FIRST-CITIZENS BANK & TRUST COMPANY, INC. OF DUNN
v.
Louis E. RAYNOR and United Co-Operative Credit Union.
No. 521.
Supreme Court of North Carolina.
January 13, 1956.*896 Young & Taylor, Dunn, for plaintiff, appellant.
Burgess & Baker, Raleigh, for United Co-operative Credit Union for defendant, appellee.
No Counsel for Louis E. Raynor.
PARKER, Justice.
The $800 cheque was the property of the defendant Louis E. Raynor. It was made payable to his order. He did not indorse it. There is no evidence that he ever authorized anyone to indorse it for him. There is no evidence that he knew his wife had procured this cheque, and had deposited it in plaintiff's bank, until after the plaintiff had cashed her $800 cheque.
G.S. § 25-35 reads: "An instrument is negotiated when it is transferred from one person to another in such manner as to constitute the transferee the holder thereof * * * if payable to order, it is negotiated by the indorsement of the holder, and completed by delivery."
This Court said in Mayers v. McRimmon, 140 N.C. 640, 53 S.E. 447, 448: "* * * to constitute a holder in due course of a negotiable instrument payable to order, it is always required that the same should be indorsed. Other requirements may, under given conditions be dispensed with, but indorsement of such an instrument is essential."
The plaintiff stamped on the back of this cheque, "absence of endorsement guaranteed." Such a stamping cannot change the positive law of this State requiring that a negotiable instrument payable to order must be indorsed by the holder to constitute the transferee a holder in due course. The plaintiff is not a holder in due course of this $800 cheque.
Printed on the card that Louis E. Raynor, and his wife, signed, when they opened a joint checking account with plaintiff, are the words, "it is hereby stipulated and agreed that any and all items deposited by the person, * * * whose signature appears below are received by this Bank for deposit or collection and in so doing this Bank acts only as depositor's collecting agent, * * *. All items are credited subject to final payment in cash or solvent credits." Printed on the face of the deposit slip for the $800 cheque issued by plaintiff appear similar words.
The Courts are practically unanimous in holding that title to a cheque or other *897 commercial paper that is deposited for the special purpose of collection does not pass to the bank. Boykin v. Bank of Fayetteville, 118 N.C. 566, 24 S.E. 357; Bank v. Citizens' National Bank, 119 N.C. 307, 25 S.E. 971; Annotations: 11 A.L.R. 1046, 42 A.L.R. 494, 68 A.L.R. 727, 99 A.L.R. 488; 7 Am.Jur., Banks, Sec. 448.
It is said in 7 Am.Jur., Banks, Sec. 449: "Even the fact that a bank receiving commercial paper for collection permits the holder to draw the amount of it before the collection is made does not of necessity change the relationship of the parties to the transaction or prevent the collecting bank, upon dishonor of the paper, from charging it back to the customer. The bank may, as a matter of favor and convenience, permit checks to be drawn against such paper before payment, since the depositor, in the event of nonpayment, is responsible for the sums drawn, not by reason of his indorsement, the paper not having ceased to be his property, but for money paid." See also Annotation 11 A.L.R. 1050.
In Baker-Cammack Textile Corp. v. Hood, 206 N.C. 782, 175 S.E. 151, 154, the deposit slips contained words identical with the words on the deposit slip for the $800 cheque here, so far as it is pertinent to the question here. The bank in the Textile Corp. case had allowed the depositor to check against uncollected items, but the depositor was solvent, and the bank had always charged returned cheques to the depositor's account. In respect to cheques deposited in the bank by the Textile Corp., and for which on every deposit it received such a deposit slip, the Court said: "We think they" (the cheques) "were held by the bank as agent for the plaintiff. We think under all the facts and circumstances of this case that the bank by express contract was an agent for collection, the contract in clear language so states."
In Worth Co. v. International Sugar Feed Co., 172 N.C. 335, 342, 90 S.E. 295, 298, the Court said: "The rule prevails with us, and it is supported by the weight of authority elsewhere, that if a bank discounts a paper and places the amount, less the discount, to the credit of the indorser, with the right to check on it, and reserves the right to charge back the amount if the paper is not paid, by express agreement, or one implied from the course of dealing, and not by reason of liability on the indorsement, the bank is an agent for collection, and not a purchaser."
The evidence in this case is susceptible of only one construction, interpretation or conclusion as a matter of law, and that is that the plaintiff received the $800 cheque as an agent for collection, and not as a purchaser. Denton v. Shenandoah Milling Co., 205 N.C. 77, 170 S.E. 107.
In Universal Supply Co. v. Hildreth, 287 Mass. 538, 192 N.E. 23, 24, 94 A.L.R. 1389, the Court said: "The drawer of a check retains the right to countermand its payment at any time before it is paid or is certified or is delivered to a bona fide holder for value." See also, In re Will of Winborne, 231 N.C. 463, 57 S.E.2d 795; 9 C.J.S., Banks and Banking, § 344.
The plaintiff is not a bona fide holder for value of the $800 cheque. It received it from Louis E. Raynor's wife, without his indorsement, and without his knowledge or consent, and as an agent for collection. The United Co-operative Credit Union had a lawful right to stop payment on this cheque at the request of Louis E. Raynor, without incurring any liability to plaintiff. Louis E. Raynor had a similar right.
Louis E. Raynor has received none of the plaintiff's money by reason of this $800 transaction. The plaintiff was not his agent in attempting to collect the cheque. The plaintiff was acting as agent for Mrs. Louis E. Raynor, who had no authority to deposit this cheque. She is the person who has received $800 of the plaintiff's money in a transaction about which Louis E. Raynor had no knowledge, and in which he did not participate in any way, and she is the *898 one who is alone responsible to plaintiff for its money paid to her.
The judgment of nonsuit below is
Affirmed.
HIGGINS, J., took no part in the consideration or decision of this case.