Wertz v. Richardson Heights Bank and Trust

• Citation: 12 UCCRep.Serv. 719,495 S.W.2d 572
• Decision Date: 02 May 1973
• Docket Number: No. B--3544,B--3544
• Parties: 12 UCC Rep.Serv. 719 Frank WERTZ, Petitioner, v. RICHARDSON HEIGHTS BANK AND TRUST, Respondent.
• Court: Texas Supreme Court

Page 572

495 S.W.2d 572

12 UCC Rep.Serv. 719

Frank WERTZ, Petitioner, v. RICHARDSON HEIGHTS BANK AND TRUST, Respondent.

No. B--3544.

Supreme Court of Texas.

May 2, 1973.

Rehearing Denied June 27, 1973.

Andress & Woodgate, William Andress, Jr., Dallas, for petitioner.

Saner, Jack, Sallinger & Nichols, H. Louis Nichols, William P. Fonville, Dallas, for respondent.

DENTON, Justice.

Petitioner Frank Wertz filed suit against Richardson Heights Bank and Trust, Hillcrest State Bank and William E. Baker, to recover damages for the dishonoring of a cashier's check. After trial before the court without a jury, judgment was entered in favor of Wertz against Baker for the amount owed by Baker to Wertz, and against the Richardson Heights Bank for the amount of the cashier's check, to-wit, $1505.00. No recovery was had against the Hillcrest State Bank. From this judgment only the Richardson Heights Bank and Trust has appealed. The court of civil appeals reversed and rendered judgment that the plaintiff take nothing. 482 S.W.2d 692. We reverse the judgment of the court of civil appeals and affirm the judgment of the trial court.

The facts are not materially disputed. Wertz was a general agent for the American National Insurance Company, and Baker was his assistant. Prior to August 1, 1970, Baker became indebted to American General Insurance Company in the amount of $1505. Wertz guaranteed payment of this indebtedness evidenced by three promissory notes. Baker defaulted and Wertz paid the notes in full, and in turn received the notes from American National. Subsequently, Baker gave Wertz his personal check for $1505 drawn on the Richardson Bank, dated August 15, 1970, payable to the order of American National Insurance Company. On August 10, 1970, five days before the check was delivered to Wertz, Baker ordered the Richardson Bank to stop payment on the August 15 check. On several successive days a secretary of the Wertz Agency called the Richardson Bank to inquire whether Baker's check was good. On each of these occasions she was advised it was not. However, on August 25, 1970, the bank advised the agency's secretary that the check was good. She stamped the following endorsement upon the check:

Pay to the order of

HILLCREST STATE BANK AMERICAN NATIONAL INSURANCE COMPANY

For Deposit Only

Thereupon, she took Baker's check to the Richardson Bank and exchanged it for a cashier's check from that bank, dated August 25, 1970, payable to the order of 'American National Insurance Company for deposit only to Hillcrest State Bank', in the sum of $1505. The cashier's check was immediately deposited in the Hillcrest Bank to the account of American National Insurance Company. Subsequently, Wertz delivered the notes to Baker. On August 27, 1970, the Richardson Bank wrote a letter to Wertz, with a copy to American National Insurance Company, asking that the cashier's check be returned to the bank because Baker's check had been paid by mistake, in that Baker had in fact given the bank an order to stop payment on his check. On August 31, 1970, the Richardson Bank wrote the American National Insurance Company, with a copy to Wertz, stating that a stop payment order had been placed on the cashier's check. The cashier's check was returned to the Hillcrest Bank on September 10, 1970, marked 'payment stopped'.

The court of civil appeals has held that the bank was authorized to stop payment on the cashier's check which it had issued. The court relied upon State v. Tyler County State Bank, 277 S.W. 625, 627 (Tex.Com.App.1925), and Preston v. First State Bank of Amarillo, 344 S.W.2d 724 (Tex.Civ.App. writ ref'd n.r.e.) for the proposition that the cashier's check, like an ordinary one, is also executory in its nature and revocable at any time before the bank has paid it. The Tyler County State Bank case was a suit filed by the State as payee against the bank as the drawer and drawee of certain cashier's checks when those checks were never paid on account of the insolvency of the bank. The court held the obligation of the bank evidenced by the cashier's check could be discharged only by the payment in money to the holder of the cashier's check. That case is not authority for the proposition that an issuing bank may stop payment on its cashier's check after it has been issued and delivered. The holding in State v. Tyler County State Bank, Supra, and Preston v. First State Bank of Amarillo, Supra, that a cashier's check like an ordinary one, is also executory in its nature and revocable at any time before a bank has paid it is disapproved.

A cashier's check is defined as a bill of exchange drawn by a bank upon itself and accepted in advance by the act of its issuance and not subject to countermand by either its purchaser or the issuing bank. Tarrant Wholesale Drug Co. v. Kendall, Tex.Civ.App., 223 S.W.2d 964 (n.w.h.). Ross v. Peck Iron & Metal Co., 264 F.2d 262 (4 Cir. 1959); Causey v. Eiland,175 Ark. 929, 1 S.W.2d 1008; State of Pa. v. Curtiss Nat. of Miami Springs, Fla., 427 F.2d 395 (5 Cir. 1970), 10 Am.Jur.2d Banks § 643 (p. 614). As such, the bank's liability on the check is governed by the Uniform Commercial Code, which was adopted in Texas in 1965 and became effective June 30, 1966. Under the code the bank's issuance of the check, which by definition is also acceptance, constituted an agreement by the bank to honor the check as presented. Texas Uniform Commercial Code § 3.410, V.T.C.A. The rule may thus be stated that a cashier's check is accepted for payment when issued. See, Mellon Nat. Bank v. Citizens Bank & Trust Co., 88 F.2d 128 (8 Cir. 1937), cert. denied, 302 U.S. 702, 58 S.Ct. 21, 82 L.Ed. 542.

Under the provision of Texas Uniform Commercial Code § 4.303, a stop order, whether or not effective under other rules of law to terminate or suspend the bank's right or duty to pay an item, comes too late to terminate or suspend such right or duty if it is received after the bank has accepted or certified the item. Since a cashier's check is accepted when issued, Sec. 4.303, Supra, has the effect of preventing a bank to stay payment on a cashier's check once it has been issued.

In support of its position the bank and the court of civil appeals relies on Texas Uniform Commercial Code § 4.403 which is entitled 'Customers Right to Stop Payment'. This section authorizes a customer to order the bank to stop payment of any item payable for his account. A cashier's check is not one payable for the customer's account but rather for the bank's account. It is the bank which is obligated on the check, not the customer. The petitioner here, the holder of the cashier's check and Baker's check which formed the consideration for the cashier's check, can not be charged with the failure of the bank to timely respond to Baker's stop payment order.

The court of civil appeals further held that since Wertz was neither payee nor endorsee of either check he was not a holder in due course, and whatever rights or ownership he might have in either check was subject to the defenses of the bank; and that the trial court was in error in concluding Wertz was the 'beneficial owner' of the cashier's check. The Texas Uniform Commercial Code § 3.302, does not require that the name of the holder be placed in this instrument. It is undisputed that Wertz paid American National the full amount of the notes and surrendered the notes to Baker. As a holder for value, Wertz was a holder in due course under Texas Uniform Commercial Code § 3.302. The cashier's check was made payable to the order of 'American National Insurance Company for deposit only to Hillcrest State Bank' at the request of Wertz's secretary, and was immediately deposited to Wertz's Agency account....