Chapter 25
Transferability and Holder
in Due Course
Case 25.1
E.D.Va.,2010.
Hammett v. Deutsche Bank Nat. Co.
Slip Copy, 2010 WL 1225849 (E.D.Va.)
United States District Court, E.D. Virginia,
CHAPTER 25: TRANSFERABILITY AND HOLDER IN DUE COURSE 421
Defendants’ Motions (Dkt.Nos.6, 17, 19) are hereby GRANTED and this case is DISMISSED. Further, Plaintiffs’
Motion for Preliminary Injunction or Temporary Restraining Order (Dkt. no. 15) is DENIED.
1. Background
FN2. Plaintiffs’ Complaint originally contained seven counts, but Plaintiffs thereafter withdrew Counts V
(labeled simply as “Injunction”); VI (“fraud”); and VII (“Due Process Violation”) in their Opposition to
Defendants’ Motion to Dismiss. Further, Count III of the Complaint alleged a claim for Breach of Fiduciary
Duty against former Defendant PFC, and this claim is also deemed withdrawn given Plaintiffs’ voluntary
FN3. Plaintiffs explicitly reference and rely upon the documents at issue in this case, and do not plausibly
dispute the authenticity of these documents. Thus, the Court may consider them at this stage in the case.
See
American Chiropractic Ass’n v. Trigon Healthcare, Inc.,
367 F.3d 212, 234 (4th Cir.2004). At the hearing held
on the Motions on February 26, 2010, the Court inquired into the authenticity of these documents and the
transactional history relating to Plaintiffs’ loan and also received Defendants’ counsel’s representation, as an
officer of this Court, regarding the legitimacy of the documents at issue in this case. Thus, notwithstanding
Plaintiffs’ counsel’s haphazard representations in his brief based on “naked assertions devoid of further
the defendant is liable for the misconduct alleged.”
Id.
III.
Procedural Posture
Plaintiffs filed their Complaint on September 8, 2009 in the Circuit Court for Fairfax County, Virginia. Defendants then
removed the action to this Court and filed motions to dismiss on January 13, 2010 and February 25, 2010,
respectively. Plaintiffs filed their Motion for Preliminary Injunction or Temporary Restraining Order on February 24,
422 CASE PRINTOUTS TO ACCOMPANY BUSINESS LAW
IV.
Analysis
Plaintiffs allege several counts against the respective defendants. At their core, Plaintiffs’ allegations seek to
challenge the authority of the various named Defendants to enforce the deed of trust securing the Note executed by
Plaintiffs.FN5
counterclaims).
Plaintiffs allege that the entities which foreclosed on their home are not entitled as a matter of law to do so.
Specifically, Plaintiffs allege that “Defendants have no legal or equitable right or interest in the Promissory Note
and/or the Deed of Trust, or in the alternative, the obligation has been extinguished, satisfied, is void, or has been
split from the Deed of Trust resulting in an unsecured Note …” Compl. at ¶ 67. However, nothing in Plaintiffs’
conclusory allegations provides a plausible basis for relief after considering the settled law of negotiable instruments
or the enforcement of a deed of trust securing notes after their negotiation.
Under Virginia law, the holder of an instrument or a nonholder in possession of the instrument with the same rights as
CHAPTER 25: TRANSFERABILITY AND HOLDER IN DUE COURSE 423
transfer this Note. The Lender or anyone who takes this Note by transfer and who is entitled to receive payments
under this Note is called the Note Holder”). As the Virginia Supreme Court noted long ago, the promise to pay a
mortgage is a promise to pay a “negotiable note [ ] secured by [the mortgage] to the respective payees thereof, or to
the person or persons to whom [it] might … be negotiated …”
Blanton v. Keneipp,
155 Va. 668, 681, 156 S.E. 413
(Va.1931).
