Regal Tour Inc. v. European American Bank
| Decision Date | 29 April 1981 |
| Citation | 108 Misc.2d 699,438 N.Y.S.2d 947 |
| Parties | , 33 UCC Rep.Serv. 1053 REGAL TOUR INC., Plaintiff, v. EUROPEAN AMERICAN BANK, Defendant. |
| Court | New York City Court |
A trial was held without a jury in this action by the plaintiff for the alleged conversion of the sum of $2,095.72 from a bank account maintained by the plaintiff at a branch of defendant's bank, located at 212-29 Jamaica Avenue, Bellerose, New York.
Testifying for the plaintiff was Ira M. Wallace, the president of Regal Tour Inc. He testified that as of December 13, 1977, three bank accounts were maintained at the Bellerose branch of defendant bank. They were entitled Bruus and Wallace Travel Ltd. (Hereinafter called "Ltd."), B & W Travel Ltd. ATC (hereinafter called "ATC") and Regal Tours Inc. (hereinafter called "Regal"). It is undisputed that Wallace only had signing authority on two of the above accounts, namely "Ltd." and "Regal". Wallace stated that in the afternoon of December 13, he telephoned defendant bank and directed them to transfer $2,095.72 from the "Ltd." account to the "ATC" account. He said that at 9 A.M. on December 14, he went to the bank with a Mrs. Martinez from his office and spoke to a Mrs. Rose at the bank. He wanted to stop or reverse the previous day's verbal order. Mrs. Rose told him that the previous order had not gone through, but he gave Mrs. Rose a letter, dated December 14, instructing the bank to stop or reverse the prior transaction. This letter was admitted into evidence. On December 14 Wallace drew a check from the "Ltd." account to "Regal" in the sum of $2,095.72 and deposited it on that day, with other checks, in the "Regal" account. The bank statements of "Ltd." and "Regal", reflecting the above transactions were admitted into evidence. A photostat of the reversal by the bank on December 14 was also admitted into evidence. On December 15, the bank, through an officer, issued a memo debiting the "Regal" account in the sum of $2,095.81, stating that this amount was "transferred in error" on December 14. Wallace testified that he went to the bank on December 15, saw Mrs. Shirley Knowlton of the bank and gave her an original letter of December 15 and a copy of a letter to the bank, dated December 14, both of which are in evidence, relating to his verbal instructions to the bank and protesting the December 15 debit of the "Regal" account by the bank. He further stated that he had dealt with this branch for about two years and had previously had oral transfers, as the one on December 13. The "ATC" bank statement, showing the credit to this account on December 13, the debit on December 14 and the credit on December 15 was admitted into evidence.
Doris Martinez testified that she is the bookkeeper for the plaintiff. On December 14, she went to the bank at 9 A.M. with Wallace and first made a deposit (to the "Regal" account, including the disputed amount.) Then, she said, she went over to Mrs. Rose, where Wallace was. She further testified that she went to the bank again on December 15 at 2:45 P.M. and gave Wallace's original December 15 and copy of his December 14 letters to Mrs. Knowlton of the bank. She said that she did not remember if she was with anyone else from her office at the time.
Testifying for defendant, was Susan Simonelli. She said that she was employed by defendant as the assistant Manager on December 13. She confirmed that Wallace had signing authority on the "Regal" and "Ltd." accounts, but not on the "ATC" account. Signature cards for the "Ltd." and "ATC" accounts were introduced into evidence. She stated that Wallace called her on December 13 and asked to transfer funds from the "Ltd." account to the "ATC" account. She identified the December 13 debit memo from the "Ltd." account and the December 13 credit memo to the "ATC" account which were introduced into evidence. The reverse orders of December 14 were likewise admitted in evidence, as were the final orders of December 15, debiting the "Regal" account and crediting the "ATC" account.
A careful examination of the law in this matter shows that prior to the adoption of the Uniform Commercial Code, once a check is deposited to and credited to an account of the depositor and charged against the account of the drawer, the check is paid and the transaction is closed. See Consolidated National Bank of New York v. First National Bank of Middletown, 129 App.Div. 538, 144 N.Y.S. 308, aff'd. 199 N.Y. 516, 92 N.E. 1081 (1908).
With the adoption of the Uniform Commercial Code, (UCC) a reading of the statutory framework shows how the law now differs from the earlier case law. The appropriate sections of the UCC are Sections 4-212, 4-213 and 4-301.
Section 4-301 of the UCC deals with the deferred posting rules 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 section 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."
Following the above statutory rule, we can see that Section 4-213 covers the rules governing final payment.
"(1) An item is finally paid by a payor bank when the bank has done any of the following, whichever happens first: (a) paid the item in cash; or (b) settled for the item without reserving a right to revoke the settlement and without having such right under statute, clearing house rule or agreement; or (c) completed the process of posting the item to the indicated account of the drawer, maker or person to be charged therewith..."
Section 4-212 follows the framework by outlining the bank's right to charge back or obtain a refund...
"(3) A depositary bank which is also the payor may charge-back the amount of an item to its customer's account or obtain a refund in accordance with the section governing return of an item received by a payor bank for credit on its books (Section 4-301)."
When the foregoing three sections are read together, it is clear that the rule as governed by the UCC allows a bank to charge back or obtain a refund of a provisional settlement (Section 4-212), as long as final payment (Section 4-213) has not been made (Section 4-301).
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...held that the $150 payment was final. Under the current U.C.C. law in New York it might not be final, Regal Tour Inc. v. European American Bank, 108 Misc.2d 699, 438 N.Y.S.2d 947, 949 (Civ.Ct. Queens Co.1981); but that does not affect the validity of the court's reasoning that a bank must s......
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