American National Bank & Trust Co. v. St. Joseph Valley Bank
Indiana Court of Appeals
391 N.E.2d 685, 180 Ind. App. 546 (1979)
- Written by Steven Pacht, JD
Facts
John Augustine and Nancy Augustine contracted with Hanover for Hanover to build a house for them. The Augustines received a check from their mortgagor, which John indorsed to Hanover as an advance against upcoming work. Nancy did not indorse the check. Hanover, who went bankrupt, did not build the house but deposited the check—which the bank mistakenly paid despite the lack of Nancy’s indorsement—into its bank account. American National Bank & Trust Company (American) (plaintiff), the payor bank, sued St. Joseph Valley Bank (St. Joseph) (defendant), the depository bank, to recover the wrongfully paid money. St. Joseph then brought a third-party claim against the Augustines. The trial court ruled for American against St. Joseph and for St. Joseph against the Augustines. The Augustines appealed. The Indiana Court of Appeals reversed the ruling below for St. Joseph, concluding that Hanover was not entitled to keep money for work it did not perform, that the Augustines’ contractual promise to pay Hanover was not a debt to Hanover, and that John’s indorsement of the check did not waive his claim against Hanover. St. Joseph petitioned for rehearing, arguing that (1) the Augustines were indebted to Hanover in the amount that was mistakenly paid to Hanover and (2) John’s indorsement was a waiver.
Rule of Law
Issue
Holding and Reasoning (Young, J.)
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