Vail Nat. Bank v. J. Wheeler Const. Corp., 82CA0959

• Citation: 669 P.2d 1038
• Decision Date: 21 July 1983
• Docket Number: No. 82CA0959,82CA0959
• Parties: 36 UCC Rep.Serv. 883 VAIL NATIONAL BANK, Plaintiff-Appellee, v. J. WHEELER CONSTRUCTION CORPORATION, a Colorado corporation, Defendant-Appellant, and Gerhard K. Lenz and Darryl K. Blanchard, individually and doing business as Eagle Masonry, Defendants. . III
• Court: Court of Appeals of Colorado

Page 1038

669 P.2d 1038

36 UCC Rep.Serv. 883

VAIL NATIONAL BANK, Plaintiff-Appellee, v. J. WHEELER CONSTRUCTION CORPORATION, a Colorado corporation,

Defendant-Appellant,

and

Gerhard K. Lenz and Darryl K. Blanchard, individually and

doing business as Eagle Masonry, Defendants.

No. 82CA0959.

Colorado Court of Appeals,

Div. III.

July 21, 1983.

Weinshienk, Miller, Borus & Permut, James A. Jacobson, Hubert T. Weinshienk, Denver, for plaintiff-appellee.

Robert A. Francis, P.C., Robert A. Francis, Aspen, for defendant-appellant.

BERMAN, Judge.

Wheeler Construction Corporation appeals the trial court's grant of summary judgment to Vail National Bank. We affirm.

The central question in this appeal is whether Vail National is a holder in due course of a check written by Wheeler to Eagle Masonry. In 1981, Eagle was hired by Wheeler to complete a masonry subcontract. In partial payment on that contract, Wheeler wrote a check to Eagle for $20,298. Eagle promptly cashed the check at Vail National in Aspen, where it had an account. The record reveals that, prior to cashing the check, Vail National called Wheeler's bank, the First National Bank of Aspen, and was told there were sufficient funds in Wheeler's account and that there was no stop payment order on the check. At this time, Eagle's checking account balance with Vail National was negligible.

Two days later, Vail National presented the check for payment to First National. Because Wheeler had since put a stop payment order on the check, it was dishonored and returned unpaid to Vail National.

In November 1981, Vail National instituted this action against Wheeler for payment on the check, alleging that it was a holder in due course. Wheeler was granted two continuances which totaled approximately six months. Both pre-trial and a summary judgment hearing were held on June 23, 1982.

At that hearing, Wheeler appeared and moved for a further continuance claiming that it needed more time to locate former officers of Vail National. Wheeler claimed that these officers would submit affidavits stating that Vail National had not followed "good banking practices" when it cashed the check because Eagle was a short-term customer and had a negligible balance in its account at the time. The court found that whether good banking practices had been followed was irrelevant to the issue of Vail National's status as a holder in due course, and it granted summary judgment against Wheeler.

I.

Wheeler contends on appeal that Vail National's motion for summary judgment was not supported by competent evidence. We disagree.

To establish that one is a holder in due course, one must show that the check was received:

"(a) For value; and

(b) In good faith; and

(c) Without notice that it is overdue or has been dishonored or of any defense against or any claim to it on the part of any person."

Section 4-3-302(1), C.R.S.1973.

Here, Vail National presented an affidavit by Jack Lofland, one of its officers. This affidavit avers that Lofland "is Vice President and Cashier of Vail National Bank ... and has personal knowledge of the facts set forth in this affidavit." It states that the Wheeler check was cashed by Vail National on August 26, 1981, and that, before cashing the check, Vail National called First National to determine whether there were sufficient funds in Wheeler's account and whether a stop payment order had been issued.

The affidavit states that the check was cashed; thus, the "for value" element is established. Also, because the affidavit contains the allegation that Vail National called First National to verify the sufficiency of Wheeler's funds and the lack of a stop payment order, it establishes that the check was taken without any notice that it was overdue, had been dishonored, or of any defense against or claim to it.

The only element which arguably is not addressed by the affidavit is the "good faith" element. However, "good faith" means honesty in fact relative to the transaction at issue, § 4-1-201(19), C.R.S.1973, and in the case of a bank cashing a check, if the bank establishes that the check was taken without notice of dishonor or of any other defense, this is sufficient to establish good faith as well. The following jurisdictions have adopted the above position in construing identical Uniform...