Valley National Bank v. Witter, Civil 4423

• Decision Date: 26 January 1942
• Docket Number: Civil 4423
• Citation: 58 Ariz. 491,121 P.2d 414
• Parties: THE VALLEY NATIONAL BANK, a National Banking Association, Appellant, v. PAYNE J. WITTER, Appellee
• Court: Arizona Supreme Court

121 P.2d 414

58 Ariz. 491

THE VALLEY NATIONAL BANK, a National Banking Association, Appellant, v. PAYNE J. WITTER, Appellee

Civil No. 4423

Supreme Court of Arizona

January 26, 1942

APPEAL from a judgment of the Superior Court of the County of Yavapai. J. W. Faulkner, Judge. Judgment modified and as so modified affirmed.

Messrs Gust, Rosenfeld, Divelbess, Robinette & Coolidge and Messrs Patterson & Eastvold, for Appellant.

Messrs O'Sullivan & Morgan and Mr. E. C. Locklear, for Appellee.

OPINION

LOCKWOOD, C.J.

Payne J. Witter, plaintiff, brought suit against Valley National Bank, a national banking association, defendant, seeking damages on account of the failure of the latter to pay certain checks drawn by the former against it. Judgment went in favor of plaintiff in the sum of $3,000, and this appeal was taken.

There are twenty-two assignments of error, grouped under thirteen propositions of law, which raise two major questions for our consideration. First, do the facts show that plaintiff had a cause of action against defendant, and second, if so, were the elements of damages properly submitted to the jury on the evidence and the instructions.

The facts applying to the first question must be assumed to be as follows: For a long time prior to the inception of the action plaintiff had lived in Miami, Arizona, where he was employed by the Miami Copper Co. While residing there he had borrowed from the Miami branch of defendant certain sums of money. Thereafter he removed to Chandler and for about three months up to July 24, 1940, had, in partnership with a man named George Tissaw, operated a restaurant called the Rainbow Inn. Upon plaintiff's removal to Chandler the records of the Miami branch concerning his loan were transferred to the Chandler branch of defendant, and thereafter payments on the loan were made in Chandler. He had, while a resident of Miami, had a checking account with the Miami branch, but this had been exhausted by July 10, 1940, and the account closed. On July 24, plaintiff and his partner sold the Rainbow Inn to a man named Gosage, who paid them by a check drawn on the Miami branch of defendant, in the sum of $600, and a promissory note for $150. Upon receiving the check, plaintiff, together with Tissaw and Gosage, went to defendant's branch in Chandler, where he gave it to the assistant manager thereof, one Middleton, and told the latter that he wanted to pay the balance then due on his indebtedness, amounting to $233.82, and to put the remainder of the check in a checking account. He also told Middleton that he was going fishing for a few days. Middleton replied that he should not write a check on the account for two days so that the $600 check could clear, but that after that it would be all right. Plaintiff then signed a card handed him by Middleton either "Payne J. Witter" or "P. J. Witter," wrote a check for $183 in favor of Tissaw, in the presence of Middleton, and left the bank. It is true that Middleton's statement in regard to the details of the transaction in the bank differed widely from that of plaintiff and Tissaw, but we must assume that the jury resolved the conflict in favor of plaintiff and are bound by its action in this respect.

On the same day the $600 check was sent on in the usual manner by the Chandler branch to the Miami branch for collection, and on the morning of July 26, the Chandler branch was advised the check had cleared, so that it then had in its possession $600 that belonged to plaintiff. Thereupon plaintiff's unpaid note of $233.82 above referred to was deducted, and a cashier's check was made out in plaintiff's favor for the difference, $366.18. This check was held in the bank until the close of business on that day and was then mailed to plaintiff at the last address which it knew, 4125 Mackey Hill, in Miami. No record was ever entered in the books of the bank showing the opening of any checking account in favor of plaintiff, the whole thing being handled by it as a collection item. In the meantime, and on July 26, plaintiff visited the Miami branch of defendant and found that the proceeds of the $600 check had been sent to Chandler. He then wrote four checks on the account, which he believed from the foregoing facts he had with the Chandler bank. Two of these checks were given Globe business houses for merchandise purchased by plaintiff, one was cashed by the Miami branch, and the last, dated July 31, was given one E. N. Reid for merchandise and cash. The total amount of these checks, including that given Tissaw and which was cashed July 26, by the Miami branch, was less than the $366.18. Plaintiff then went on his fishing trip and was gone several days, returning to Clarkdale, Arizona, on August 5, when he first discovered that none of these checks had been honored. The circumstances under which they were dishonored were as follows: A few days after the cashier's check was mailed to plaintiff's address in Miami his checks began to return to the Chandler branch and the records were examined to see whether he had a checking account. None could be found and Middleton refused to pay them, with the notation placed thereon "Refer to maker." Upon plaintiff discovering that his checks were being turned down, he called the branch in Chandler, inquiring as to why this was done. He then employed an attorney to make a trip to Chandler to interview defendant in regard to the situation. On August 17 defendant issued a new cashier's check in the place of the one sent to Miami, which had not at that time reappeared, and sent it to the Bank of Arizona in Clarkdale, with instructions to deliver it upon the execution of an indemnity bond and release. Plaintiff was willing to execute the bond but was not willing to release defendant from liability for its actions, and this cashier's check was eventually returned to defendant, and later the first cashier's check was also returned to it. Thereafter this action was begun.

We think there can be no question but that on these facts plaintiff did believe, and as a matter of law, was justified in believing, that the bank would honor his checks up to an amount of $366.18 at any time on or after July 26. There is no question from the undisputed testimony that on July 26 the bank owed plaintiff sufficient money to pay all the checks drawn by him. The only issue is whether it had agreed to treat this amount as a checking account, or merely as the proceeds of a collection. The evidence on this point was conflicting and we are bound by the verdict of the jury to assume that it had agreed to treat the money as a checking account.

There was considerable evidence to the effect that the matter was not handled by the bank in the manner in which it usually handled the opening of an account, and this may be true, but we know of no law which requires that a bank shall open an account in any particular manner. The regulations made by the bank in regard thereto are for its own benefit and protection, and may be waived by it, either directly or impliedly by its conduct, and if such conduct was of that nature that plaintiff, as a reasonable man, would believe, and did believe, that he had done everything which the bank required in order to establish a checking account, then it is liable for a failure to honor his checks, notwithstanding the fact that some of its regulations may not have been complied with, or that it did not intend to open a checking account with him.

We hold, therefore, that a judgment for damages against defendant was justified by the evidence and the law applicable thereto.

The next question is as to the amount of damages allowed and the manner in which that issue was submitted to the jury, both by the evidence and the instructions of the court.

There is no statute in Arizona covering the liability of a bank for dishonoring a check of a depositor, and we must, therefore, consider the principles of the common law. The relation between a bank and a depositor is held to be that of a debtor to a creditor and arises out of a contract express or implied, that the bank will pay to the depositor, or his order, any amount not exceeding his deposit. Brown v. State, 25 Ariz. 518, 220 P. 225. In the ordinary case of debtor and creditor, the former is not liable to the latter in an action in tort for a failure or refusal to pay the debt, since the liability arises out of contract and is limited to the amount of the debt. However, while the relation between the bank and the depositor is that of debtor and creditor, in our modern world the effect upon the depositor of the refusal of the bank to pay upon his order goes far beyond the effect of such a failure to pay by an ordinary debtor. In the last case there is no presumed imputation against the character of the creditor which will affect his business relations in other respects, no matter how many people may know of the fact. But the refusal of a bank to pay a check of its depositor is generally considered by those who know of the failure to be an imputation...