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Chrysler Credit Corp. v. First National Bank and Trust Co.

October 15, 1984

CHRYSLER CREDIT CORPORATION, A DELAWARE CORP.
v.
FIRST NATIONAL BANK AND TRUST COMPANY OF WASHINGTON, A NATIONAL BANKING ASSOCIATION INCORPORATED UNDER THE LAW OF THE COMMONWEALTH OF PENNA., FIRST NATIONAL BANK AND TRUST COMPANY OF WASHINGTON, PENNSYLVANIA, APPELLANT



Appeal from the United States District Court for the Western District of Pennsylvania - Pittsburgh

Before: ALDISERT, Chief Judge, HUNTER and WEIS, Circuit Judges.

Opinion OF THE COURT

Per Curiam.

As stated by the district court, this case brought in diversity under Pennsylvania law presents the question whether presentment of a check at the data processing center of a payor bank requires the bank either to give notice of dishonor or to return the check prior to midnight of the next banking day. The district court conceded that the issue was one of first impression under Pennsylvania law and that the decisions from other jurisdictions are sparse. The district court concluded that the Supreme Court of Pennsylvania, if confronted with the question, would hold that when a check is received at the data processing center of the payor bank, where the bookkeeping services for the branch offices are conducted, the bank's failure to send a notice of dishonor or to return the check before midnight of the next business day renders the bank liable for the amount of the worthless check pursuant to 13 Pa. Cons. Stat. Ann. § 4302. We will affirm the judgment of the district court on the basis of the opinion of District Judge Donald E. Ziegler, as set forth hereinafter.

We offer two additional comments. First, we recognize that this is a case of statutory construction and our standard of review is plenary. Universal Minerals, Inc. v. C.A. Hughes & Co., 669 F.2d 98, 101-02 (3d Cir. 1981).

Second, we address the argument of the appellant that the district court failed to address the second paragraph of comment 5 to § 4-106 of the Uniform Commercial Code. Appellant argues that in no addressing this paragraph "the District Court ignored what is perhaps the single most important comment applicable to the instant case." Brief for appellant at 14. The appellant is referring to the following excerpt from the comment:

In its relations to customers a branch may function as a separate bank regardless of whether it maintains its own deposit ledgers. Checks may be drawn on a particular branch and notices and stop orders delivered to that branch even though all the bookkeeping is done at the head office or another branch.

U.C.C. § 4-106 comment 5. We do not disagree that this comment raises a relevant consideration. We also note, however, that the same comment provides: "If a particular bank having branches does all of its bookkeeping at its head office, the branches of that bank do not usually function as separate banks either in the payment or collection of items." Id.

We are satisfied that the district court considered all of the relevant data. The court concluded:

In summary, the language of § 4106 is ambiguous and this court must consider the official comments and other authorities to determine the definition of a "branch bank." As rehearsed, the comments recommend that a branch be judged by the functions it performs, without regard to where those functions are physically performed.

Chrysler Credit Corp. v. First National Bank & Trust Co. of Washington, 582 F. Supp. 1436, 1440 (W.D.Pa. 1984).

We adopt as our own, the following opinion of Judge Ziegler:

I.

Plaintiff, Chrysler Credit Corporation, instituted this diversity action to recover the sum of $53,337.75 from First National Bank and Trust of Washington County, Pennsylvania (First National). Plaintiff also seeks money damages for conversion and fraud. Pennsylvania law is controlling.

The evidence established during the bench trial that Chrysler Credit and Al Barry, Inc., executed financing agreements whereby plaintiff agreed to finance the purchase of new and used vehicles for sale by the dealer. Barry granted a security interest in all vehicles financed under the agreements, and also agreed to remit to Chrysler Credit the proceeds from the sale of all vehicles on the date of sale.*fn1

Plaintiff presented evidence, which is not disputed, that Al Barry drew 10 checks on January 18 and 19, 1979, payable to Chrysler Credit Corporation in the total sum of $53,337.75.*fn2 The checks were drawn on the Barry account at the Charleroi branch office of First National. Chrysler deposited the checks in its account at the Monroeville branch of Mellon Bank on January 19, 1979. The checks were routed through the Federal Reserve and received at the main branch and data processing center of First National at Washington, Pennsylvania, on January 22, 1979.

The checks were processed by employees at the processing center, placed in a reader-sorter memory machine, and posted in a reject journal because they were drawn on uncollected funds. The checks were then withdrawn or pulled by employees of central operations.

On January 23, 1979, at approximately 10:30 a.m., the Charleroi branch received a copy of the posting reject journal by courier from the main branch. The branch manager made a decision to pay the checks the same day. However, on January 24, the branch manager reversed the decision, dishonored the checks and notified the ...


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