Rezapolvi v. First Nat. Bank of Maryland

Decision Date25 April 1983
Docket NumberNo. 171,171
Citation459 A.2d 183,296 Md. 1
CourtMaryland Court of Appeals

James Robert Miller, Rockville (Miller & Steinberg, Rockville, on the brief), for appellant.

C. Lamar Garren, Baltimore (Piper & Marbury, Baltimore, on the brief), for appellee.



The dispute in this case concerns the right of a bank to dishonor its own cashier's check.

Kamal Rezapolvi entered into a "Preliminary Agreement" with R. Gordon Loetz, Sr., the president and owner of Columbia Marketing Corporation, for the purchase of a restaurant franchise. Pursuant to this agreement, in October 1977, Rezapolvi paid Loetz a total of $13,622 as a deposit. According to the uncontradicted testimony, after Loetz failed to find a location for the franchise within 30 days, as provided by the contract, and after Loetz raised the price of the franchise from $40,000 to $100,000, Rezapolvi requested that Loetz return his deposit. On December 1, 1977, Loetz personally delivered to Rezapolvi a check in the amount of $13,622. The check was drawn on Columbia Marketing's account with the First National Bank of Maryland. The check was signed by Stanley E. Lloyd, an employee of Columbia Marketing, whose signature was not an "authorized" signature for the Columbia Marketing account. Accompanying the check was the following letter:

"December 1, 1977

Kamal Relapolvi [sic]:

Inclosed [sic] you will find our check for $13,622.00 which represents your deposit for an Old Western Chicken 'N' Chips Restaurant. I am returning your deposit at your request. Mrs. Merhadi will be purchasing an Old Western Chicken 'N' Chips Restaurant this evening. This cancellation is contingent upon Mrs. Merhadi's participation.

Sincerely yours,


R. Gordon Loetz, Sr.



encl: check" The next morning, Friday, December 2, 1977, Rezapolvi brought the Columbia Marketing check to First National's branch in Bethesda, Maryland, where he endorsed the check in blank and exchanged it and a one dollar service charge for a cashier's check payable to himself. 1 Before issuing the cashier's check, the head teller checked Rezapolvi's identification, and determined that there was no stop payment order on Columbia Marketing's check and that Columbia Marketing's account contained sufficient funds to cover its check. The teller then placed a hold on those funds so that they could not be paid out on other items. The teller did not follow standard procedure and ascertain whether the Columbia Marketing check contained an authorized signature. Rezapolvi then deposited the cashier's check in his account at the American Security and Trust Company bank.

On Monday, December 5, 1977, Loetz, apparently unaware that the Columbia Marketing check had already been paid by a cashier's check, sent his secretary to First National's branch in Columbia, Maryland, for the purpose of placing a stop payment order on the Columbia Marketing check. Someone at First National's branch in Columbia contacted the manager of First National's Bethesda branch, Frances Manus, because the Bethesda branch had placed a hold on Columbia Marketing's funds in its account. Manus testified that she then contacted Loetz who stated that Columbia Marketing's check could not properly have been paid because of insufficient funds. After being informed that Columbia Marketing had sufficient funds, Loetz replied:

"Well, you ... still couldn't have [properly cashed the check] ... because someone else signed the check. I didn't sign the check. I had someone else sign the check ... I did intend to come into the Branch and give you new signature cards with this new person's [Stanley Lloyd's] signature and resolutions but there was a meeting and we just, you know, didn't get around to it." (Emphasis added.)

When Manus attempted to pursue the matter with Loetz, he responded, "Well, you know, I can't do anything about it .... I had someone else sign the check and you're the one that gave the money." Manus thereupon issued a stop payment order on the cashier's check and released the hold on Columbia Marketing's account. 2 A few days later, Rezapolvi received a telephone call from American Security and Trust Company informing him that First National had stopped payment on the cashier's check and that Rezapolvi could retrieve the cashier's check from an American Security and Trust Company office. 3 Subsequently, Rezapolvi telephoned Loetz and requested another check. Loetz replied, "Don't talk to me. I cancelled your contract, and I gave you a check. This is between you and your bank.... You got your check."

In November 1979, Rezapolvi commenced this action in the Circuit Court for Montgomery County, seeking damages from First National for its dishonor of its cashier's check. After a trial by the court, judgment was entered in favor of First National. Rezapolvi appealed to the Court of Special Appeals, and this Court issued a writ of certiorari prior to a decision by the Court of Special Appeals.


