On April 1, Moore gave Pipkin a check properly drawn by Moore on Zebra Bank for
ID: 363030 • Letter: O
Question
On April 1, Moore gave Pipkin a check properly drawn by
Moore on Zebra Bank for $5,000 in payment of a painting to be
framed and delivered the next day. Pipkin immediately indorsed
the check and gave it to Yeager Bank as payment in full of his
indebtedness to the bank on a note he previously had signed.
Yeager Bank canceled the note and returned it to Pipkin.
On April 2, upon learning that the painting had been destroyed
in a fire at Pipkin’s studio, Moore promptly went to Zebra Bank,
signed a printed form of stop payment order, and gave it to the
cashier. Zebra Bank refused payment on the check upon proper
presentment by Yeager Bank.
(a) What are the rights of Yeager Bank against Zebra Bank?
(b) What are the rights of Yeager Bank against Moore?
(c) Assuming that Zebra Bank inadvertently paid the amount
of the check to Yeager Bank and debited Moore’s account,
what are the rights of Moore against Zebra Bank?
Explanation / Answer
Answer a)
Looking at above scenario, Yeager Bank do not have any rights against Zebra Bank as Zebra Bank is received a Stop Payment Order from its customer well in advance. This way Yeager Bank does not hold any rights against Zebra Bank.
Answer b)
Moore is not connected directly with Yeager Bank, he is customer of Zebra Bank. Thus he is not liable to Yeager bank in any way and so Yeager bank does not have any rights against Moore.
Answer c)
If Zebra Bank inadvertently paid the amount of check to Yeager Bank inspite of receiving Stop Payment Order from Moore, Moore can file a case against the bank for operating his account without his written consent and transferring amount to Yeager Bank. He holds the operating instructions to bank and it was the Zebra Banks mistake that they paid the amount and now liable to Moore for his money.
Moore can claim his money through application and still not received he can file a lawsuit against the Bank for unethically operating his account.
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