South Central Bank of Daviess County v. Lynnville National Bank

Landmark Housing Center, Inc. (Landmark) was a registered dealer for Patriot Homes, Inc. (Patriot). On May 7, 2004, Bryan and Lisa Fisher entered into a contract with Landmark to purchase a Patriot-manufactured home. However, unbeknown to the Fishers, Landmark no longer qualified as a registered dealer for Patriot as of May 21, 2004. On June 1, 2004, the Fishers borrowed $31,917.55 from Lynnville National Bank (Lynnville) (defendant) to make a downpayment for half of the home’s purchase price. Lynnville issued the funds in the form of a cashier’s check made payable to Landmark, which the Fishers delivered to Landmark the same day. Landmark deposited the check into its account with South Central Bank of Daviess County (South Central) (plaintiff) and requested immediate funds. Before making the funds available to Landmark, South Central’s branch manager called Lynnville and confirmed the cashier’s-check information. At approximately 10:00 a.m. on June 3, 2004, a Landmark employee used the funds in Landmark’s account to obtain a South-Central cashier’s check in the amount of $24,000 made payable to a Landmark principal. On the same date, the Fishers learned that Landmark was no longer a dealer for Patriot, informed Lynnville that Landmark purportedly defrauded the Fishers, and directed Lynnville to stop payment. However, Lynnville did not call South Central until 1:45 p.m., so the funds from the Fishers’ cashier’s check had already been paid out of Landmark’s account. Subsequently, South Central paid the $24,000 cashier’s check upon presentment by the Landmark principal. Lynnville refused payment of the Fishers’ cashier’s-check amounts. Accordingly, South Central sued Lynnville for payment. The trial court granted summary judgment in Lynnville’s favor. On appeal, South Central argued that Lynnville impermissibly refused payment and that South Central was a holder in due course.