Lowe's of Sanford, Inc. v. Mid-South Bank & Trust Co.

260 S.E.2d 801 (1979) 44 N.C. App. 365

LOWE'S OF SANFORD, INC., Plaintiff,
v.
MID-SOUTH BANK AND TRUST COMPANY, Defendant and Third-Party Plaintiff,
v.
Billy T. GLADDEN, Jr., and Billy T. Gladden, Sr., First Third-Party Defendants,
v.
SOUTHERN NATIONAL BANK OF NORTH CAROLINA, Second Third-Party Defendant,
v.
Harry E. WILSON, Third Third-Party Defendant.

No. 7911SC282.

Court of Appeals of North Carolina.

December 18, 1979.

McElwee, Hall, McElwee & Cannon, by William H. McElwee III, North Wilkesboro, for plaintiff appellee.

McDermott & Parks, by O. Tracy Parks III, Sanford, for defendant appellant.

HILL, Judge.

A cashier's check is a bill of exchange drawn by a bank upon itself and accepted in advance by the act of its issuance and not subject to countermand either by its purchaser or by the issuing bank. The bank's issuance of the cashier's check, which by definition is also an acceptance, constitutes an engagement by the bank to honor the check as presented extinguishing the right of the bank or anyone else to countermand the check. State of Pa. v. Curtiss Nat. Bank of Miami Springs, Fla., 427 F.2d 395 (5th Cir. 1970). Acceptance of any instrument is final in favor of a holder in due course. G.S. 25-3-418. Lowe's was a holder in due course as defined by G.S. 25-3-302.

Cases from other jurisdictions support our holding that issuance of the cashier's check constituted a final acceptance. In Citizens and Southern National Bank v. Youngblood, 135 Ga.App. 638, 219 S.E.2d 172 (1975), the plaintiff bank issued its cashier's check to defendant in exchange for a check drawn on plaintiff by one of its depositors. A stop-payment order on depositor's account had been overlooked, and plaintiff bank tried to recover from defendant. The court ruled that defendant was entitled to receive funds from the cashier's check, stating that,

"It is, therefore, the general rule, sustained by almost universal authority, that a payment in the ordinary course of business of a check by a bank on which it is drawn under the mistaken belief that the drawer has funds in the bank subject to such check is not such a payment under a mistake of fact as will permit and bank to recover the money so paid from the recipient of such payment." (citations omitted) Youngblood, at p. 640, 219 S.E.2d at p. 174.

Rosenbaum v. First National City Bank of New York, 11 N.Y.2d 845, 227 N.Y.S.2d 670, 182 N.E.2d 280 (1962), reargument denied 11 N.Y.2d 1017, (1962), is also similar to our case factually. The distinction is that in Rosenbaum payment was made despite a stop-payment order rather than for the reason that the customer had insufficient funds in its account. There, the court stated that,

The weight of authority holds that when a bank pays a check after and despite receiving a stop-payment order from its depositor it cannot recover on the check from the payee of the check. (citations omitted) The same rule should apply with equal or greater force when the bank in payment of the check has issued its own cashier's check to the holder. Rosenbaum, at p. 846, 227 N.Y.S.2d at p. 671, 182 N.E.2d at p. 280.

For the reasons stated above, the judgment below is

Affirmed.

MORRIS, C. J., and PARKER, J., concur.