Court Opinion

ID: 877843
Source: CourtListenerOpinion
Date Created: 2013-06-04 21:45:00.050306+00
Date Added: 2024-06-11T09:07:19.599048
License: Public Domain

No. 81-449
              IN THE SUPREME COURT OF THE STATE OF MONTANA
                                1982

FELIX MISKE and FLORENCE MISKE,
husband and wife of Wibaux, Montana,
                            Plaintiff and Appellant,

ROBERT L. STIRLING, DOME: PETROLEUM
CORPOP!ATION, et al.,
                            Defendants and Respondents.

Appeal from:     District Court of the Seventh Judicial District,
                 In and for the County of Wibaux
                 Honorable L. C. Gulbrandson, Judge presiding.
Counsel of Record:
     For Appellants:
           Gene Huntley argued, Baker, Montana
           R. W. Heineman, Wibaux, Montana
     For Respondents:
           Crowley, Haughey, Hanson, Toole & Dietrich, Billings,
            Montana
           Sherry J. Matteucci argued, Billings, Montana

                                Submitted:   April 5, 1982
                                 Decided: July 6, 1982
Filed:   'JUL 6 - 1982
Mr. Justice Fred J. Weber delivered the Opinion of the
Court.

     Plaintiffs Felix and Florence Miske (Miskes) brought

this action in the Seventh Judicial District Court, Wibaux
County, for cancellation of an oil and gas lease because of
late payment of a bonus rental consideration by Dome Oil
to the Miskes.    The District Court in a summary judgment

found the payment to have been timely.   We affirm.
     Miskes appeal and raise the following issues:
     (1) Did the District Court err in finding the bonus

rental payment had been timely paid.

     (2)    If the bonus rental was not timely paid, would the
delay justify a forfeiture of the lease.

     Miskes on July 11, 1979, executed an oil and gas lease
covering 960 acres of their land to Robert Stirling as
lessee.    Stirling assigned his interest to Dome Petroleum,
which assigned its interest to Dome Oil (Dome). A supplemental
agreement executed the same day as the lease provided for a
first payment of $4,800, which was made, and a second and
final bonus payment of $43,200.00, in the form of a time
draft "payable on or before June 24, 1980."   The draft bears
the legend "collect directly through First Citizens Bank,
Billings, Montana."

     Miskes deposited the draft with their bank, Farmers and
Merchants Bank of Beach, North Dakota (Farmers).   Farmers
forwarded the draft to First Citizens, which received it on
April 2, 1980, and notified Dome of the receipt.   First
Citizens received Dome's corporate check for payment of the
draft on June 23 and deposited it in Dome's account, setting
aside funds for the Miske draft.   A First Citizens' employee
made out a cashier's check and stamped the collection notice
"paid" on June 24, the date of required payment under the
time draft.     Then, noticing the amount of the cashier's

check was wrong, the First Citizens' employee set the check
aside and on June 25 corrected it and mailed it to Farmers.
Farmers received the cashier's check on June 27; Miskes
refused payment on July 1, and ordered the cashier's check
returned to First Citizens.     On July 15, 1980, one day
before tendering return of original $4,800 payment, Miskes

entered into another oil and gas lease with another party on
the same property.

        Did the District Court err in finding the bonus rental

payment had been timely paid?
        Both parties agree that First Citizens is a collecting

bank.     "'Collecting bank' means any bank handling the item
for collection except the payor bank."        Section 30-4-105(d),
MCA.     Clawson v. Berklund (1980), 37 St.Rep. 892, 610 P.2d
1168.    First Citizens was holding the bonus payment draft
for the Miskes until it received payment from Dome.
        Section 30-4-201(1), MCA, provides:
             "Unless a contrary intent clearly appears
             and prior to the time that a settlement
             given by a collecting bank for an item is
             or becomes final (subsection (3) of 3-4-211
             and 30-4-212 and 30-4-213) the bank is an
             agent or a subagent of the owner of the
             item and any settlement given for the item
             is provisional."

The Miskes were the owners of the draft and First Citizens
was acting as their agent in the collection of the draft.
        The facts as stipulated by the parties, and summarized
by the District Court, showed that Dome issued its corporate
check payable to First Citizens, and on June 23, 1980, First

Citizens received and acknowledged the check and cover
letter.   The stipulated facts further show that on June 24,

1980, a First citizen; employee prepared a cashier's check
for $43,221.00 instead of the correct $43,201.00, and marked
the collection notice "paid."   First Citizens then voided

the erroneous cashier's check, and on June 25, 1980, issued
a new cashier's check for the correct amount, stamped the
draft paid on June 25, and forwarded the cashier's check to

Farmers by mail.
     The parties further stipulated as to the following
facts:
          "That funds sufficient to pay the time draft
          payable on or before June 24, 1980 to Plain-
          tiffs drawn by Robert L. Stirling as drawer
          and drawee were received by First Citizens
          Bank on June 23, 1980 and dedicated for such
          payment;'
                  I
In addition, the District Court found the following facts
from the stipulated exhibits and the uncontradicted affidavit
of Donald Hanson, Vice President of First Citizens:
          "16. Payment of time drafts by deposit of a
          cashier's check in the U.S. mails on the date
          the draft is due is a commonly accepted prac-
          tice within the banking industry and a prac-
          tice followed in previous transactions between
          Farmers and Merchants Bank and First Citizens
          Bank.
          "17. The statutory midnight deadline by which
          First Citizens Bank was obligated to pay or
          return the draft was at 12:OO midnight on June
          25, 1980."

