Summary
holding that bank accepted the cashier's check by issuing it
Summary of this case from CRAWFORD v. JP MORGAN CHASE BANK, NAOpinion
Docket No. 52577.
Decided November 30, 1981.
Frank J. Kelley, Attorney General, Robert A. Derengoski, Solicitor General, and E. David Brockman and Alan H. Broad, Assistants Attorney General, for plaintiff.
Mark T. Sophiea, for defendant Bank of the Commonwealth.
Defendant Bank of the Commonwealth (hereafter bank) appeals as of right from an amended order of summary judgment under GCR 1963, 117.2(2), in favor of the Department of Treasury in the amount of $4,434.02.
On August 29, 1977, Erma J. Brown, who owed the state $7,672.38 in employee withholding taxes, purchased a cashier's check from defendant bank in the amount of $4,434.02, payable to the state. On May 17, 1978, the state served a warrant-notice of levy upon the bank, notifying it of Brown's liability, and also served notice of the levy on her.
On May 22, 1978, Brown appeared at one of the bank's branches, indorsed the uncashed check to herself, and received full payment. The bank, in appealing the trial court's determination, cites MCL 440.4303(1); MSA 19.4303(1), arguing that once a bank has accepted or certified a check that item is beyond the reach of levy. Defendant bank cites Citizens Peoples National Bank of Pensacola, Florida v United States, 570 F.2d 1279 (CA 5, 1978), in support of its argument.
The Department of Treasury argues that the bank's reliance on MCL 440.4303; MSA 19.4303 is misplaced, that section only applying to protect the payee of the draft. It further argues that when Brown submitted the check to the bank with her indorsement, all duties and obligations owed by the bank to her terminated, and the funds became subject to the levy as with any other personal account. It cites Munson v American National Bank Trust Co of Chicago, 484 F.2d 620, 624 (CA 7, 1973), to support its argument that a cashier's check, once issued, cannot be countermanded.
Uniform Commercial Code, § 4303 provides:
"SEC. 4303. (1) Any knowledge, notice or stop-order received by, legal process served upon or setoff exercised by a payor bank, whether or not effective under other rules of law to terminate, suspend or modify the bank's right or duty to pay an item or to charge its customer's account for the item, comes too late to so terminate, suspend or modify such right or duty if the knowledge, notice, stop-order or legal process is received or served and a reasonable time for the bank to act thereon expires or the setoff is exercised after the bank has done any of the following:
"(a) accepted or certified the item;
"(b) paid the item in cash;
"(c) settled for the item without reserving a right to revoke the settlement and without having such right under statute, clearing house rule or agreement;
"(d) completed the process of posting the item to the indicated account of the drawer, maker or other person to be charged therewith or otherwise has evidenced by examination of such indicated account and by action its decision to pay the item; or
"(e) become accountable for the amount of the item under subsection (1)(d) of section 4213 and section 4302 dealing with the payor bank's responsibility for late return of items.
"(2) Subject to the provisions of subsection (1) items may be accepted, paid, certified or charged to the indicated account of its customer in any order convenient to the bank."
A cashier's check is:
"A bank's own check; a check drawn upon a bank and signed by its cashier, or assistant cashier, being a direct obligation of the bank. Cashier's checks are issued to borrowers when loans are made in lieu of a deposit credit or actual cash, sold to customers for remittance purposes, and issued in payment of the bank's own obligations, money transfers, etc. When a cashier's check is issued it becomes a credit, and upon its return through the clearing house or otherwise, a debit to the cashier's account. Cancelled cashier's checks are presumed as vouchers in the bank's files." Garcia, Munn's Encyclopedia of Banking and Finance (7th ed, 1973).
The issuance of a cashier's check by a bank constitutes an acceptance of the check, generally said to extinguish the bank's right to countermand the check. State of Pennsylvania v Curtiss National Bank of Miami Springs, Florida, 427 F.2d 395, 398-399 (CA 5, 1970), National Newark Essex Bank v Giordano, 111 N.J. Super. 347, 351; 258 A.2d 327 (1970). The maker or acceptor of an instrument "engages that he will pay [it] according to its tenor at the time of his engagement * * *". MCL 440.3413(1); MSA 19.3413(1).
Although the bank accepted the check by issuing it, that acceptance never became effective since it was never completed by delivery or notification. MCL 400.3410(1); MSA 19.3410(1). Brown never delivered (negotiated) the check to the state, MCL 440.1201(14); MSA 19.1201(14), MCL 440.3202(1); MSA 19.3202(1). Also, the bank's duties to the state as drawer of the check were not yet in effect because the state was not yet the holder, MCL 440.3413(2); MSA 19.3413(2). To be a holder, a party must be in possession of the instrument in question. MCL 440.1201(20); MSA 19.1201(20).
Because the bank's liability to the state had not yet become fixed, the check was still subject to cancellation by agreement between the bank and the purchaser. Even though a cashier's check may not be countermanded once issued and delivered, it may be cancelled by the purchaser prior to such delivery.
Pursuant to MCL 600.6017(2); MSA 27A.6017(2), execution may be had against a debtor's personal property including "bills and other evidences of debt". The cashier's check, prior to delivery, represented the bank's debt to Brown. See Jensen v Oceana Circuit Judge, 194 Mich. 405; 160 N.W. 620 (1916).
The levy was served upon the bank before Brown returned and cancelled the check prior to a delivery of it to the state. It represented personal property in her hands as a debt owed by the bank to her. The trial judge was correct in holding that the levy was valid and that the funds held by the bank as a result of the issuance of the cashier's check to Brown were subject to the state's levy.
Affirmed.