Court Opinion

ID: 2977823
Source: CourtListenerOpinion
Date Created: 2015-09-22 18:14:42.179105+00
Date Added: 2024-06-11T11:44:08.816878
License: Public Domain

RECOMMENDED FOR FULL-TEXT PUBLICATION
                          Pursuant to Sixth Circuit Rule 206
                                 File Name: 09a0101p.06

              UNITED STATES COURT OF APPEALS
                             FOR THE SIXTH CIRCUIT
                               _________________

                                                X
                                                 -
 JULIET M. MURPHY,
                                                 -
                            Plaintiff-Appellant,
                                                 -
                                                 -
                                                     No. 08-1483
          v.
                                                 ,
                                                  >
                                                 -
                        Defendant-Appellee. -
 NATIONAL CITY BANK,
                                                 -
                                                N
                  Appeal from the United States District Court
                 for the Eastern District of Michigan at Detroit.
                  No. 07-14292—John Feikens, District Judge.
                              Argued: January 16, 2009
                         Decided and Filed: March 17, 2009
              Before: MERRITT, ROGERS, and WHITE, Circuit Judges.

                                 _________________

                                      COUNSEL
ARGUED: Carl G. Becker, BECKER & WASVARY, Troy, Michigan, for Appellant.
Keith A. Noreika, COVINGTON & BURLING, Washington, D.C., for Appellee.
ON BRIEF: Carl G. Becker, Mark K. Wasvary, BECKER & WASVARY, Troy, Michigan,
for Appellant. Keith A. Noreika, Fuad Rana, COVINGTON & BURLING, Washington,
D.C., Kathleen A. Lang, DICKINSON WRIGHT, Detroit, Michigan, Joseph A. Fink,
DICKINSON WRIGHT, Lansing, Michigan, for Appellee.
                                 _________________

                                      OPINION
                                 _________________

       WHITE, Circuit Judge. Plaintiff Juliet M. Murphy filed this putative class action,
alleging that Defendant National City Bank’s practice of charging fees as a condition of
cashing official checks violated Michigan’s Uniform Commercial Code (MUCC), M.C.L.

                                           1
No. 08-1483                     Murphy v. Nat’l City Bank                                         Page 2

                                          1
440.3412, 440.3413, and 440.3414.             The district court granted Defendant’s motion to
dismiss on pre-emption grounds, and did not reach the MUCC issue. We affirm for the
reasons the district court set forth in a companion case, i.e., that the MUCC is not
violated by a bank charging a non-accountholder a fee to cash its teller’s check. See
NNDJ, Inc. v. Comerica, Inc., 584 F. Supp. 2d 957 (E.D. Mich. 2008).2

                                                    I

         Defendant National City Bank (National City) is a national banking association
subject to the National Banking Act (NBA), 12 U.S.C. § 21 et seq. Plaintiff was the
named payee on an official check of National City dated October 5, 2007. Plaintiff, who
did not have an account at National City, presented the check for payment at a National
City branch in Berkley, Michigan, and was charged a ten-dollar fee for the service of
cashing the check.

         On October 16, 2007, additional plaintiffs represented by the same counsel filed
a similar action against National City, JP Morgan Chase Bank, and several regional or
state banks, including Comerica and Fifth Third Bank, asserting identical claims under
the MUCC. See NNDJ, Inc., supra, 584 F. Supp. 2d 957. The NNDJ case was
transferred to the same district court judge who presided over the instant case.

