Guaranty Bank & Trust v. Smith
Missouri Court of Appeals
952 S.W.2d 787 (1997)
On December 4, 1995, L.B. Smith Company, Inc. (Smith) (defendant) received a check for $18,198 from Merit Construction Company, Inc. (Merit) as payment for work Smith performed for Merit. The check was drawn on Merit’s account with Guaranty Bank & Trust (Guaranty) (plaintiff). Smith deposited the check in its account with another bank on December 5. On December 6, Merit issued a stop-payment order on its December 4 check due to a perceived error in the amount. Merit notified Smith and provided a replacement check (also drawn on its Guaranty account) for $18,171.85, the proceeds of which Smith deposited with its bank. But, despite Merit’s stop-payment order, Guaranty paid the December 4 check, leaving Smith with more than $36,000 even though Merit intended to pay only $18,171.85. Merit demanded that Smith return the claimed excess payment, but Smith refused on the ground that Merit allegedly still owed Smith money (which Merit did not deny) even after the roughly $36,000 in payments. Guaranty sued Smith and Lawrence Smith (Lawrence) (defendant), seeking restitution. The trial court granted summary judgment to Guaranty. Smith and Lawrence appealed, arguing, among other things, that Uniform Commercial Code (UCC) § 4-407 supplanted the common-law remedy of restitution and that, under § 4-407, Guaranty could recover only as Merit’s subrogee, meaning that Guaranty had to prove that Merit had a defense to paying the initial December 4 check. Per Smith and Lawrence, Guaranty failed to do so.
Rule of Law
Holding and Reasoning (Barney, J.)
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