UAW-CIO Local No. 31 Credit Union v. Royal Ins. Co., Ltd., UAW-CIO

CourtUnited States State Supreme Court of Missouri
Writing for the CourtALDEN A. STOCKARD; BARDGETT; HIGGINS
Citation594 S.W.2d 276
Parties28 UCC Rep.Serv. 1435 LOCAL #31 CREDIT UNION, Appellant, v. ROYAL INSURANCE CO., LTD., Respondent.
Docket NumberNo. 61420,UAW-CIO
Decision Date11 February 1980

Page 276

594 S.W.2d 276
28 UCC Rep.Serv. 1435
UAW-CIO LOCAL #31 CREDIT UNION, Appellant,
v.
ROYAL INSURANCE CO., LTD., Respondent.
No. 61420.
Supreme Court of Missouri, En Banc.
Feb. 11, 1980.

Page 278

Dennis G. Muller, Kansas City, for appellant.

Danny L. Curtis, Niewald, Risjord & Waldeck, Kansas City, for respondent.

ALDEN A. STOCKARD, Special Judge.

UAW-CIO Local No. 31 Federal Credit Union (hereafter "Federal"), as the holder of a dishonored draft brought suit for the face amount of the draft against the maker, Royal Insurance Co., Ltd., (hereafter "Royal"). After judgment in favor of Royal, an appeal was taken by Federal to the Missouri Court of Appeals, Western District, which affirmed the judgment. Upon application of Federal we ordered the case transferred to this court, and it will be determined here as on original appeal.

On May 8, 1974, Royal issued its draft in the amount of $12,000 "payable through" the Morgan Guaranty Trust Company of New York to Gary E. Terrell in settlement of a claim on an insurance policy for fire damage to premises located at 3031 North 11th Street, Kansas City, Kansas. On the following day the attorney for Mr. and Mrs. Louis Wexler notified Royal that his clients had an insurable interest in the damaged property. As a result Royal immediately "stopped payment" on the draft. On that same day the draft was indorsed in blank by Gary E. Terrell and also by his father, Wilson Terrell, and it was deposited by Wilson Terrell in his "share account" with Federal. Immediately following the deposit, Wilson Terrell withdrew $1,000. On the following day, May 10, he made three additional withdrawals totaling $8,008.60. On May 13 Federal credited the balance of a loan account of Wilson Terrell by transferring $771.54 from his share account. Wilson Terrell subsequently withdrew $745 from the share account.

Immediately upon receipt Federal indorsed the draft and deposited it in its account at the Brotherhood State Bank of Kansas City, Kansas, which, after indorsement, forwarded it through the bank clearing channels to the Morgan Guaranty Trust Company. It was then presented by that bank to the New York office of Royal whose "Cashier's Department" returned it to Morgan with the notation dated May 14, 1974, "payment stopped." The draft was then returned to the Brotherhood Bank, which on May 30 returned it to Federal together with notice that Federal's account had been debited $12,000.

Upon the receipt by Federal of this dishonored draft, Shirley Gans called Wilson Terrell. He referred Shirley Gans to Lester Leamon of Leamon Adjustment Company, Royal's adjuster on the fire loss. She stated to Mr. Leamon that she had the dishonored draft and she explained her interest by reason of the "stop payment." Mr. Leamon stated that "there evidently had been another lien on the property that Mr. (Gary) Terrell owned and that that was the reason for them (Royal) stopping the payment." Shirley Gans stated that as a result of her conversation with Mr. Leamon she received the "impression" that the situation was being clarified. Mr. Leamon did not ask that the dishonored draft be returned to him or to Royal.

In August, 1974, Shirley Gans telephoned Paul Niewald, an attorney for Royal, because she had obtained information from Wilson Terrell that new drafts were to be issued. She inquired whether Federal's name could be placed on the larger of two separate drafts that were to be issued to Gary Terrell for the insurance settlement. Mr. Niewald asked her if Federal had any interest in the property, and according to her she answered that it had no interest in the property; "just the check." Mr. Niewald replied that Federal could not have its name on the draft. Shirley Gans could not recall whether she told Mr. Niewald that she had the dishonored draft in her possession.

Paul Niewald testified that he was employed in the late summer of 1974 to advise Royal about payment of a fire loss at 3031 North 11th Street, Kansas City, Kansas. He recalled a telephone conversation in August

Page 279

1974 with a lady from a credit union who inquired whether the credit union could be included as a payee on a draft to be issued by Royal in payment of a fire loss, and he advised her that it could not. He admitted, somewhat equivocally, that he "probably" knew a draft had previously been issued and that a stop payment had been ordered.

