Oregon Iron & Steel Co. v. Kelso State Bank

• Decision Date: 27 March 1924
• Docket Number: 18457.
• Citation: 129 Wash. 109,224 P. 569
• Court: Washington Supreme Court
• Parties: OREGON IRON & STEEL CO. v. KELSO STATE BANK et al.

224 P. 569

129 Wash. 109

OREGON IRON & STEEL CO. v. KELSO STATE BANK et al.

No. 18457.

Supreme Court of Washington

March 27, 1924

Department 1.

Appeal from Superior Court, Cowlitz County; Kirby, Judge.

Action by the Oregon Iron & Steel Company against the Kelso State Bank, John P. Duke, Supervisor of Banking, and others. Judgment for defendants, and plaintiff appeals. Reversed with directions to allow plaintiff's claim.

Fisk &amp McCarthy, of Kelso, and Prescott W. Cookingham and Leo J Hanley, both of Portland, Or., for appellant.

Miller Wilkinson & Miller, of Vancouver, for respondents.

MACKINTOSH J.

This action is here without any statement of facts and the only question is whether the findings of fact justify the conclusions of law and the judgment. The findings, conclusions, and judgment are as follows:

'I. That the Oregon Iron & Steel Company, Ladd & Tilton Bank, Federal Reserve Bank of San Francisco, United States National Bank of Portland, and the Kelso State Bank of Kelso, Wash., are all corporations duly organized and existing.

'II. That John P. Duke is the duly qualified and acting supervisor of banking of the state of Washington; that on the 17th day of March, 1921, the said Kelso State Bank became unsound and insolvent, and its assets were taken charge of under the banking laws of the state of Washington, and since that time it has been in liquidation, and T. H. Adams is now in charge as the special deputy supervisor of banking liquidating the Kelso State Bank.

'III. That for a long time prior to the 17th day of March, 1921, and until the bank was taken in charge by the bank officials of the state of Washington, F. L. Stewart was the cashier and general manager of the said Kelso State Bank and had been its cashier in charge of the affairs of the bank and the managing officer thereof for a number of years previous thereto.

'IV. That on or about the 15th day of March, 1921, the said F. L. Stewart drew his personal check on the Kelso State Bank for the sum of $3,237.64, payable to the order of the Oregon Iron & Steel Company, the plaintiff herein; that said check was forwarded in due course of mail to the Oregon Iron & Steel Company at Portland, Or., and indorsed by it and delivered to the Ladd & Tilton Bank in Portland, Or., for collection, and was indorsed by the Ladd & Tilton Bank of Portland to the Federal Reserve Bank of San Francisco, Portland Branch, for collection.

'V. That on or about the 16th day of March, 1921, the said Federal Reserve Bank presented to the Kelso State Bank items drawn on the Kelso State Bank aggregating $4,891.08, and that among the items so presented to said Kelso State Bank was the check drawn by the said F. L. Stewart and payable to the Oregon Iron & Steel Company, the plaintiff herein; that when said items were presented to said Kelso State Bank it issued its draft, No. 298, dated March 16, 1921, in the sum of $4,891.08, payable to the Portland Branch of the Federal Reserve Bank and drawn on the United States National Bank of Portland.

'VI. That on March 17, 1921, said Federal Reserve Bank presented said draft to the United States National Bank at Portland, and payment was refused, and the draft returned marked, 'Bank closed,' by the United States National Bank, and said draft was on March 18, 1921, protested for nonpayment and notice given to the officials in charge of the Kelso State Bank, and the said draft was subsequently returned to the Kelso State Bank by the Federal Reserve Bank of San Francisco.

'VII. That at the time said check was drawn by the said F. L. Stewart he had no sufficient funds to pay the same, and it constituted an overdraft to the amount of $3,164.38 and continued an overdraft in the same amount until the bank closed.

'VIII. That at said time and for a long time prior thereto, the said Kelso State Bank was in an insolvent condition and unable to meet its liabilities, and its condition was well known to the said F. L. Stewart.

'IX. That said draft was payable to the order of the Portland Branch of the Federal Reserve Bank at Portland, and that upon its receipt by the said Federal Reserve Bank at Portland the said Federal Reserve Bank, acting as agent for the plaintiff herein, refused to accept the same or any part thereof, but repudiated the draft and returned the same to the said Kelso State Bank and notified the officers in charge of the bank of its refusal to accept the draft, and said draft was never accepted by the Portland Branch of the Federal Reserve Bank, either for itself or for the plaintiff, and was never accepted by the plaintiff, but plaintiff refused to accept the same.

