Merced Security Savings Bank v. Bent Bros.

WASTE, C. J.

On the seventeenth day of September, 1926, at Los Angeles, Bent Bros., Inc., the appellant here, drew its check on the Merchants National Bank of Los Angeles in the sum of $5,000, payable to the order of the Farmers & Merchants National Bank of Merced. It mailed the check to the Merced bank for the purpose of depositing the amount of the check to its credit. The bank received the check by mail on the morning of September 18th, and credited the sum of $5,000 in the usual manner to the account of Bent Bros., Inc. Later in the day it indorsed and delivered the check to the Merced Security Savings Bank, the respondent, in settlement of a clearance of business for that day between the two institutions. At noon, the Farmers

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Merchants National Bank of Merced closed its doors and, under orders from the national bank examiner, was not thereafter permitted to resume business.

When the respondent presented the check of Bent Bros., Inc., to the Los Angeles bank on which it was drawn, payment had been stopped, and the check was accordingly dishonored. Respondent thereupon presented the check to Bent Bros., Inc., and its payment was again refused. The Merced Security Savings Bank thereupon brought this action against Bent Bros., Inc., to recover the amount of the check. The trial court found that the plaintiff took the check as an innocent purchaser, and in good faith for value, and without notice of any equities existing in favor of Bent Bros., Inc., and without any knowledge of the insolvency and consequent inability of the Farmers & Merchants National Bank of Merced to meet its financial

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obligations. Judgment was accordingly entered for the plaintiff, and the defendant has appealed.

Appellant disputes the correctness of the findings of the trial court, and contends that the evidence not only fails to give them support, but, on the contrary, “conclusively demonstrates that the defendant had the legal right to stop payment of the check and therefore cannot be held liable by reason of its nonpayment.” The evidence upon which appellant relies for support of its contention that the respondent was not a holder in due course, but took the check in question with knowledge of its infirmity, relates to the transactions had between the two Merced banks during the forenoon of Saturday, September 18th, in settlement of the balance shown by their clearances for the 17th and 18th. There appear to have been two independent settlements. A draft on the San Francisco correspondent of the Farmers