Business Law 11th Edition by Kenneth Clarkson,Roger LeRoy Miller,Gaylord Jentz,Frank Cross

تمرين 20

Mid Wisconsin Bank v. Forsgard Trading, Inc.
Wisconsin Court of Appeals, 2003. 2003 WI App 186, 266 Wis.2d 685, 668 N.W.2d 830.
www.wisbar.org/WisCtApp/index.html a
• Background and Facts Forsgard Trading, Inc., opened an account at Mid Wisconsin Bank in July 1999. The account agreement stated, "Any items, other than cash, accepted for deposit * * * will be given provisional credit only until collection is final." Mid Wisconsin's practice is to give immediate credit on deposits, but an employee may place a hold on a check if, for example, there is reasonable doubt about it. On May 7, 2001, Lakeshore Truck and Equipment Sales, Inc., wrote a check payable to Forsgard in the amount of $18,500. On May 8, Forsgard deposited the check in its account at Mid Wisconsin, which gave Forsgard immediate credit. The same day, Lakeshore issued a stop-payment order (an order to its bank not to pay the check-see Chapter 27). When Mid Wisconsin received notice on May 16 that payment had been stopped, it deducted the $18,500 from Forsgard's account. Because of transfers from the account between May 8 and May 16, the deduction resulted in a negative balance. Before this incident, Forsgard had overdrawn the account twenty-four times but, on each occasion, had deposited sufficient funds to cover the overdraft. Forsgard did not do so this time. Mid Wisconsin filed a suit in a Wisconsin state court against Forsgard, Lakeshore, and others to recover the loss. The court issued a summary judgment in Mid Wisconsin's favor. Lakeshore appealed to a state intermediate appellate court.
a. Click on "Simple Search." In the page that opens, select "Court of Appeals" from the "Court or agency" menu, type "Forsgard Trading" in the "Keywords" box, select "Case name" in the "Order by" row, and click on "Go." The State Bar of Wisconsin maintains this Web site.
PETERSON, J. [Judge]
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Lakeshore claims Mid Wisconsin was not a holder in due course of the check Forsgard deposited. Wisconsin Statutes Section 403.305 [Wisconsin's version of UCC 3-305] gives a holder in due course the right to recover from a drawer who places a stop-payment order on a check. According to [Wisconsin Statutes Section] 403.302(1) [UCC 3-302(a)], a holder in due course is one who takes an instrument for value and in good faith. There is no dispute Mid Wisconsin took the check for value. Lakeshore argues, however, that Mid Wisconsin did not take the check in good faith. [Wisconsin Statutes Section] 403.103(1)(d) [UCC 3-103(a)(4)] defines good faith as "honesty in fact and the observance of reasonable commercial standards of fair dealing." Lakeshore concedes that Mid Wisconsin took the check with honesty in fact, but contends Mid Wisconsin did not observe reasonable commercial standards of fair dealing. [Emphasis added.]
First, Lakeshore contends that Mid Wisconsin's banking agreement with Forsgard did not allow it to give immediate credit, so that the Bank was not observing reasonable commercial standards when it granted the credit. The banking agreement states, "Any items, other than cash, accepted for deposit (including items drawn 'on us') will be given provisional credit only until collection is final
* * *." Lakeshore contends that this means Mid Wisconsin could not grant immediate credit. Lakeshore misinterprets the agreement. In fact, Mid Wisconsin complied with the agreement. Mid Wisconsin gave Forsgard provisional credit, which the agreement allows. When Lakeshore stopped payment on the check, the Bank deducted the amount of the check from Forsgard's account. This also was in accordance with the agreement. However, Forsgard did not cover the negative balance that resulted from the deduction.
Next, Lakeshore maintains that under the circumstances, reasonable commercial standards of fair dealing should have led Mid Wisconsin to place a hold on the check instead of giving immediate credit. Lakeshore notes that * * * Forsgard's account had been overdrawn many times in the past.
To begin with, Wisconsin courts have approved of the practice of extending immediate credit on deposited checks.* * * [E]xtending immediate credit is consistent with reasonable banking standards. * * * [Emphasis added.]
* * * It would hinder commercial transactions if depository banks refused to permit the withdrawal prior to the clearance of checks. * * * [B]anking practice is to the contrary. It is clear that the Uniform Commercial Code was intended to permit the continuation of this practice and to protect banks [that] have given credit on deposited items prior to notice of a stop payment order * * *. [Emphasis added.]
• Decision and Remedy The state appellate court affirmed the lower court's judgment that Mid Wisconsin had observed reasonable commercial standards of fair dealing and was an HDC of the check.
• What If the Facts Were Different Suppose that Forsgard's account at Mid Wisconsin already had been overdrawn when the check was deposited. How might the result in this case have been different
• The Legal Environment Dimension Should the court have given more weight to the fact that Forsgard's account had been overdrawn twenty-four times Why or why not