Scioto Bank v. Columbus Union Stock Yards
Decision Date | 26 March 1963 |
Citation | 201 N.E.2d 227,120 Ohio App. 55 |
Parties | , 28 O.O.2d 245 The SCIOTO BANK, Appellant, v. COLUMBUS UNION STOCK YARDS et al., Appellees. (Two cases.) * |
Court | Ohio Court of Appeals |
Ray W. Davis, Circleville, and James M. Hengst, Columbus, for appellant.
Tom A. Renick, Circleville, and James C. Britt, Columbus, for appellees.
This is an appeal from judgments of the Court of Common Pleas of Franklin County in two cases. The cases have been consolidated for hearing and determination in this court. In both, judgment was for the defendants-appellees after both sides had rested on the merits.
Plaintiff-appellant, The Scioto Bank, is a commercial bank located in Commercial Point, Pickaway County. The defendant Arthur P. Berger held an account for many years doing a large volume of checking and depositing. Upon the deposit of a check, it was the practice of the bank to credit Berger's account and allow him to draw prior to collection of the item. On March 6, 1956, the state banking department made the following recommendation:
'* * *
'Management should scrutinize the account of Arthur Berger carefully, since this customer has been operating for some time on uncollected funds. If stop payment orders should be given on any of the checks he submits for deposit, subject might find itself in an embarrassing position. It does not appear that customer is kiting checks and in looking over his account no record was found of any overdrafts. However, bank is extending credit to this customer until checks have cleared and on the average day these may run into thousands of dollars. It is recommended that this customer be asked to maintain a balance that will cover these uncollected funds.
'* * *.'
In September 1956, a separate 'collection' account was opened and a deposit of $17,000 made. Prior to August 14, 1957, Berger had drawn very heavily upon his active checking account and these checks had been honored by the bank. On August 14, 1957, Berger held two checks drawn by the defendant-appellee Columbus Union Stock Yards payable to Berger or order and in the amounts of $8,841.21 and $8,324.01. Berger endorsed them in blank (see former Sections 1301.35 and 1301.36, Revised Code) and deposited them in his active account. The deposit slip stated in print:
However, as in previous instances, the bank credited Berger's account before collection.
Payment on these two checks was stopped. The drawee bank notified Scioto, and returned the checks dishonored on August 20, 1957. On that date the bank transferred the balance shown in the active account (then $16,117.73) to the collection account which, when added to the $17,000, made a balance of $33,117.73 in that account. It charged the two dishonored checks to that account. Thus, the collection account record on August 20 shows a remaining balance of $15,952.51. Subsequently further deposit items were dishonored, and by August 29 the final accounting showed Berger's accounts to be a minus $51,389.41.
The Scioto Bank sued Berger as endorser and Columbus Union Stock Yards as drawer on the checks. Berger did not appear, put in no defense, and apparently is insolvent. The drawer-appellee filed a general denial, and the case was submitted on the merits. The appellee rested without offering any defensive evidence. Thus, there is no claim or proof of any infirmity in the instruments sued upon nor any defense of lack of consideration. Cf. former Section 1301.26, Revised Code, effective October 1, 1953.
The appellee's first contention is that Scioto is not a holder in due course because it did not give value. It is argued that Berger's indebtedness arose after August 20 because the amount of the dishonored deposit items did not exceed the balance shown in both accounts until after that date, and the bank had notice of dishonor on the Union Stock Yards' checks before August 20.
It should be noted that no checks drawn by Berger on his accounts were honored and paid by the bank after August 15. The indebtedness arose from the dishonor of deposit items. In effect, appellee is arguing that value is not given until the books reflect what is in fact true, i. e., the bank has honored and paid checks which exceed collectible items on deposit. However, we need not decide that point. These checks were endorsed in blank,...
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