By their own allegations, Plaintiffs admit they “refused to pay” on the Note. Compl. at ¶ 49. In Virginia, the obligation
to pay an instrument can only be “discharged as stated in [Title 8.3A] or by an act or agreement with the party which
debt carries with it the security without formal assignment or delivery.”). Moreover, as the Virginia Supreme Court has
recognized, when deeds of trust and their underlying notes are ‘separate and distinct’ documents,
FN6. Further, pursuant to Va.Code § 55–59(9), “[t]he party secured by the deed of trust, or the holders of
greater than fifty percent of the monetary obligations secured thereby” are empowered to appoint a substitute
trustee, “regardless of whether such right and power is expressly granted in such deed of trust.”
Id.
Part of
Plaintiffs’ argument is that none of the Defendants are the “party secured by the deed of trust” or “the holder
of greater than fifty percent of the monetary obligations secured thereby,” and thus neither Ocwen or PFC
were authorized to act as a substitute trustee. However, as discussed above, the faces of the documents
referenced in the Complaint plainly indicate that the Note is endorsed in blank and is possessed by Deutsche
Bank, which is thus the “party secured by the deed of trust.” The face of the “Appointment of Substitute
Trustee” indicates that Deutsche Bank then appointed PFC as substitute trustee. Once appointed, a
424 CASE PRINTOUTS TO ACCOMPANY BUSINESS LAW
note’s unenforceability because it is held in such a trust.
a.
Count 1-FDCPA
Count I of Plaintiffs’ Complaint alleges a claim under the FDCPA against Defendant Ocwen Loan Servicing, LLC
(“Ocwen”).FN8 In order to establish a FDCPA violation, Plaintiffs must prove that: (1) the plaintiff has been the object of
collection activity arising from consumer debt; (2) the defendant is a debt collector as defined by the FDCPA; and (3)
attempting to collect any debt owed or due or asserted to be owed or due another to the extent such activity is
incidental to a bona fide fiduciary obligation or a bona fide escrow arrangement”) and 5 U.S.C. § 1692a(6)(F)(iii) (“The
term [debt collector] does not include … any person collecting or attempting to collect any debt owed or due or
asserted to be owed or due another to the extent such activity … concerns a debt which was not in default at the time
it was obtained by such person.”)).
The Complaint does allege, albeit generically, that Ocwen acted without “authority to enforce the obligation, or in the
alternative, the obligation has been extinguished, satisfied, or has been split from the Deed of Trust resulting in an
unsecured Note … or was acquired after an alleged declaration of default.” Compl. at ¶ 64–65. However, these are
precisely the type of “threadbare” and unsupportable assertions
Twombly
and
Iqbal
are meant to root out.
CHAPTER 25: TRANSFERABILITY AND HOLDER IN DUE COURSE 425
b.
Count II-Declaratory Judgment
Count II of the Complaint seeks a declaratory judgment from the Court declaring that none of the Defendants have
any proper legal or equitable interest in the Property. Compl. at ¶ 67. As Defendants note, this theory certainly seems
uncertainty, insecurity, and controversy giving rise to the proceeding”). In this case, as in
Horvath,
Plaintiffs’ home has
already been foreclosed on, and thus, seeking a declaratory judgment as to Defendants’ title and interest in the
property is inapposite to the underlying purpose of declaratory relief.
Further, given the Court’s foregoing discussion of the transferability of promissory notes and the deeds that secure
them, the Court simply has no basis to award the declaratory relief sought by Plaintiffs in this action.
c.
Count IV-Quiet Title
In Count IV, Plaintiffs assert a claim to quiet title to the property in dispute. Plaintiffs simply assert the legal conclusion
that Plaintiffs are “the only party to this matter than can prove legal and equitable ownership interest in the Property.”
Again, given the Court’s foregoing discussion of the transferability of promissory notes and the deeds that secure
them, the Court has no basis to award the relief sought by Plaintiffs in Count IV of their Complaint.
IV.
