Galyen Petroleum Co. v. Hixson

Norman Hixson (defendant) owed more than $7,000 on promissory notes to the Commercial Bank of Bassett, Nebraska (Commercial Bank). The promissory notes provided that Commercial Bank had a security interest in and a right of setoff against Hixson’s deposit-account balances and could apply any deposit-account balance against the payment of any promissory note, regardless of whether the note was due. Galyen Petroleum Company (Galyen) (plaintiff) sold fuel to Hixson in a separate transaction. Hixson issued three checks to Galyen, which were drawn on Hixson’s deposit account with Commercial Bank. Galyen presented the three checks to Commercial Bank. At the time, Hixson had sufficient funds in his deposit account to pay some of the checks that were presented. However, Commercial Bank refused payment on the checks and returned the checks to Galyen. Commercial Bank then used funds from Hixson’s deposit account to set off Hixson’s account on the promissory notes, which left insufficient funds to pay any of Galyen’s checks. The promissory notes were not due at that time, but Hixson did not object to Commercial Bank’s setoff. Galyen brought suit against Hixson and Commercial Bank to recover on the three checks. Hixson was dismissed from the case after his debts were discharged by bankruptcy. The lower court entered summary judgment in favor of Commercial Bank. Galyen appealed, arguing that there were genuine issues of material fact as to whether Commercial Bank had improperly refused to pay on Hixson’s checks, even though Hixson had sufficient funds in his deposit account to pay some of the checks at the time of presentment for payment.