         National City and JP Morgan Chase (the national bank defendants) filed motions
to dismiss in both the instant case and in NNDJ under Fed. R. Civ. P. 12(b)(6) (failure
to state a claim), arguing that nothing in the MUCC prohibited a bank from assessing a
check-cashing fee on an official check and that, to the extent the MUCC was interpreted
to preclude a national bank from so doing, such an interpretation is pre-empted by the
NBA, 12 U.S.C. § 24(Seventh), and Office of the Comptroller of the Currency (OCC)

         1
         Because the district court’s jurisdiction was based on diversity of citizenship, 28 U.S.C. § 1332,
Michigan law applies unless pre-empted.
         2
          Defendant argued in its supplemental authority letter that the district court’s ruling in the
companion case, NNDJ, Inc., supra, supports that the MUCC is not violated by the imposition of a check-
cashing fee on non-accountholders presenting a teller’s check for payment.
No. 08-1483                       Murphy v. Nat’l City Bank                                          Page 3

regulations implementing the Act, 12 C.F.R. § 7.4002.3 The district court granted the
national banks’ motions to dismiss on pre-emption grounds, its order stating “[f]or the
reasons set forth in my order granting the National Banks’ Motion to Dismiss in NNDJ
Inc. v. National City Bank, Case no. 07-14406, I find that if sections of the UCC, as
enacted in Michigan, are interpreted to prohibit National City from charging non-
accountholder customers a fee to cash official checks, those state law provisions are
preempted by the NBA.” Order granting Motion to Dismiss, entered March 21, 2008,
case no. 2:07-cv-14292 (E.D. Mich.), see also NNDJ, Inc. v. Nat’l City Bank,540 F.
Supp.2d 851 (E.D. Mich. 2008). The district court did not reach the question whether
Defendant’s charging a fee for cashing an official check presented by a non-
accountholder violated the MUCC. This appeal ensued. Subsequently, the district court
held in the companion case, NNDJ, Inc., supra, under the same facts presented herein,
that Comerica’s charging a fee for cashing teller’s checks did not violate the MUCC.

                                                     II

         The MUCC4 defines “Drawer” as “a person who signs or is identified in a draft
as a person ordering payment.” M.C.L. 440.3103(1)(c). “Drawee” is defined as “a
person ordered in a draft to make payment.” M.C.L. 440.3103(1)(b). “Remitter” is
defined as “a person who purchases an instrument from its issuer if the instrument is
payable to an identified person other than the purchaser.” M.C.L. 440.3103(1)(k). The

         3
             National banks may exercise “all such incidental powers . . . to carry on the business of banking
. . . [including the power to negotiate] drafts,” i.e., to cash checks. 12 U.S.C. § 24 (Seventh). The NBA
generally gives the Office of the Comptroller of the Currency (OCC) exclusive regulatory, supervisory,
and enforcement authority regarding national banks’ provision of banking services, including charges for
those services. See 12 U.S.C. § 24 (Seventh), 484(a). OCC regulations provide that “establishment of
non-interest charges and fees, [and] their amounts . . . are business decisions to be made by each bank, in
its discretion,” provided that certain factors are considered. 12 C.F.R. § 7.4002(b)(2).
          A national bank may “charge its customers non-interest charges and fees” for its authorized
services. 12 C.F.R. § 7.4002(a). The OCC interprets the term “customer” as used in § 7.4002(a) to mean
“any party that obtains a product or service from the bank.” Two federal courts of appeals have upheld
the OCC’s interpretation of the term “customer” as including non-accountholders. See Wells Fargo Texas,
N.A. v. James, 321 F.3d 488, 490, 495 (5th Cir. 2003) (noting that district court did not err in deferring to
OCC’s construction of “customer” in § 7.4002(a) as meaning anyone who presents a check for payment),
and Bank of America v. City and County of San Francisco, 309 F.3d 551, 563 (9th Cir. 2002) (noting that
OCC’s construction of incidental powers of national banks as encompassing provision of ATM services
to non-depositors at a charge was reasonable and thus entitled to great weight).
         4
             The provisions of the MUCC that are at issue are the same or similar to those of the UCC.
No. 08-1483                   Murphy v. Nat’l City Bank                                     Page 4