Conclusion
Plaintiffs’ Complaint fails to state a plausible basis on which relief may be granted. As such, all counts must be
dismissed as to Defendants Deutsche Bank National Trust Company, Bravo Mortgage Asset Trust 2006-1 (Dkt. no.
6); Ocwen Loan Servicing, LLC (Dkt. no. 17); and Mortgage Electronic Registration System, Inc. (Dkt. no. 19)
(“Defendants”). Accordingly, this case is DISMISSED.FN9 Further, because the Court grants Defendants Motions to
Dismiss, Plaintiffs’ Motion for Preliminary Injunction or Temporary Restraining Order (Dkt. no. 15) is DENIED as moot.
Case 25.2
426 CASE PRINTOUTS TO ACCOMPANY BUSINESS LAW
178 P.3d 1209
Supreme Court of Colorado,En Banc.
Clinton GEORG and Freestyle Sports Marketing, Inc., Petitioners
v.
METRO FIXTURES CONTRACTORS, INC., Respondent.
No. 07SC26.
March 17, 2008.
instrument.
We hold that, under the facts of this case, Freestyle had constructive possession of the check and qualified as a
holder in due course under sections 4-3-302 and 4-3-306, C.R.S. (2007), of Colorado’s UCC. Accordingly, we reverse
the judgment of the court of appeals and remand with directions that the court of appeals return this case to the
district court for entry of judgment in favor of Freestyle.
I.
Freestyle employed Cassandra Demery as a bookkeeper for several years before it discovered that Demery had
embezzled over $200,000 for personal use and had failed to pay, on Freestyle’s behalf, approximately $240,000 in
state and federal employment taxes. Freestyle terminated Demery’s employment, demanded that she repay
Freestyle, and threatened to notify the authorities if she did not.
After leaving Freestyle, Demery went to work as a bookkeeper at Metro Fixtures Contractors, Inc. (“Metro”), a
company owned by her parents. Demery’s bookkeeping position at Metro included balancing the accounting books,
invoicing customers, and paying outstanding bills on behalf of the company. In her position as bookkeeper, Demery
wrote a check from Metro’s bank account and made it payable to Freestyle in the amount of $189,000. Demery wrote
“for deposit only” on the back of the check as well as Freestyle’s account number, filled out a deposit form, and
deposited the check in Freestyle’s bank account.
Demery then informed Clinton Georg, Freestyle’s president, by phone, that she had obtained a loan from her family to
repay Freestyle and had deposited the funds into Freestyle’s account. After Demery’s phone call, Georg called his
bank and confirmed the deposit of the funds into Freestyle’s account. Georg subsequently used the deposited funds
With regard to whether Freestyle was a holder in due course by constructive possession of the check, the trial court
found that no contested material facts were in dispute and that Freestyle was a holder in due course under the
applicable provisions of Colorado’s UCC.
The court of appeals accepted the trial court’s finding that no contested issue of material fact existed. However, the
court of appeals partially set aside the trial court’s judgment in favor of Freestyle, reasoning that Freestyle lacked
actual possession of the check and therefore did not qualify as a holder in due course.
B.
Holder in Due Course
428 CASE PRINTOUTS TO ACCOMPANY BUSINESS LAW
“Holder” means:
(A) The person in possession of a negotiable instrument that is payable either to bearer or to an identified
person that is the person in possession;
(B) The person in possession of a negotiable tangible document of title if the goods are deliverable either to
bearer or to the order of the person in possession;
(C) The person in control of a negotiable electronic document of title.
(a) an instrument is issued or transferred for value if:
(1) the instrument is issued or transferred for a promise of performance, to the extent the promise has
been performed;
(2) the transferee acquires a security interest or other lien in the instrument other than a lien obtained by
judicial proceedings;
(3) the instrument is issued or transferred as payment of, or as security for, an antecedent claim against
any person, whether or not the claim is due;
(4) the instrument is issued or transferred in exchange for a negotiable instrument; or
(5) the instrument is issued or transferred in exchange for the incurring of an irrevocable obligation to a
third party by the person taking the instrument.
