North Carolina Nat. Bank v. Harwell

• Decision Date: 03 October 1978
• Docket Number: No. 7718DC859,7718DC859
• Court: North Carolina Court of Appeals
• Parties: , 5 A.L.R.4th 928, 25 UCC Rep.Serv. 225 NORTH CAROLINA NATIONAL BANK, v. Rupert A. HARWELL, Jr.

Page 720

247 S.E.2d 720

38 N.C.App. 190, 5 A.L.R.4th 928, 25

UCC Rep.Serv. 225

NORTH CAROLINA NATIONAL BANK, v. Rupert A. HARWELL, Jr.

No. 7718DC859.

Court of Appeals of North Carolina.

Oct. 3, 1978.

Hugh C. Bennett, Jr., High Point, for plaintiff-appellee.

Bencini, Wyatt, Early & Harris by William E. Wheeler, High Point, for defendant-appellant.

MORRIS, Judge.

The defendant has challenged the District Court's order granting summary judgment for plaintiff on two grounds. First, he asserts, for the first time on appeal, that summary judgment was improper because the pleadings and affidavits in support of the motion did not satisfy the requirements of G.S. 1A-1, Rule 56(e). Second, the defendant argues that as a matter of law, he, not the plaintiff, is entitled to summary judgment in his favor.

Defendant made no objection in the trial court to the insufficiency of plaintiff's pleadings and affidavits submitted in support of the motion for summary judgment. Failure to make a timely objection to the form of affidavits supporting a motion for summary judgment is deemed a waiver of any objections. Noblett v. General Electric Credit Corp., 400 F.2d 442 (10th Cir. 1968), Cert. den. 393 U.S. 935, 89 S.Ct. 295, 21 L.Ed.2d 271 (1968); Auto Drive-Away Company of Hialeah, Inc. v. I.C.C., 360 F.2d 446 (5th Cir. 1966), See e. g. Wright and Miller, Federal Practice and Procedure: Civil, § 2738, p. 706-707. Technical objections based on G.S. 1A-1, Rule 56(e), are not timely made when they are first raised on appeal. This is especially so when there was no attempt to contradict facts and thus no question of material fact before the court. Auto Drive-Away Company of Hialeah, Inc. v. I.C.C., supra.

The ultimate issue properly before this Court, therefore, is whether NCNB preserved its right of charge-back against the defendant's account. See G.S. 25-4-212. The resolution of this question requires a determination of whether the bank sent notice of dishonor within the time constraints imposed by G.S. Chapter 25, Art. 4. (North Carolina version of the Uniform Commercial Code, Article 4, Bank Deposits and Collections.)

Defendant argues that plaintiff's right to charge-back is governed by his status as both "payor bank" and "depositary bank" and that plaintiff failed to notify the defendant of dishonor within the time limits for such notice. See G.S. 25-4-105; 25-4-212(3); 25-4-301; 25-4-213(1)(d); 25-4-104(h).

Plaintiff, on the other hand, urges this Court to consider the effects of G.S. 25-4-106, as amended in 1967, on the obligations of the plaintiff.

" § 25-4-106. Separate office of a bank. A branch or separate office of a bank is a separate bank for the purpose of computing the time within which and determining the place at or to which action may be taken or notices or orders shall be given under this article and under article 3."

Plaintiff brings to this Court for the first time since adoption of the Uniform Commercial Code the question of the applicability and effect of G.S. 25-4-106.

The few reported cases which could have applied that section, as it appears in the statutes of the respective states, have either ignored the section or found it unnecessary for decision. See Kirby v. First and Merchants National Bank, 210 Va. 88, 168 S.E.2d 273 (1969) (discussed in White and Summers, Uniform Commercial Code 531-532, n. 29 (1972)), and Manufacturers Hanover Trust Co. v. Akpan, 91 Misc.2d 622, 398 N.Y.S.2d 477; 22 U.C.C.Rep.Serv. 1009 (1977).

The application of G.S. 25-4-106 is not mandatory. The comments indicate that a branch or separate office may be treated as a separate bank for certain purposes while maintaining the single legal entity for other reasons. The comments also correctly note that, as a practical matter, many branches function as separate banks in the handling and payment of certain items and require time for doing so. This is especially true in states where branch banking is permitted throughout a state. G.S. 25-4-106, Comment 2; Cf. G.S. 53-62 (permitting branch banking in North Carolina). The comment specifically suggests that, where Article 4 imposes time limits (such as the notice of dishonor in this case), the branch which functions as a separate bank should be entitled to the time limits available to a separate bank. Id., Comment 4.