MUCC defines “Teller’s check” as “a draft drawn by a bank on another bank, or payable
at or through a bank.” M.C.L. 440.3104(8). A “Cashier’s check” is defined as “a draft
with respect to which the drawer and drawee are the same bank or branches of the same
bank.” M.C.L. 440.3104(7). The MUCC, M.C.L. 440.3409(1), defines “acceptance”
as

        the drawee’s signed agreement to pay a draft as presented. It must be
        written on the draft and may consist of the drawee’s signature alone.
        Acceptance may be made at any time and becomes effective when
        notification pursuant to instructions is given or the accepted draft is
        delivered for the purpose of giving rights on the acceptance to any
        person.
        The National City official check in the instant case stated that it was drawn on
Citibank, N.A. Plaintiff’s response to Defendant’s motion to dismiss admitted that
Defendant issued “Teller’s checks” rather than “Cashier’s checks,” and conceded that
two of the three provisions of the MUCC on which her claims were based, M.C.L.
440.3412 and 440.3413, were thus inapplicable.

        The remaining MUCC provision is M.C.L. 440.3414, which provides in pertinent
part:

        Obligation of drawer

        Sec. 3414. (1) This section does not apply to cashier’s checks or other
        drafts drawn on the drawer.
        (2) If an unaccepted draft is dishonored, the drawer is obliged to pay the
        draft (i) according to its terms at the time it was issued or, if not issued,
        at the time it first came into possession of a holder, or (ii) if the drawer
        signed an incomplete instrument, according to its terms when completed,
        to the extent stated in sections 3115 and 3407. The obligation is owed
        to a person entitled to enforce the draft or to an endorser who paid the
        draft under section 3415.[5]
        Under M.C.L. 440.3502(2)(b), “dishonor” of a “draft payable on demand,”
requires “presentment for payment . . . to the drawee.” [Emphasis added.]

        5
          UCC 3-414(a) and (b) are the same as M.C.L. 440.3414(1) and (2), with the exception of the
spelling of “endorser.” UCC 3-414(b) spells the word “indorser.”
No. 08-1483                 Murphy v. Nat’l City Bank                                 Page 5

                                           III

       In the companion case, NNDJ, Inc., supra, the district court concluded that
Comerica did not violate UCC §§ 3-412, 3-413, or 3-414, as adopted in Michigan (i.e.,
M.C.L. 440.3412, 440.3413, and 440.3414), by charging a non-accountholder a fee for
cashing a teller’s check:

       UCC § 3-412 applies only to cashier’s checks or notes, neither of which
       is at issue here. . . . In this case, the check was not drawn on the drawer,
       but on a different bank. Therefore, Comerica cannot be liable under
       UCC § 3-412.
                                         ***
       UCC § 3-413 is titled “Obligation of Acceptor.” However, by definition,
       Comerica cannot be an acceptor as the drawer on the check. UCC § 3-
       103 defines acceptor as a “drawee who has accepted a draft.” In this
       instance, Comerica is the drawer, not the drawee. Therefore, Comerica
       cannot be held liable under UCC § 3-413.
                                          ***
       The instant case involves a teller’s check, where Comerica is the drawer
       and not the drawee. Since Comerica is the drawer, its liability is
       secondary to the drawee of the check, in this case, Citibank. According
       to White & Summers:
               The drawer of a draft drawn on another bank or other
               third party is only secondarily liable on the instrument,
               that is the holder must make an attempt to collect
               elsewhere before the drawer must pay . . . . Thus, in
               common experience the holder of a check looks first to
               the bank for payment, and if it cannot be had there, to the
               drawer.
       2 White & Summers, Uniform Commercial Code § 16-6 (5th ed.).
       Section 3-414 of the UCC is entitled “Obligation of a Drawer.”
       According to UCC § 3-414(b), if an unaccepted draft is dishonored, “the
       drawer is obliged to pay the draft (i) according to its terms at the time it
       was issued.” Dishonor occurs where a draft is payable on demand and
       “presentment for payment is duly made to the drawee and the draft is not
       paid on the date of presentment.” UCC § 3-502(b)(2). Here presentment
       for payment was not made to the drawee; therefore the requirement of
       dishonor under UCC § 3-502(b) has not been met.
No. 08-1483                    Murphy v. Nat’l City Bank                                         Page 6