CHAPTER 25: TRANSFERABILITY AND HOLDER IN DUE COURSE 429
Sometimes the one claiming to be a holder in due course will not have possession of the instrument at the time of
the suit. When a collecting bank holds the check, the solution is simple, for section 4-201 makes that bank the
agent of the owner of the check.
Under traditional analysis, the agent’s possession would be the owner’s*1214
possession and thus the owner would have “possession.”
§ 17-3, 153 (emphasis added).
Thus, there are circumstances wherein requiring actual physical possession of the instrument would be problematic
Many states have not had the opportunity to address the issue of constructive possession under the UCC. However,
decisions in six other jurisdictions, in addition to New York and Oregon, have recognized the sufficiency of
Court of Appeals aptly held that, when recognizing constructive possession in relation to whether a negotiable
D.
Application to this Case
[8] In the case before us, Demery was Metro’s agent, specifically its employee. As a bookkeeper for Metro, Demery’s
authority included the power to write checks on Metro’s behalf. Despite the fact that Metro did not specifically
authorize Demery to write a check to Freestyle, Metro placed her in a position to do so. Subsequently, Demery
informed Freestyle that she had obtained authority from Metro’s owners, her parents, to issue the check and had
directly deposited the funds into Freestyle’s account. Freestyle verified with its bank the deposit of these funds into its
account and then, relying on the availability of those funds, paid the delinquent taxes to the state and federal
authorities.
430 CASE PRINTOUTS TO ACCOMPANY BUSINESS LAW
(a) Subject to subsection (c) of this section and section 4-3-106(d) “holder in due course” means the holder of an
instrument if:
(1) The
instrument
when issued or negotiated to the holder
does not bear such apparent evidence of forgery
or
alteration or is not otherwise so irregular or incomplete*1215 as to call into question its authenticity; and
(2)
The holder took the instrument (i) for value, (ii) in good faith,
(iii) without notice that the instrument is overdue or
has been dishonored or that there is an uncured default with respect to payment of another instrument issued as
part of the same series, (iv)
without notice that the instrument contains an unauthorized signature
or has been
constructive delivery).
FN8. The trial court specifically stated, “The Court adopts by reference [Freestyle’s] recitation of holder in due
course and its applications of the facts of this case ….”
However, Metro counters that the bank was not Freestyle’s agent with respect to the collection of a “stolen
instrument” because under the UCC, a collecting bank is only the agent for an owner of an instrument and, according
to Metro, Freestyle did not own the check. But Metro’s argument is contrary to prior Colorado law defining the term
“owner” in relation to negotiable instruments such as checks. An otherwise authorized signature on a negotiable
instrument is not converted into an unauthorized forgery when an agent, authorized to sign negotiable instruments in
CHAPTER 25: TRANSFERABILITY AND HOLDER IN DUE COURSE 431
information was false.
Finally, Freestyle had no notice that Demery lacked authority to issue the check or that it was forged. The undisputed
facts are that Demery was Metro’s bookkeeper and had authority to issue the check. Metro simply insinuates that,
because its employee stole from Freestyle, Freestyle should have been on notice that she was also stealing from
Metro. However, Metro was in the best position to protect itself against Demery’s action. When the instrument is
regular on its face, we have held that there is no duty to inquire into possible defenses, absent circumstances that
at 1266.
Applied to this case, Demery acted as a bookkeeper for Metro for several years. Metro was in the best position to
have instituted internal procedures and mechanisms regarding the company’s accounting. Attesting to its lack of
internal procedure, Metro did not uncover the embezzlement until two years after Demery deposited the check into
Case 25.3
432 CASE PRINTOUTS TO ACCOMPANY BUSINESS LAW
Ind.App.,2009.
South Central Bank of Daviess County v. Lynnville Nat. Bank
901 N.E.2d 576
Court of Appeals of Indiana.
SOUTH CENTRAL BANK OF DAVIESS COUNTY, Appellant-Plaintiff,
v.