Prior to the 1967 amendment, G.S. 25-4-106 required that a bank maintain its own deposit ledgers before it was entitled to separate bank treatment. 1965 N.C.Sess.Laws, Chapter 700, Sec. 1. Such a requirement was left optional to the states in the official draft of the Uniform Commercial Code. Clarks, Bailey, and Young, Bank Deposits and Collections, ALI/ABA Joint Committee on Continuing Legal Education 33 (4th Ed. 1972). The draftsmen's intent was that a bank and its branch which maintained a central bookkeeping facility would be treated as only one bank. Since collection items would generally only be handled through the central processing, it would not be proper to treat them separately. Id.

Our legislature deleted the provisions requiring the maintenance of separate deposit ledgers. See 1967 N.C.Sess.Laws, Chapter 562, Sec. 1. The legislature's intent was obviously to lessen the requirements for a branch to attain separate bank status. This amendment is consistent with the legislature's encouragement of statewide branch banking to serve the "needs and convenience" of the public. See G.S. 53-62. Since the official comments make it clear that G.S. 25-4-106 should be given a practical application depending on the particular banking practices established and followed in this State, it is necessary to look to the operations of the plaintiff's branches.

The plaintiff's pleadings and affidavits outline the basic structure of NCNB's operations. The bank apparently has divided the State into an eastern and western operations district. The Eastern Operations Center (Raleigh) and the Western Operations Center (Charlotte) function as the bookkeeping centers for all of the branches located in their respective districts. Therefore, when NCNB-HP in the western operations district deals with NCNB-W in the Eastern Operations Center for collection purposes, the banks are in many practical respects operating as separate banks. The accounts of customers in the eastern and western districts are maintained separately in the respective operations centers.

Under the facts in this case, G.S. 25-4-106 as amended is particularly applicable. NCNB-HP and its bookkeeping department in the Western Operations Center are functionally one bank while NCNB-W and its bookkeeping department in the Eastern Operations Center are functionally a separate bank. See generally Farmers and Merchants Bank v. Bank of America, 20 Cal.App.3d 939, 98 Cal.Rptr. 381 (1971). For the foregoing reasons, we hold that NCNB-HP and NCNB-W are entitled to separate bank status under G.S. 25-4-106.

Since each branch operates through a different operations center, it is not necessary to determine whether two branches operating through the same operations center should be entitled to separate bank status.

We must now turn to the statute to determine if the plaintiff's branches, operating as separate banks, sent notice of dishonor within the requirements of the statute so as to preserve the ultimate right of charge-back by NCNB-HP. Since there are now two "separate banks" involved in the transaction, it is necessary to determine whether each "separate bank" acted within its respective time limit. See 3 Anderson: Uniform Commercial Code, § 4-106:7, p. 187 (2d Ed. 1971).

I.

NCNB-W is clearly the "payor bank" in this transaction. G.S. 25-4-105(b). Therefore, before NCNB-W may revoke any settlement it must satisfy the requirements of G.S. 25-4-301 which provides as follows "(1) Where an authorized settlement for a demand item (other than a documentary draft) received by a payor bank otherwise than for immediate payment over the counter has been made before midnight of the banking day of receipt the payor bank may revoke the settlement and recover any payment if before it has made final payment (subsection (1) of § 25-4-213) and before Its midnight deadline it

(a) returns the item; or

(b) sends written notice of dishonor or nonpayment if the item is held for protest or is otherwise unavailable for return.

(2) If a demand item is received by a payor bank for credit on its books it may return such item or send notice of dishonor and may revoke any credit given or recover the amount thereof withdrawn by its customer, if it acts within the time limit and in the manner specified in the preceding subsection.

(3) Unless previous notice of dishonor has been sent an item is dishonored at the time when for purposes of dishonor it is returned or notice sent in accordance with this section.

(4) An item is returned:

(a) as to an item received through a clearing house, when it is delivered to the presenting or last collecting bank or to the clearing house or is sent or delivered in accordance with its rules; or

(b) in all other cases, when it is sent or delivered to the bank's customer or transferor or pursuant to his instructions. " (Emphasis added.)

The recognition of separate bank status requires a determination of to whom the payor bank must return the item. That return must then comply with the time limitations imposed by the statute.

Under the facts in this case, the item is returned when it is sent or delivered to the "transferor". G.S. 25-4-301(4)(b). Since each branch of NCNB is receiving separate bank status, the...