Although Royal had on May 8 issued a draft in the amount of $12,000 to Gary Terrell in full payment of the fire loss, on August 12, 1974, it issued two additional drafts, one in the amount of $2,849.28 payable to Gary Terrell and to the Wexlers and their attorney, and the second in the amount of $9,150.72 payable to Gary Terrell alone, without receiving back the first draft or determining its whereabouts. Both drafts issued on August 12 were subsequently honored and paid.

Subsequent to receiving the dishonored draft Federal contacted Wilson Terrell, its immediate indorser, and although the record is incomplete in this respect, it apparently remained in contact with him in an effort to obtain payment. No demand for payment was made directly to Royal until January 1975, and payment was then refused. Federal filed this suit against Royal for the face amount of the draft on February 10, 1975.

The $12,000 draft drawn on May 8, was not drawn by Royal without recourse, § 400.3-413(2). 1 It was drawn on itself payable through the Morgan Guaranty Trust Company which resulted in the draft having the status of a note, § 400.3-118, and in Morgan Guaranty Trust Company being a "collecting bank" to make presentment to Royal's New York office. § 400.3-120. Royal states to this court in its brief that it "did not contest the authenticity of the instrument or any signature." Federal accepted the instrument for value in good faith and without notice of any defense or that payment had been or would be stopped. There is no question but that the $12,000 draft was a negotiable instrument within the meaning of § 400.3-104, and that Federal was a holder in due course.

Royal asserts, however, that Federal "cannot now claim the rights of a holder in due course (because) that issue was not submitted (to the jury) for determination." But, all the facts necessary to establish Federal as a holder in due course were admitted or established by substantial evidence, and Royal presented no evidence to refute that status. Therefore, there was no live issue as to any of the matters essential to Federal's status as a holder in due course, and it was not necessary that such issue be submitted to the jury. John Deere Company of St. Louis v. Davis, 335 S.W.2d 686, 689 (Mo.App.1960).

It is provided in § 400.3-307(2) that "When signatures are admitted or established, production of the instrument entitles a holder to recover on it unless the defendant establishes a defense."

Royal submitted an affirmative defense, which may best be described by setting fourth its Instruction No. 3, which was objected to by Federal, and which was as follows:

Your verdict must be for the defendant if you believe:

First, plaintiff paid Wilson M. Terrell on the draft issued May 8, 1974, before defendant had the opportunity to accept or reject it, and

plaintiff failed to notify defendant of its claim as a holder of the draft in question and demand payment therefor until after defendant had issued two subsequent drafts, and

plaintiff's delay in failing to demand payment was unreasonable under the circumstances; and

Second, plaintiff's conduct or failure to act as submitted in paragraph First, caused or contributed to any loss or damage plaintiff may have sustained.

In support of this theory of defense Royal cited § 400.3-502 to the trial court. Paragraph (1) of that section pertains to unexcused

Page 280

delays in making "necessary presentment or notice of dishonor," and paragraph (2) provides that "Where without excuse a necessary protest is delayed beyond the time when it is due any drawer or endorser is discharged." But, Subparagraph (b) of § 400.3-511(2) provides that "presentment or notice or protest" is "entirely excused" when "such party (the one to be charged) has himself dishonored the instrument or has countermanded payment * * * ." Royal stopped payment on the draft. Therefore, there was no "necessary" presentment, notice of dishonor or protest, although presentment was in fact made. Section 400.3-502 does not authorize or support the submission of Instruction No. 3 as a defense to Federal's action on the draft.

Stopping payment on the draft did not absolve Royal from its obligation thereon to a holder in due course. Di Franco v. Steinbaum, 177 S.W.2d 697, 701 (Mo.App.1944); Martin v. Ficklin, 240 Mo.App. 1225, 227 S.W.2d 69 (1950); Maryland Casualty Co. v. Dobbin, 232 Mo.App. 557, 108 S.W.2d 166, 176 (1937); 10 C.J.S. Bills and Notes § 35(e); 11 Am.Jur.2d Bills and Notes § 590. Instruction No. 3 submits as a basis of avoiding liability on the part of Royal that Federal paid Wilson Terrell before Royal had the opportunity...