LYNNVILLE NATIONAL BANK, Bryan K. Fisher, and Lisa C. Fisher, Appellees-Defendants.
No. 87A01-0806-CV-256.
Feb. 20, 2009.
cashier’s check-$31,917.55-plus expenses, interest, and consequential damages, if any, to be determined by the trial court.
FACTS
FN1
FN1. We held oral argument on February 3, 2009. We thank counsel for their written and oral presentations and for
making the snowy drive to get here.
The parties entered into a joint stipulation of the undisputed facts. In 2004, appellees-third-party-defendants Bryan K. and Lisa C.
Fisher were searching for a manufactured home and encountered the sales lot of an Owensboro, Kentucky, company that claimed
to sell manufactured *578 housing-Landmark Housing Center, Inc. (Landmark). Landmark was a registered dealer for a Texas
statement.
Id.
On the same day-June 1, 2004-South Central gave unfettered and immediate cash and credit to Landmark after the
cashier’s check was deposited into Landmark’s account.
On June 3, 2004, an employee of Patriot called the Fishers and informed them that Landmark was no longer a dealer for Patriot.
Lisa Fisher then called Lynnville to report that Landmark could not fulfill its contract and that it had allegedly defrauded the Fishers
by representing itself as a dealer for Patriot. Lynnville confirmed with Patriot that Landmark was not, in fact, an authorized dealer
CHAPTER 25: TRANSFERABILITY AND HOLDER IN DUE COURSE 433
set off, or halt the withdrawal of any funds by Landmark. The following day, on June 4, 2004, South Central paid the $24,000
cashier’s check upon presentment by Rice.FN2Thus, South Central emphasizes that it “paid out $32,388.00 (i.e., the entire credit
from the deposit of the [Fishers’ cashier’s check] ) from the account
prior to notice from Lynnville of its intent not to pay the Check,
and it cleared the $24,000.00 cashier’s check it issued after such notice.” Appellant’s Br. p. 10 (emphasis in original).
FN2. At some point, Rice and Landmark declared bankruptcy.
On September 14, 2004, South Central filed a complaint against Lynnville, alleging that Lynnville had wrongfully refused payment
on the $31,917.35 cashier’s check payable to Landmark, seeking the amount of the check plus prejudgment interest, attorney fees,
6. A cashier’s check, under the UCC, is a creature of statutory definition. But, due diligence, reasonableness, duty of care,
responsibility, usage, custom, and ordinary care are part of the UCC.
7. [South Central] violated its duties by failing in its obligation to protect not only itself, but the other parties by failing to exercise
due diligence, reasonableness, duty of care, responsibility, usage, custom, and ordinary care.
8. If [South Central] had acted reasonably, prudently, and in accord with banking usage and custom, then only [South Central’s]
customer, Landmark [ ] or its principals, would have suffered.... [South Central’s] actions taken on June 3 and June 4 are fatal to
its position.
9. On June 3, [South Central] had $28,000 in Landmark’s account. When Lynnville [ ] called [South Central, South Central] had
issued two cashier’s checks, either before or after 2:00 p.m., to Landmark and to … an employee of Landmark. By having been
placed on notice, [South Central] could have stopped payment or refused payment on its checks. If it had done so, all parties
would have been protected.
10. [South Central] failed in its duty by allowing immediate credit on June 1; [South Central] failed in its duty to protect itself and
others by not refusing to pay $24,000 to Landmark [ ] and $4,188 to [a Landmark employee].
11. … [W]hen two duties clash, one must prevail. The very beginning of the UCC indicates that custom, usage, and equity should
prevail. [South Central] was under no duty to give immediate funds or immediate credit to Landmark or its principals. The
14. [South Central] responded too quickly in violation of its own procedures and safety measure.
* * *
18. Even though [South Central] states that there are certain assumptions about cashier’s checks …, assumptions are fraught with
peril. Assumptions*580 are
not presumptions,
which bear more deference.
