account Hunt proceeded to examine it, and he says that, when he "saw that the E. Burdick check wasn't charged" to his account, he told Hoff that he "had a check out for ninety dollars in favor of E. Burdick," and that he "desired to stop payment on the check." Hunt testified that Hoff then said, "The E. Burdick check has just arrived; I have it here right in my hand;" and, according to Hunt's testimony, Hoff "reached to his left and picked off the spindle the check and handed me, which was the E. Burdick check." Hunt was then asked to relate the conversation which ensued between him and Hoff, and his answers, together with subsequent questions and answers, are here set down:

"A. Why, I said, 'You haven't my account charged with the check, not in this, and I am glad I got here before the account was charged, as I want payment stopped on it.'

"Q. What did he say? A. He hesitated--seemed nonplussed as to whether he could stop payment or not through the fact, he says, 'We have marked it "Paid,"' or 'stamped it "Paid."'

"Q. What else was said? A. Well, I told him he should send the check back--or rather he asked me what he should do in regard to it. I told him I wasn't up on banking terms, but would judge he would be capable of making some interlineation, if any was necessary, through the mark 'Paid,' and return the check.

"Q. What, if any, conversation did you have with him in reference to whether or not a remittance had been made? A. Well, he said no remittance had been made, and the account had not been charged."

The defendant denies that Hunt countermanded payment of the check; but we shall assume that the verdict of the jury necessarily implies a finding that Hunt directed the bank not to pay the check. At about 3 o'clock in the afternoon of January 27, 1917, the defendant drew a draft directing the Scandinavian American Bank of Portland to pay to the United States National Bank of that city the sum of $671.95, the amount of the 10 checks, including the Burdick check, which had been received with the "cash letter." This draft was mailed that afternoon to the United States National Bank, and was subsequently paid by the drawee bank.

In March, 1917, the plaintiff received from the defendant a statement, together with canceled checks mentioned in the statement, showing the condition of his account to March 2, 1917. The statement contained a charge of $90 under date of "Jan. 27," and the Burdick check was among the canceled checks. In the language of Hunt, "I didn't acknowledge the correctness of this statement, and I returned him (Hoff) the ninety-dollar check then and there." Subsequently, on April 21, 1917, the plaintiff drew a check on the defendant for $90 payable to "self," but the bank refused to pay the check, and wrote on it the words "Account closed." The plaintiff then commenced this action to recover the sum of $90, which he claims the bank wrongfully charged against his account. A trial resulted in a verdict and judgment for the plaintiff for $90. The defendant appealed.

H. Overton, of Woodburn, and Roy F. Shields, of Salem (H. Overton, of Woodburn, and Smith & Shields, of Salem, on the brief), for appellant.

W. C. Winslow, of Salem, for respondent.

HARRIS, J. (after stating the facts as above).

The defendant vigorously contends that it was entitled to a directed verdict. This contention proceeds upon the theory that the act of stamping the check "paid," followed by the act of placing it upon the spindle, where all "paid" checks were kept until entries were made upon the books, after having first ascertained that there were sufficient funds to the credit of the drawer, and that the signature was genuine, operated as a charge against the drawer, and as a credit to the holder of the check, and amounted to payment. The plaintiff insists that the acts of the defendant did not effect a transfer of credit from Hunt to the United States National Bank of Portland, the holder.

The relation existing between a bank and its depositor is that of debtor and creditor; a check is simply an order signed by the creditor (depositor) directing the debtor (bank) to pay money to a named person; an uncertified check of itself does not operate as a legal or as an equitable assignment of any part of the funds in the bank, and, unless it accepts the check, the bank is not liable to the holder; and consequently the drawer of the check can, if he chooses, countermand the check or first order, and the bank will be obliged to obey the second or countermanding order, unless the bank has paid, or has become obligated to pay, the check. Section 6022, L. O. L.; United States National Bank v. First Trust & Savings Bank, 60 Or. 266, 272, 119 P. 343; Marks v. First National Bank, 84 Or. 601, 603, 165 P. 673; Pullen v. Placer County Bank, 138 Cal. 169, 172, 66 P. 740, 71 P. 83, 94 Am. St. Rep. 19; Rogers Com. Co. v. Bank of Leslie, 100 Ark. 537, 140 S.W. 992; Pease & Dwyer v. State National Bank, 114 Tenn. 693, 88 S.W. 172; First National Bank of Durant v. School District No. 4, Bryan County, 31 Okl. 139, 120 P. 614, 39 L. R. A. (N. S.) 655; Hentz v. National City Bank, 159 A.D. 743, 144 N.Y.S. 979; Kahn v. Walton, 46 Ohio St. 195, 20 N.E. 203; Buskirk v. State Bank, 35 Colo. 142, 83 P. 778, 117 Am. St. Rep. 182; Usher v. Tucker Co., 217 Mass. 441, 105 N.E. 360, L. R. A. 1916F, 826; 5 R. C. L. 526; 7 C.J. 701; 2 Michie on Banks and Banking, 1101.

If what the bank did prior to Hunt's conversation with Hoff amounted to payment, then Hunt had lost the right to countermand payment of the check.

During the investigation we must not lose sight of the fact that payment and acceptance are essentially different. Payment is the natural, expected, and intended end of a check. Acceptance strengthens the vitality of a check, and...