Soldier Valley Sav. Bank v. Camanche Sand & Gravel Co.

• Decision Date: 12 February 1935
• Docket Number: 42713.
• Citation: 258 N.W. 879,219 Iowa 614
• Parties: SOLDIER VALLEY SAV. BANK v. CAMANCHE SAND & GRAVEL CO. et al.
• Court: Iowa Supreme Court

258 N.W. 879

219 Iowa 614

SOLDIER VALLEY SAV. BANK v. CAMANCHE SAND & GRAVEL CO. et al.

No. 42713.

Supreme Court of Iowa.

February 12, 1935

Appeal from District Court, Scott County; C. L. Ely, Judge.

This action is brought by the Soldier Valley Savings Bank against Camanche Sand & Gravel Company and Lynch Construction Company, both of Davenport, Iowa, upon a certain instrument for $3,715.07. The lower court held that the instrument was nonnegotiable, and allowed, as an offset thereto, a claim of $3,621.91, which the Camanche Sand & Gravel Company had against the payee, and entered judgment accordingly.

Affirmed.

Ottesen, Doerr & Weise, of Davenport, and Prichard & Prichard, of Onawa, for appellant.

Smith & Swift, of Davenport, for appellee Camanche Sand & Gravel Co.

J. M Maloney, of Davenport, for appellee Lynch Construction Co.

KINTZINGER, Justice.

On November 17, 1932, the following instrument was delivered to the Lynch Construction Company by the Camanche Sand & Gravel Company:

" To Bills as follows " Camanche Sand & Gravel Co., Voucher No. 2410

Check No. 1896 Davenport, Iowa, Nov. 17, 1932.

Invoice This Voucher when properly indorsed by payee becomes a

check on

Note: Do not change this Voucher. In case of error return at once. Indorsement on back is the only receipt required. Deposit in any Bank for collection as check.

Union Savings Bank and Trust Company of Davenport, Iowa.

To Lynch Construction Company,

For ____

Three Thousand Seven Hundred Fifteen and 07/100 Dollars.

$3,715.07" [Signed] Geo. E. Kuhn

Asst. Treasurer."

It contained the following indorsement on the back: " Deposit to Soldier Valley Savings Bank, Soldier, Iowa, accepted as payment in full for bills noted on face of this check. [Signed.] Lynch Construction Co., By T. F. Harrington, Jr."

This instrument, after being so indorsed, was, by the Lynch Construction Company, sent direct to the Continental Illinois National Bank & Trust Company of Chicago, a correspondent bank of the Soldier Valley Savings Bank, and was by the Chicago bank deposited to the credit of the Soldier Valley Savings Bank, Soldier, Iowa. After being notified of such credit, the Soldier Valley Savings Bank credited the account of Lynch Construction Company with the amount of the instrument, and thereafter paid checks of the Lynch Construction Company for the full amount of said deposit. Payment of the instrument was stopped by the Camanche Sand & Gravel Company, and payment was refused by the Union Savings Bank & Trust Company when presented. The instrument was then returned to the Soldier Valley Savings Bank, who brought this action.

The undisputed evidence shows that the defendant Camanche Sand & Gravel Company would have had a valid defense against the instrument in question, if sued on by the payee, to the extent of $3,621.91. It is also conceded that if the instrument in question is not a negotiable instrument, the same defense could be interposed against the present holder of the instrument.

If it is negotiable, the defense alleged should be precluded; if it is nonnegotiable, the defense against the Lynch Construction Company is available against appellant. The lower court held the instrument to be nonnegotiable, and entered judgment allowing the offset. Plaintiff filed a motion for a new trial which was overruled; hence this appeal.

I. The principal question presented is whether or not the paper sued on is a negotiable instrument. Section 9461 of the Code of 1931 (Negotiable Instruments Act) provides:

" An instrument to be negotiable must conform to the following requirements: * * *

4. Must be payable to the order of a specified person or to bearer ." (Italics ours.)

Section 9468 of the Code provides that:

" The instrument is payable to order where it is drawn payable to the order of a specified person or to him or his order . * * * (Italics ours.)

Where the instrument is payable to order, the payee must be named or otherwise indicated therein with reasonable certainty."

Section 9469 of the Code provides that: " The instrument is payable to bearer:

1. When it is expressed to be so payable; or

2. When it is payable to a person named therein or bearer."

It is clearly not payable " to bearer."

It is contended that because the instrument contains the words, " this Voucher when properly endorsed by payee becomes a check on Union Savings Bank and Trust Company," it became a check after the following indorsement was made thereon by the payee: " Deposit to Soldier Valley Savings Bank, Soldier, Iowa. Indorsed and accepted as payment in full for bills noted on face of this check. [Signed.] Lynch Construction Co., by T. F. Harrington, Jr." It is now claimed that the instrument was thereby properly indorsed; that by such indorsement it became a check and constituted a negotiable instrument.

The most that can be claimed for the instrument, if properly indorsed, would be that it then became a check. If it then became a check, it was still payable specifically to only the Lynch Construction Company, and not to its order . An instrument does not become negotiable by simply calling it a check unless the words of negotiability required by the act for negotiable instruments appear thereon. The words of negotiability required by the act in this state and by the Uniform Negotiable Instruments Act are that the instrument be made payable to the order of a specified person, or to him or his order . Neither the face of the instrument nor the indorsement on the back makes the instrument payable to the order of any one. If it be considered a check, it is apparent that the face of the check is payable to the Lynch Construction Company, and not to its order, or to the order of the Lynch Construction Company . It also appears that the indorsement of the Lynch Construction Company upon the back of the instrument was for the special purpose " of deposit to Soldier Valley Savings Bank," and was not indorsed to the order of the Soldier Valley Savings Bank. This indorsement was placed upon the instrument by the Lynch Construction Company and forwarded by it to the Continental Illinois National Bank & Trust Company for the deposit of the Soldier Valley Savings Bank.

It is also apparent from the face of the instrument that it was not a check when issued, and that it was not even contemplated to be a check, either negotiable or nonnegotiable, until after it was properly indorsed by the Lynch Construction Company. It rather contains the characteristics of a voucher and receipt, as the following appears on the face of the instrument: " Indorsement on back is the only receipt required." The instrument is payable to the Lynch Construction Company and not to the order of Lynch Construction Company or to the Lynch Construction Company order.

If therefore, it can be considered a check upon the Union Savings Bank & Trust Company when properly indorsed, it necessarily became a check payable to the Lynch Construction Company only. It is not payable to bearer, and is not payable to the order of the Lynch Construction Company, or to Lynch Construction Company or order. It is simply payable to the Lynch Construction Company, and is not " payable to the order of a specified person or to bearer." It is, therefore, obvious that it...