19. Because the UCC is superceded [sic] by Regulation CC [and] limited by usage and custom, the definition of a cashier’s check
is not strictly applicable in this situation between two banks.
20. A bank
can
pay, but it does not say that a bank
must
pay. [South Central] was
entitled
to deposit the check and [South Central]
22. [South Central’s] statements show that its actions were conditional and permissive, but never mandatory. [South Central] was
not forced to cash the check, and the law provides for stopping payment on documents. Specifically, the law permits refusal and
states that damages are only to be compensated if the stop payment was wrongful. Refusal of payment on a cashier’s check is
not always wrongful and a bank has a right to stop payment.
* * *
434 CASE PRINTOUTS TO ACCOMPANY BUSINESS LAW
It is the depositor, not the bank, who ultimately bears the risk of non-payment. Ultimately, the deposit of the check and giving of
credit is provisional and non-binding unless and until sufficient time has elapsed to make it binding on the parties. Giving
immediate credit or funds is simply not done by a prudent banker.
Summary
[South Central] had the right to protect itself, but it failed to do so. Lynnville [ ] had the right to protect itself and its customer; and
it did so. [South Central] failed to protect itself and bears the risk of being damaged. [South Central] assumed the risk by not
following its own written procedures; [South Central] cannot blame its loss on Lynnville [ ]. [South Central] assumed the risk,
suffered the loss, and shall not be entitled to recover any monies from Lynnville [ ].
Appellant’s App. p. 19-23 (emphases in original). South Central now appeals.
DISCUSSION AND DECISION
As noted above, this appeal presents an issue of first impression in Indiana, namely, under what circumstances-if any-an issuing
bank may properly refuse to pay a cashier’s check. A cashier’s check is “[a] check drawn by a bank on itself, payable to another
person, and evidencing the payee’s*581 authorization to receive from the bank the amount of money represented by the check; a
draft for which the drawer and drawee are the same bank, or different branches of the same bank.”
Black’s Law Dictionary
230 (7th
(a) In this section, “obligated bank” means … the issuer of a cashier’s check….
(b) If the obligated bank wrongfully:
(1) refuses to pay a cashier’s check …;
* * *
the person asserting the right to enforce the check is entitled to compensation for expenses and loss of interest resulting from the
nonpayment and may recover consequential damages if the obligated bank refuses to pay after receiving notice of particular
circumstances giving rise to the damages.
(c) Expenses or consequential damages under subsection (b) are not recoverable if the refusal of the obligated bank to pay
occurs because:
(1) the bank suspends payments;
(3) the obligated bank has a reasonable doubt whether the person demanding payment is the person entitled to enforce the
instrument; or
(4) payment is prohibited by law.
1. In some cases a creditor may require that the debt be paid by an obligation of a bank. The debtor may comply by obtaining
CHAPTER 25: TRANSFERABILITY AND HOLDER IN DUE COURSE 435
certification of the debtor’s check, but more frequently the debtor buys from a bank a cashier’s check or teller’s check payable to
3. Subsection (c) provides that expenses or consequential damages are not recoverable if the refusal to pay is because of the
reasons stated. The purpose is to limit that recovery to cases in which the bank refuses to pay even though its obligation to pay
is clear and it is able to pay. Subsection (b) applies only if the refusal to honor the check is wrongful. If the bank is not obliged to
pay there is no recovery.
The bank may assert any claim or defense that it has, but normally the bank would not have a claim or
defense.
…
Lynnville relies on the defense of fraud as its basis for stopping payment on the cashier’s check. But we agree with South Central
that “Lynnville cannot maintain an action of its own against Landmark for fraud. Lynnville was never a victim of fraud. Rather, it is
Lynnville’s customers who claim a fraud was perpetrated upon them by their seller, Landmark.” Appellant’s Br. p. 18-19. No
interaction occurred between Lynnville and Landmark such that Lynnville can assert its
own
defense of fraud.
