Opinion ID: 2230023
Heading Depth: 1
Heading Rank: 5

Heading: analysis

Text: The Bank alleged in its petition that [b]ased on the written account agreement, both defendants are jointly and severally liable to plaintiff for the account overdrafts. An overdraft occurs when the bank pays from its funds a check drawn on it by a depositor who does not have sufficient funds on deposit to pay the check. Video Trax, Inc. v. NationsBank, N.A., 33 F.Supp.2d 1041, 1045 n. 3 (S.D.Fla.1998), aff'd per curiam, 205 F.3d 1358 (11th Cir.2000); see also Black's Law Dictionary 1136 (8th ed.2004) (defining overdraft as [a] withdrawal of money from a bank in excess of the balance on deposit). It is undisputed that there were overdrafts in the Winfield Implement checking account that resulted in a negative account balance. However, when the cash proceeds from Steele's and Hassenfritz's promissory notes were applied to the account, the account balance went from a negative figure to a positive one. As a result, the account overdraftsthe sole subject of the Bank's petitionno longer existed at the time the petition was filed. The defendants correctly argued in their motion for summary judgment that [t]he overdrafts complained of in the petition have been fully satisfied and paid by virtue of the promissory notes executed by Jerry Steele and James Hassenfritz. Steele has fully paid his promissory note. Steele has no liability for the Hassenfritz note which remains in default. Plaintiff's only remedy should be against Hassenfritz on the Hassenfritz note. In their application for further review, the defendants also correctly argue that [t]his was not just a replacement of one piece of paper for another representing a debt. Rather, once the proceeds of the promissory notes were deposited into the Winfield Implement checking account, [t]here was no longer a shortage upon which personal liability could occur under the language of the checking account agreement. The Bank relies heavily on Orcutt v. Hanson, 163 N.W.2d 914 (Iowa 1969). The issue in that case was whether the execution and acceptance of a promissory note was full and complete settlement of an open account. Orcutt, 163 N.W.2d at 915-16. In his affidavit, the defendant stated that the note was given by him and accepted by the plaintiff as a full and complete settlement of the account. Id. at 916. This statement was enough to convince this court that a genuine issue of material fact existed as to whether the execution and acceptance of the note was intended as a full and complete settlement of the open account or only a conditional payment as the plaintiff contended. Id. at 916-17. The court stated the general rule that a promissory note given by a debtor for a precedent debt will not be held to extinguish the debt in the absence of an agreement to that effect. The mere promise in writing to pay cannot of itself be regarded as an effective payment.... Id. at 917 (emphasis added) (citations omitted). Here, there was more than a mere promise in writing to pay. Id. The proceeds of the promissory notes were applied to the checking account shortage in a manner described by the Bank as a customer deposit, thereby completely eliminating the overdrafts and shortage. See 60 Am. Jur.2d Payment § 51, at 745 (2003) (If by agreement a note is taken in absolute payment of a debt, the debt is extinguished whether or [not] the note is paid, leaving the creditor's remedy on the note. (Footnotes omitted.)).