Caisse Populaire (St-Jean-Baptiste) Belle Riviere Ltd. v. A &

L Auto Wreckers Ltd.

18 O.R. (2d) 344







23RD JANUARY 1978.

Bills and notes -- Holder in due course -- Cheque deposited at payee's bank -- Payment stopped by drawer -- Whether drawer liable to bank as holder in due course.

Where a cheque is deposited at the payee's bank and credited to the payee's account the bank becomes a holder in due course and can maintain an action against the drawer even though the latter has stopped payment on the cheque.

[Huron & Erie Mortgage Corp. v. Rumig, [1970] 2 O.R. 204, 10 D.L.R. (3d) 309, apld; Capital Associates Ltd. v. Royal Bank of Canada (1973), 36 D.L.R. (3d) 579, 17 N.R. 205; affd 65 D.L.R. (3d) 384n, 17 N.R. 204, distd]

ACTION on a cheque.

D. W. Phillips, for appellant.

R. G. Colautti, for respondent.

The judgment of the Court was delivered orally by

GRANGE, J.:-- This is an appeal by the plaintiff from the judgment of His Honour Judge B. J. S. MacDonald in the Seventh Small Claims Court of the County of Essex dismissing the claim of the plaintiff upon a cheque drawn by the defendant and deposited by the payee in an account held by it with the plaintiff.

The cheque was issued on August 27, 1975, in favour of Belle River Automotive and deposited on either August 29th or 30th. The cheque was drawn on the Provincial Bank, went through the appropriate clearing process but because of non-relevant problems was not returned to the plaintiff until September 23, 1975, with the notation that payment had been stopped by the defendant. In the meantime the payee had gone bankrupt and the plaintiff seeks recovery as a holder in due course.

It is clear from the evidence that while there was ample reason for the countermanding between the drawer and the payee, the plaintiff took the cheque without knowledge of any defect. It is disputed that the cheque was actually deposited but I cannot, on the evidence, find otherwise. The payee filled out a deposit slip and gave that plus the cheque to the plaintiff. No question was raised at trial as to the deposit and it seems clear that although there was no direct evidence thereof the cheque was credited to the customer's account. There was no evidence one way or the other of any actual advance of the proceeds to or for the customer.

On the basis of the deposit alone it follows, in my view, that the plaintiff must succeed. In Huron & Erie Mortgage Corp. v. Rumig, [1970] 2 O.R. 204, 10 D.L.R. (3d) 309, the plaintiff had taken a deposit from a solvent customer and sued the drawer after the cheque was returned with payment stopped. The Court divided on the question of recovery, Laskin, J.A., holding that the plaintiff should have effected recovery from its customer before pursuing the drawer, but all Judges agreed that the plaintiff in the circumstances was a holder in due course and would ordinarily be entitled to the benefits that flowed from that status. In the case at bar, of course, no relief could be obtained after knowledge of the countermand from the customer.

The learned trial Judge in his reasons and the respondent in argument relied on Capital Associates Ltd. v. Royal Bank of Canada (1973), 36 D.L.R. (3d) 579, 17 N.R. 205, affirmed in the Supreme Court of Canada, 65 D.L.R. (3d) 384n, 17 N.R. 204. In my view the case has no application. It was a contest between a bank and its customer arising out of the alleged failure of the bank to recover the amount of a cheque credited to the customer on deposit but not debited to the drawer, a customer of the same branch of the bank, before its countermand. Nowhere is it suggested the bank would not be a holder in due course against the drawer.

The appeal must therefore be allowed with costs and judgment entered for the plaintiff for his claim in the amount of $395 and costs.

Appeal allowed.