'X. That at no time from the time the original check was issued by the said F. L. Stewart was there sufficient funds to the credit of the said F. L. Stewart to pay said check or the draft referred to, and they amounted to an overdraft in the sum of $3,164.38.

'Conclusions of Law.

'That at the time the check in question was issued by the said F. L. Stewart he had no funds to his credit with which to pay said check, and the issuance of the same constituted an overdraft and was in violation of law.

'That at the time said draft was issued, there were no funds to pay the same, and it was issued in violation of law and was therefore void.

'That the plaintiff refused to accept the draft, and it was never accepted or became a binding obligation against the Kelso State Bank.

'That plaintiff is not entitled to recover in this action, and the defendant is entitled to a judgment of dismissal.

'Judgment.

'It is ordered and adjudged that plaintiff's action be dismissed and that defendant recover judgment for his costs.'

The court having found that the draft given by the Kelso Bank in payment of the check was repudiated and never accepted by the appellant, the appellant is bound by that finding, and it is therefore to be borne in mind that this is not an action against the respondent upon that draft. The theory upon which any judgment in favor of the appellant can be granted is that the respondent is liable by virtue of having accepted and honored the Stewart check.

The sections of the Code applicable to the facts are:

'That portion of section 3453, Rem. Comp. Stat., reading as follows: 'The acceptor by accepting the instrument engages that he will pay it according to the tenor of his acceptance.'

And that portion of section 3522, Rem. Comp. Stat., reading: 'The acceptance of a bill is the signification by the drawee of his assent to the order of the drawer.'

And section 3579, Rem. Comp. Stat., as follows: 'A check of itself does not operate as an assignment of any part of the funds to the credit of the drawer with the bank, and the bank is not liable to the holder unless and until it accepts or certifies the check.'

The court found that the respondent accepted and honored the check, but that the appellant refused to accept the draft given as payment for the check, which the appellant had a right to do; for if the bank accepted the check, the obligation was then on the bank to pay the proceeds to the appellant in cash if the payee did not request some other form of payment. Some question is made that the findings do not show that the check was accepted. Finding No. 7, however, clearly states that the bank accepted the Stewart check because it is stated that the check constituted an overdraft and 'continued an overdraft in the same amount until the bank closed.' In order to constitute an overdraft the check must have been accepted by the bank and marked 'paid' and the account of Stewart charged with the amount of the check. This is further clearly indicated by the fact that the draft was issued for the amount of the check and the check retained. These acts constituted an acceptance under the statute.

In First National Bank v. National Park Bank, 100 Misc. 31, 165 N.Y.S. 15, the court said:

'By charging the account of the trust company with this check, the same has been paid, nothing more was left to be done, and the plaintiff was entitled to receive the proceeds of the check.'

Under facts very similar to the facts of the case at bar, the court, in Consolidated National Bank v. First National Bank, 129 A.D. 538, 114 N.Y.S. 308, said:

'The check, when presented to the defendant, was paid by its acceptance by the defendant as valid, by marking the same paid, crediting the amount to the account of the plaintiff and charging it against the account of Davis & Co. As a matter of law, that closed the transaction without power of revocation. The defendant bank had become the debtor of the plaintiff's agent to the extent of the amount of the credit given, which was the amount of the check.' This case was reaffirmed in Consolidated National Bank v. First National Bank, 199 N.Y. 516, 92 N.E. 1081.

The Supreme Court of the United States, in First National Bank of Cincinnati v. Burkhardt, 100 U.S. 686, 25 L.Ed. 766, said this concerning this question:

'When a check on itself is offered to a bank as a deposit, the bank has the option to accept or reject it, or to receive it upon such conditions as may be agreed upon. If it be rejected, there is no room for any doubt or question between the parties. If, on the other hand, the check is offered as a deposit and received as a deposit, there being no fraud and the check genuine, the parties are no less bound and concluded than in the former case. Neither can disavow or repudiate what has been done. The case is simply one of an executed contract. There are the requisite parties, the requisite consideration, and the requisite concurrence and assent of the minds of those concerned.

It was well said by an eminent chief justice: 'If there has ever been a doubt on this point, there should be none hereafter.' Oddie v. The National City

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