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11 practice notes
  • Naccache v. Taylor, No. 11–CV–0392.
    • United States
    • District of Columbia Court of Appeals of Columbia District
    • July 25, 2013
    ...Miss. Dep't of Human Servs. v. Molden, 644 So.2d 1230, 1232–33 (Miss.1994); UAW–CIO Local No. 31 Credit Union v. Royal Ins. Co., 594 S.W.2d 276, 281 (Mo.1980) (en banc); Van Pelt v. Greathouse, 219 Neb. 478, 364 N.W.2d 14, 18–19 (1985); Corvallis Sand & Gravel Co. v. State Land Bd., 250 Or.......
  • Rabius v. Brandon, No. WD 67890.
    • United States
    • Court of Appeal of Missouri (US)
    • July 1, 2008
    ...law." G.M. Morris Boat Co., v. Bishop, 631 S.W.2d 84, 88 (Mo.App. S.D. 1982) (citing UAW-CIO Local # 31 Credit Union v. Royal Ins. Co., 594 S.W.2d 276, 281 (Mo. banc 1980)); see also Erwin v. City of Palmyra, 119 S.W.3d 582, 586 (Mo. App. E.D.2003) (citing Marvin E. Nieberg Real Estate Co. ......
  • CitiMortgage, Inc. v. Just Mortg., Inc., No. 4:09 CV 1909 DDN
    • United States
    • United States District Courts. 8th Circuit. United States District Court (Eastern District of Missouri)
    • December 13, 2013
    ...do not apply to actions at law. The doctrines do not apply to actions at law. UAW-CIO Local No. 31 Credit Union v. Royal Ins. Co., Ltd., 594 S.W.2d 276, 281 (Mo. 1980) (laches); Karpierz v. Easley, 68 S.W.3d 565, 572 (Mo. Ct. App. 2002) (unclean hands). However, the UFTA expressly allows eq......
  • G. M. Morris Boat Co., Inc. v. Bishop, No. 12294
    • United States
    • Court of Appeal of Missouri (US)
    • March 12, 1982
    ...the land. Laches is an equitable doctrine not applicable to actions at law. UAW-CIO Local # 31 Credit Union v. Royal Insurance Co., Ltd., 594 S.W.2d 276, 281 (Mo. banc 1980). Plaintiff's suit here based on a claim of legal title to the property is an action at law and laches is not a defens......
  • Request a trial to view additional results
6 cases
  • Rabius v. Brandon, No. WD 67890.
    • United States
    • Court of Appeal of Missouri (US)
    • July 1, 2008
    ...G.M. Morris Boat Co., v. Bishop, 631 S.W.2d 84, 88 (Mo.App. S.D. 1982) (citing UAW-CIO Local # 31 Credit Union v. Royal Ins. Co., 594 S.W.2d 276, 281 (Mo. banc 1980)); see also Erwin v. City of Palmyra, 119 S.W.3d 582, 586 (Mo. App. E.D.2003) (citing Marvin E. Nieberg Real Estate Co. v. Tay......
  • New Garden Rest., Inc. v. Dir. Revenue, No. SC 94897
    • United States
    • United States State Supreme Court of Missouri
    • October 13, 2015
    ...not be affirmative misconduct and, thus, not a basis for equitable estoppel. SeeUAW–CIO Local No. 31 Credit Union v. Royal Ins. Co., Ltd.,594 S.W.2d 276, 283 (Mo. banc 1980)(“[I]t is equally clear that mere innocent silence or inaction will not work an estoppel ... but that there must be a ......
  • State ex rel. General Elec. Co. v. Gaertner, No. 64787
    • United States
    • United States State Supreme Court of Missouri
    • March 20, 1984
    ...in law. See Safeway Stores, Inc. v. City of Raytown, 633 S.W.2d at 730; UAW-CIO Local # 31 Credit Union v. Royal Insurance Co., Ltd., 594 S.W.2d 276, 281 (Mo. banc 1980). We need not decide this question at this time, however, because we must reject General Electric's contention for another......
  • Warren v. Warren, No. WD
    • United States
    • Court of Appeal of Missouri (US)
    • December 19, 1989
    ...correctly states that the doctrine of laches cannot apply as a defense to an action at law. UAW-CIO Local # 31 v. Royal Insurance Co., 594 S.W.2d 276, 281 (Mo.1980) (en banc); G.M. Morris Boat Co., Inc. v. Bishop, 631 S.W.2d 84, 88 (Mo.App.1982). Nevertheless, his arguments The Supreme Cour......
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