B. Holder in Due Course
Moreover, South Central argues that it was a holder in due course (HDC) of the cashier’s check, which would further limit the
defenses available to Lynnville. A “holder in due course” means the holder of an instrument if:
(1) the instrument when issued or negotiated to the holder does not bear such apparent evidence of forgery or alteration or is not
otherwise so irregular or incomplete as to call into question its authenticity; and
(2) the holder took the instrument:
(A) for value;
(B) in good faith;
(C) without notice that the instrument is overdue or has been dishonored or that there is an uncured default with respect to
payment of another instrument issued as part of the same series;
436 CASE PRINTOUTS TO ACCOMPANY BUSINESS LAW
are irrelevant to the validity of the cashier’s check on June 1 and South Central’s status as an HDC. The clock stopped following
presentment and acceptance.
Because South Central is an HDC, the only defenses that could be raised by Lynnville are the “real” defenses enumerated by
See
I.C. § 26-1-3. 1-305(b) (explaining that the above-listed defenses are the only ones available against an HDC). None of these
defenses apply to Lynnville-it is plainly not an infant, nor has it filed bankruptcy. There has been no suggestion of duress, lack of
Landmark’s fraud on the Fishers does not automatically spill over to South Central who had absolutely no knowledge of what
Landmark did or did not *584 promise the Fishers…. There is absolutely nothing in the cashier’s check that in any way indicated
what type of transaction was involved or what, if anything, had been promised to the Fishers.
[3] Initially, we note that Lynnville gave the Fishers a cashier’s check in exchange for a lien on the home to be constructed but did
no due diligence on Landmark before doing so. Lynnville neither phoned Landmark nor perfected its security interest. Therefore,
we believe that it is Lynnville, rather than South Central, that should bear the risk of loss herein because it was the party best able
to prevent the loss from occurring.
Risk of loss notwithstanding, we note that Lynnville argues that South Central failed to abide by its own policy providing for a delay
in payment to its customers. South Central’s “Funds Availability Policy” provides as follows:
Our general policy is to allow you to withdraw funds deposited in your account on the next business day after the day we receive
your deposit. In some cases, we may delay your ability to withdraw funds beyond the next … business day. The funds will
generally be available by the fifth business day after the day of deposit.
Br. p. 19. While Landmark may have been an unreliable customer of South Central, nothing in these facts, the law, or South
Central’s policy leads us to conclude that its decision to give immediate credit to South Central was an action taken without
ordinary care.
Third, as to South Central’s decision to pay its cashier’s check upon presentment by Rice, we observe that South Central merely
recognized that the law applies equally to South Central and Lynnville. Therefore, had South Central refused to pay the cashier’s
check, it would have been a wrongful refusal pursuant to all of the law cited and discussed above. South Central would have had
no greater right to refuse to pay the cashier’s check payable to Rice than Lynnville did with respect to the Fishers’ cashier’s check.
Therefore, we conclude that South Central did not fail to exercise ordinary care when it paid that check.
[s]uch policies allow a depositary bank time to collect the funds from the payor bank and allow the payor bank either to transmit
funds or return items before the deposit is available for withdrawal from the customer’s account. Inherent in Regulation CC are
approved governmental standards for a bank to follow: protect the bank by allowing time to ensure that a transaction occurs as
desired and don’t hold onto money so long as to be unfair to the customer or so as to profit excessively.
Appellee’s Br. p. 15-16 (internal citations omitted). South Central’s failure to “tak[e] advantage of the protections of Regulation CC
is another breach of ordinary care,” according to Lynnville, because “South Central had the right to protect itself but chose not to
do so.” Appellee’s Br. p. 18.
South Central, on the other hand, notes that “the whole purpose of a cashier’s check and Regulation CC is to speed funds
availability, not slow it down.” Reply Br. p. 11. We agree. As one court noted,
By adopting the Expected Funds Availability Act,
Congress intended to accelerate the availability of funds to bank depositors
and