     Section 30-4-211, MCA, describes in paragraph (1) the
items which a collecting bank may take in settlement, and
these items do not include an individual or corporate check.
Miskes' argument appears to basically be that since Dome
sent its corporate check to First Citizens rather than a
cashier's check or other form of remittance specifically

authorized in section 30-4-211, MCA, no final payment by
Dome was made or could occur until the Miskes actually had
cash in hand which, of course, was subsequent to the June 24
due date.    In considering the matter of payment, it is also
well to distinguish from final settlement as contemplated
under the U.C.C.     As such, we are not specifically involved
here with a question of final settlement.
     Under this issue, we are required to determine when
payment in fact was made to the Miskes, if at all.    We do
not find any statutes which deal with the determination of
the time when final payment occurs in transactions involving
collecting banks such as between First Citizens and Farmers.
Farmers and Merchants National Bank v. Boardwalk National
Bank, 245 A.2d 35, cert. den. 246 A.2d 452 (N.J. 1968), is a
case which is directly comparable to the present fact situation.
In the New Jersey case, drafts drawn on a private company
were delivered to a collecting bank and subsequently accepted
by the drawee.     The drawee delivered its company check to
the bank in payment of the drafts and the collecting banks
stamped the draft "paid" and returned them to the company.
The next day the company discovered the drafts had been paid
in error, and returned them to the collecting bank and wrote
the words "stamped in error" over the paid stamps.    The
collecting bank then notified the prior endorsers that the
drafts were dishonored.    A prior collecting bank sued and in
ruling that the payment had in fact been made and that the
subsequent dishonor was invalid, the New Jersey court in
part stated:
            "As a collecting bank, Boardwalk was Farmers'
            agent authorized to receive payment of the
            drafts [citing the Uniform Commercial Code
            section comparable to our section 30-4-201(1),
            MCA], and obligated to seasonably transmit
            the payment through appropriate channels to
            Farmers.
              "Payment of an instrument to a collecting
              bank is the equivalent of payment to its
              principal, the owner of the instrument, and
              constitutes an absolute discharge thereof.
              [Citing 10 Am.Jur.2dI Banks section 6971 The
              payment was final as far as Farmers was con-
              cerned. . ."  Farmers, 245 A.2d at 39.
       The trial court in the present case entered the following
conclusion of law:
              "1. First Citizens Bank of Billings is a
              collecting bank by virtue of the 'collect
              directly through' language contained in the
              draft. As a collecting bank, First Citizens
              Bank of Billings acted as an agent for plain-
              tiffs, owners of the obligation, under sec-
              tion 30-4-201(1), Montana Code Annotated (MCA).
              The first ground for decision in favor of
              defendants, therefore, is that payment to a
              duly authorized agent constitutes payment
              to the principal and discharges the obligation.
              The dedication of funds from defendant Dome
              Oils' account by First Citizens Bank on June
              23, 1980, constituted payment of the draft and
              discharged all liability of defendants on the
              obligation."
We adopt the rule of Farmers and Merchants National Bank v.
Boardwalk National Bank, and hold that the receipt of the
Dome check by First Citizens and the dedication of funds by
First Citizens on June 23, 1980, constituted payment of the
draft.
       Following receipt of payment by Dome, First Citizens
was then obligated to send its remittance check by a "reasonably
prompt method taking into consideration any relevant instructions,
the nature of the item, the number of such items on hand,
and the cost of collection involved and the method generally
used by it or others to present such items."     Section 30-4-
204,   MCA.    In order to determine if the bank seasonably
forwarded its cashier's check to Farmers, it is necessary to
determine the midnight deadline.     Section 30-4-104(1)(h),
MCA, defines midnight deadline as follows:
              "(h) 'Midnight deadline' with respect to a
              bank is midnight on its next banking day fol-
              lowing the banking day on which it receives
              the relevant item or notice or from which the
              -- taking action commences - - which-
              time for                         to run,
              ever is later;" (Underscoring added.)
              --
Here, the time for taking an action commenced on June 24,
1980, giving First Citizens up to midnight on June 25, its
next banking day, in which to mail its cashier's check.        By
mailing its cashier's check before the midnight deadline of
June 25, 1980, First Citizens acted in accordance with the
instructions given by Farmers and also in accordance with
the general practice used by banks as established by the
uncontradicted affidavit of Donald L. Hanson which in part
stated:
              "That it is a commonly accepted practice with-
              in the banking industry to pay time drafts on
              the date designated for payment on the time
              draft by depositing of a cashier's check in
              the U.S. mails.
              "That First Citizens Bank has had transactions
              involving time drafts with Plaintiffs' bank,
              Farmers and Merchants Bank of Beach, North
              Dakota, for many years and continues to have
              such transactions and, further, that such
              time drafts are normally paid by deposit of a
              cashier's check in the U.S. mails on the date
              the time draft is payable. . ."
    We hold that payment by Dome of the bonus rental payment
was timely and it is therefore not necessary to discuss the
other issue raised by appellant.
    We affirm.

We Concur:

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