Preliminarily, it should be emphasized that two separate negotiable instruments are involved in this case--the Columbia Marketing check and First National's cashier's check. Furthermore, the parties to the checks differ with the exception of the plaintiff, Rezapolvi. Before turning to First National's specific argument as to why it was entitled to dishonor the cashier's check, we shall discuss more generally both negotiable instruments, dealing first with the Columbia Marketing check and second with the cashier's check.


The first instrument in this case, the Columbia Marketing check, was accepted and paid prior to Columbia Marketing's attempted stop payment order. Although acceptance and payment are normally viewed as separate events, if a check has been paid it has clearly been accepted. First National accepted and paid the Columbia Marketing check when it issued its cashier's check in return for the Columbia Marketing check. The issuance of the cashier's check represented both a promise to pay the Columbia Marketing check and payment of the check. See Citizens & Southern Nat. Bank v. Youngblood, 135 Ga.App. 638, 219 S.E.2d 172, 173 (1975); Page v. Holmes-Darst Coal Co., 269 Mich. 159, 162-165, 256 N.W. 840 (1934); Friends in Need Society v. Peterson, 9 S.W.2d 1110, 1111 (Tex.Civ.App.1928). 2 Bender's Uniform Commercial Code, Commercial Paper, § 12.16 (W. Willier & F. Hart ed. 1982); Brady on Bank Checks, § 4.8 (H. Bailey 5th ed. 1979).

Furthermore, contrary to the assertion in First National's brief, the later nonpayment of the cashier's check did not change the fact that the Columbia Marketing check had been paid. "A holder who accepts a bank instrument on which the bank is obligor, such as a cashier's check or a bank draft, has ... been paid whether or not the bank instrument is ever paid." 2 Bender's Uniform Commercial Code Commercial Paper, supra, at § 12.16. See § 4-213 of the Uniform Commercial Code, Maryland Code (1975), § 4-213 of the Commercial Law Article, and Official Comment point 2 (Final payment does not depend on whether bank's remittance draft was itself paid). 4 See also Brady on Bank Checks, supra, at § 4-8. Under § 3-802(1), "[u]nless otherwise agreed where an instrument is taken for an underlying obligation (a) the obligation is pro tanto discharged if a bank is drawer, maker or acceptor of the instrument and there is no recourse on the instrument against the underlying obligor." When First National issued its cashier's check in exchange for the Columbia Marketing check, Columbia Marketing's obligation as drawer of its check was pro tanto discharged, and Rezapolvi would not be able to recover from Columbia Marketing on its check to him.


The traditional definition of a cashier's check has been set forth in a multitude of cases, both prior to and after the adoption of the Uniform Commercial Code. One leading opinion stated it as follows ( State of Pa. v. Curtiss Nat. Bank Of Miami Springs, Fla., 427 F.2d 395, 398 (5th Cir.1970)):

"A cashier's check is defined as a bill of exchange drawn by a bank upon itself and accepted in advance by the act of its issuance and not subject to countermand by either its purchaser or the issuing bank."

A recent decision of the United States Court of Appeals for the Fourth Circuit, holding that a bank was not entitled to dishonor its own cashier's check, and that the timeliness under the Uniform Commercial Code of the dishonor notice was immaterial, said ( Swiss Credit Bank v. Virginia Nat. Bank-Fairfax, 538 F.2d 587, 588 (4th Cir.1976)):

"We see no need to reach the question of timeliness of the notice of dishonor. A cashier's check is a bill of exchange drawn by a bank upon itself. It is accepted in advance by the act of its issuance, and it cannot be dishonored by the issuing bank because of an indebtedness to it of one of its customers."

Also a "cashier's check, purchased for adequate consideration, unlike an ordinary check, stands on its own foundation as an independent, unconditional and primary obligation of the Bank." State of Pa. v. Curtiss Nat. Bank of Miami Springs, Fla., supra, 427 F.2d at 400. "[T]he general rule [is] that the act of issuing a cashier's check binds the issuing bank to pay the instrument and the bank is not allowed to stop payment on it." Anderson, Clayton & Co. v. Farmers Nat. Bank, etc., 624 F.2d 105, 109-110 (10th Cir.1980). See, e.g., TPO Incorporated v. Federal Deposit Insurance Corp., 487 F.2d 131, 135 (3d Cir.1973); Banco Ganadero y Agricola v. Soc. Nat. Bk., Cleve., 418 F.Supp. 520, 523 (N.D.Ohio 1976); Kaufman v. Chase Manhattan Bank, National Ass'n, 370 F.Supp. 276, 278 (S.D.N.Y.1973); Gillespie v. Riley Management Corporation, 59 Ill.2d 211, 319 N.E.2d 753, 756 (1974); Louis Falcigno Enterprises v. Mass. Bank, 14 Mass.App. 92, 436 N.E.2d 993 (...

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