Court Opinion

ID: 9559487
Source: CourtListenerOpinion
Date Created: 2023-08-21 17:30:09.037076+00
Date Added: 2024-06-11T09:11:12.512198
License: Public Domain

WAHLQUIST, District Judge:
(dissenting).
I respectfully dissent.
The problem presented has been a common one in legal history. It arises when a third party sues a bank alleging that the bank had been told by a depositor to pay the third party a sum of money then on deposit and the bank later refused to do so. The third party usually alleged a third party beneficiary contract or an equitable assignment of funds. The bank usually alleged that no instructions had been given, or that the instructions were merely oral and the bank insisted that the matter be *1119reduced to writing. The problem is discussed in 10 American Jurisprudence Second, Banks, Section 568, Liability to Holder or Payee; and referred to in 9 Corpus Juris Secundum, Banks and Banking, Section 366, Liability to Holder of Check for Refusal to Pay. The compilers of the Uniform Negotiable Instruments faced the problem and presented their solution. Utah adopted the Uniform Negotiable Instruments and it was known as Title 44 of the Utah Code Annotated. That statute has now been repealed. (See State Bank of Southern Utah v. Stallings, 19 Utah 2d 146, 427 P.2d 744.) Utah has now enacted the Uniform Commercial Code which covers this subject in the same manner. This code is known as Title 70A of Utah Code Annotated. Insofar as applicable to this situation, Section 409, Chapter 3, Title 70A, Utah Code Annotated, provides:
“(1) A check or other draft does not of itself operate as an assignment of any funds in the hands of the drawee available for its payment, and the drawee is not liable on the instrument until he accepts it. ...”
Section 410, Chapter 3, Title 70A, Utah Code Annotated further provides:
(1) Acceptance is the drawee’s signed engagement to honor the draft as presented. It must be written on the draft, and may consist of his signature alone. It becomes operative when completed by delivery or notification. .
This case presents a problem that the above statutes were intended to remove. The plaintiff below alleged that the depositor’s agent told, that is orally, a bank’s agent out at a branch bank to pay the plaintiff directly as opposed to making payment to the plaintiff’s local distributor; they allege that this constitutes a third party beneficiary contract. The bank later made payment to the local distributor. This is alleged to be the breach of contract. The depositor and the local distributor are not parties to this action; however, the entire group are parties to another action pending in another county where hopefully the money in question might reach the proper party.
If the plaintiff’s allegations are factual, the court below’s summary judgment would be properly entered because:
First: The directions to the bank were oral only.
Second: The bank’s acceptance of the obligation to pay was oral only.
Historically, these disputes have had their origin in some form of oral discussion or communications. The situations have placed banks in an uncomfortable position of being forced at their peril to either make decisions in favor of their depositors as against the depositors’ creditors, or in favor of creditors against their depositors, or in favor of one creditor in priority over other creditors. The common law precedents, with little exception, have reached the same conclusion as the compilers of both uniform statutes. The solution has been that this style of alleged agreement is unenforceable unless reduced to writing either in the form of a check, draft, or other memorandum and accepted in writing.
I believe that the majority opinion is contrary to the state statute. The precedent this case will set re-introduces the confusion into banking that has been carefully removed by common law precedents and the uniform statutes.
WILKINS, J., having disqualified himself, does not participate herein.