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Bank wrongfully refused to pay cashier's check

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In an issue of first impression as to what circumstances an issuing bank may refuse to pay a cashier's check, the Indiana Court of Appeals ruled in the instant case the issuing bank wasn't entitled to stop payment on it later.

In South Central Bank of Daviess County v. Lynnville National Bank, Bryan K. and Lisa C. Fisher, No. 87A01-0806-CV-256, the Court of Appeals for the first time today considered the propriety of a bank's refusal to pay a cashier's check under the Uniform Commercial Code.

Bryan and Lisa Fisher obtained a cashier's check for a down payment on a manufactured home they purchased through Landmark Housing Center, which had an account at South Central Bank. Shortly after the Fishers signed a contract with Landmark, they discovered Landmark was no longer a registered dealer with Patriot Homes and wanted to stop payment on the cashier's check. By then, South Central's bank manager had already called and confirmed the cashier's check with Lynnville and credited it to Landmark's account. Even after it was informed by Lynnville that it wasn't going to pay the cashier's check, South Central paid out $24,000 to a Landmark principal the next day.

South Central filed suit, alleging Lynnville wrongfully refused payment and sought the amount of the original cashier's check, plus prejudgment interest, attorney fees, and costs. Lynnville denied liability and contended South Central failed to mitigate its losses. The trial court granted Lynnville's cross-motion for summary judgment.

Indiana Code Section 26-1-3.1-411, which is modeled after Article 3 of the UCC, explains the specific situations in which an obligated bank can stop payment on a cashier's check. None of those circumstances occurred in this case, wrote Chief Judge John Baker.

"Lynnville's obligation to pay was clear and it was able to pay, but it refused payment on the check as an accommodation to the Fishers, who had no right to make that request," he wrote. "This statute was enacted specifically to discourage that practice."

The appellate court also found that South Central is a holder in due course of the cashier's check, which limits Lynnville's available defenses to those that fall under Indiana Code Section 26-1-3.1-305(a)(1), and none of those apply to Lynnville, he wrote.

Lynnville's arguments that South Central failed to mitigated its damages also failed. The Court of Appeals remanded with instructions to enter final judgment in favor of South Central in the amount of $31,917.55 - the original cashier's check - plus expenses, interest, and any consequential damages determined by the trial court.

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  1. A sad end to a prolific gadfly. Indiana has suffered a great loss in the journalistic realm.

  2. Good riddance to this dangerous activist judge

  3. What is the one thing the Hoosier legal status quo hates more than a whistleblower? A lawyer whistleblower taking on the system man to man. That must never be rewarded, must always, always, always be punished, lest the whole rotten tree be felled.

  4. I want to post this to keep this tread alive and hope more of David's former clients might come forward. In my case, this coward of a man represented me from June 2014 for a couple of months before I fired him. I knew something was wrong when he blatantly lied about what he had advised me in my contentious and unfortunate divorce trial. His impact on the proceedings cast a very long shadow and continues to impact me after a lengthy 19 month divorce. I would join a class action suit.

  5. The dispute in LB Indiana regarding lake front property rights is typical of most beach communities along our Great Lakes. Simply put, communication to non owners when visiting the lakefront would be beneficial. The Great Lakes are designated navigational waters (including shorelines). The high-water mark signifies the area one is able to navigate. This means you can walk, run, skip, etc. along the shores. You can't however loiter, camp, sunbath in front of someones property. Informational signs may be helpful to owners and visitors. Our Great Lakes are a treasure that should be enjoyed by all. PS We should all be concerned that the Long Beach, Indiana community is on septic systems.

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