Court Opinion

ID: 9668863
Source: CourtListenerOpinion
Date Created: 2023-08-24 02:28:59.762934+00
Date Added: 2024-06-11T18:15:49.107364
License: Public Domain

WALKER, Justice
(dissenting).
I respectfully dissent. It seems to me that the question in the case is not one of authority to “stop payment” on the cashier’s check. A stop payment order is frequently given by the drawer of an instrument to the drawee instructing the latter not to apply the drawer’s funds to payment of the item. The problem of stopping payment also arises occasionally in cases where a cashier’s check is purchased by one person (the remitter) and made payable to another (the payee). After the check has been delivered by the remitter to the payee in payment of some real or fancied obligation, the remitter may, for one reason or another, wish to prevent payment of the check and to that end instruct the bank to stop payment. By issuing the check, the bank undertakes and becomes primarily liable to pay the payee on demand the amount of money represented by the check. Once this legal relationship is established between the bank and the payee, the remitter obviously has no authority to order the bank not to pay the cashier’s check. And the fact that there is some difficulty or misunderstanding between the remitter and the payee does not warrant the bank’s repudiating its obliga-, tion on the check. That is the situation generally involved in cases where the courts have said that a cashier’s check is not subject to countermand by the purchaser or the issuing bank.
That is not, however, the situation in the present case. No one is attempting to order another person not to pay, and respondent is not denying liability on the check because it was requested to do so or because of any claim or right asserted by another person. Respondent has repudiated its obligation to pay on the ground that it has a legal defense to liability on the check, and the question to be decided is whether the asserted defense is good. In my opinion it is not correct to say that a bank can never legally refuse to pay one of its cashier’s checks. For example, a bank from which a cashier’s check has been procured by fraud would certainly be entitled to set up the fraud and defeat liability as long as the check remained in the hands of the payee who perpetrated the fraud. The text writers agree that a bank may properly refuse to pay its cashier’s check to the payee on the ground of failure of consideration or fraud. SB Michie, Banks and Banking, § 251 (Supp.1972); 7 Zollman, Banks and Banking, §§ 4694, 4695. In Dakota Transfer & Storage Co. v. The Merchants Nat’l Bank and Trust Co., N.D., 86 N.W.2d 639, it was held that a bank could refuse to pay a cashier’s check that was still in the hands of the original payee where there was no consideration given for the check, the payee had not changed his position in reliance thereon, and no holder in due course was involved. A similar holding was made in National Bank of California v. Miner, 167 Cal. 532, 140 P. 27.
If respondent had given petitioner cash rather than a cashier’s check and petitioner had not changed his position in any way, the bank would have been entitled to recover the money paid in violation of its customer’s stop-payment order. See Murfreesboro Bank & Trust Co. v. Travis, 190 Tenn. 429, 230 S.W.2d 658. The rule is stated in 10 Am.Jur.2d, Banks, § 654, as follows:
In accord with the well-settled rule which permits the recovery of money paid to another under mistake of fact, even though that mistake was due to negligence, where there has been no change in the position of the other parties making it unjust to require a refund, it is generally held that a bank which pays a check after receiving proper notice countermanding the order may recover the money thus paid out as money paid under a mistake of fact, and that negligence in paying the check after receiving the notice will not prevent the *576bank from recovering, at least if the holder has not changed his position after receiving payment or is not a bona fide holder for value.
Since respondent could recover the cash it had paid in the circumstances just mentioned, it should also be entitled to refuse payment of its own cashier’s check issued under the same circumstances. To recover then petitioner must show either that he is a holder in due course or that he so changed his position in reliance on the cashier’s check that respondent is precluded from denying liability thereon.
In my opinion petitioner is not a holder in due course within the meaning of the Uniform Commercial Code. The term “holder in due course” is defined by § 3.-302 as “a holder” who takes the instrument for value, in good faith and without notice. By the express terms of § 1.201 and subject to certain exceptions not material here, the word “holder” wherever used in the Uniform Commercial Code “means a person who is in possession of a document of title or an instrument or an investment security drawn, issued or endorsed to him or to his order or to bearer or in blank.” The cashier’s check involved in the present case is payable to the order of American National Insurance Company for deposit only to Hillcrest State Bank. It is not payable to petitioner or his order. It is not payable to bearer. It was not endorsed to petitioner. Since petitioner is not a “holder,” he cannot be a “holder in due course.”
Petitioner’s right to recover thus turns upon whether he has so changed his position in reliance upon the check that the bank should be precluded from denying liability thereon. On this point the Court of Civil Appeals reasoned and held as follows:
Wertz cannot say that he paid the insurance company in reliance upon either Baker’s check or the cashier’s check, or that he has been damaged by anything
the Richardson bank did, because he had already paid the insurance company and received the notes from it before either check was issued. .

Wertz argues that he changed his position in reliance upon the issuance of the cashier’s check by delivering the notes to Baker, and was thus damaged by the Richardson bank’s refusal to hon- or its cashier’s check. However, he sustained no damage or loss thereby, because he recovered judgment against Baker for the amount of said notes together with $1,000 exemplary damages, from which judgment no appeal was taken.
Since petitioner does not question the holding of the Court of Civil Appeals that he did not make a detrimental change of position in reliance on the cashier’s check, I necessarily accept it as sound. I would affirm the judgment of the Court of Civil Appeals.
STEAKLEY and REAVLEY, JJ„ join in this dissent.