         Despite the fact that Plaintiff did not present the check to the drawee for
         payment, the check may still be considered dishonored if Comerica
         waived presentment.         Dishonor occurs without presentment if
         presentment is excused and the instrument is not duly accepted or paid.
         UCC § 3-502(e). Presentment is excused if the drawer waives it. UCC
         § 3-504(a)(iv). Therefore, in order to determine whether Comerica is
         liable on its tellers [sic] check, this Court must determine whether
         Comerica waived presentment. If it waived presentment, then the
         requirement of dishonor has been met, making Comerica liable on the
         check.
         Comerica’s acceptance of the check did not constitute a waiver of
         presentment. “Waiver of presentment and notice of dishonor will not be
         implied from doubtful acts or language.” Kramer v. Stryker, 274 Mich.
179, 182, 264 N.W. 618 (1936). There was clearly no express waiver
         here. There was no writing on the instrument or otherwise that indicated
         a waiver, nor was there any oral agreement by Comerica to waive
         presentment to Citibank. Because there was no express waiver, any
         waiver of presentment would have to be implied from Comerica’s
         conduct.
         When Ms. Dluzynski went to Comerica to cash the check, Comerica did
         not tell her that the check was drawn on Citibank nor did it tell her that
         she should present the check to Citibank for payment. Plaintiffs argue
         that this constitutes a waiver of presentment. However, this is not a clear
         waiver by conduct. Comerica indicated to Ms. Dluzynski that it charged
         $5.00 to cash the check for a non-customer. This could just as easily be
         seen as a statement that it had no obligation to pay the check yet and
         would only do so for an additional fee because it was providing a service
         that it was not obliged to provide. Since Comerica’s actions do not
         amount to a clear waiver, I hold that Comerica did not waive notice of
         presentment and was therefore not obligated to pay the check until the
         drawee, Citibank, had dishonored it.
584 F. Supp. 2d 957, 960-61.[6]

         The district court’s analysis is equally applicable here. Because the check was
a teller’s check, National City’s only obligation was to pay the check if dishonored.
Only Citibank, the drawee bank, could have dishonored the check. Plaintiff does not
claim she presented the check to Citibank for payment. Therefore, the check was not
dishonored.

         6
            During the pendency of the instant case, the district court in this companion case denied the
plaintiffs’ motion for reconsideration of its grant of summary judgment to the defendant Comerica.
No. 08-1483                Murphy v. Nat’l City Bank                               Page 7

       Plaintiff also asserts that National City did not pay the teller’s check according
to its terms. M.C.L. 440.3414(2) provides that if an unaccepted draft is dishonored, “the
drawer is obliged to pay the draft (i) according to its terms at the time it was issued.”
National City had no obligation to pay the check according to its terms because the
check was not dishonored.

       Plaintiff argues that the district court erred in relying on Kramer v. Stryker, 274
Mich. 179, 182, 264 N.W. 618 (1936), rather than Bessenger v. Wenzel, 161 Mich. 61,
125 N.W. 750 (1910), in concluding that Comerica did not waive presentment and
dishonor by cashing the check. We agree with the district court’s decision on rehearing
in NNDJ that Comerica’s or National City’s cashing a teller’s check and retaining the
check-cashing fee does not constitute partial payment on the check and waiver of
presentment to the drawee. Bessenger, and the cases discussed therein, found that
presentment was excused by conduct of the drawer or endorser that led the holder to
believe that presentment would not be required. No such conduct is involved in
charging a check-cashing fee.

       Appellate courts may affirm on alternative grounds supported by the record. In
re Cardizem CD Antitrust Litigation, 481 F.3d 355 (6th Cir. 2007). We AFFIRM the
district court’s grant of Defendant’s motion to dismiss on the alternative grounds set
forth in NNDJ, Inc., supra, 584 F. Supp. 2d at 961, which held that M.C.L. 440.3412,
440.3413, and 440.3414 are not violated by a bank charging a check-cashing fee to a
non-accountholder who presents a teller’s check for immediate payment. We do not
reach the pre-emption issue because it is unnecessary to do so.