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WILHELM FOODS, INC. v. NATIONAL BANK OF NORTH AMER

August 21, 1974

WILHELM FOODS, INC., Plaintiff,
v.
NATIONAL BANK OF NORTH AMERICA, Defendant and Third-Party Plaintiff, v. CENTAUR PACKING CO., INC., and Samuel Schweid, Third-Party Defendants


Edward Weinfeld, District Judge.


The opinion of the court was delivered by: WEINFELD

EDWARD WEINFELD, District Judge.

Plaintiff Wilhelm Foods, Inc., a meatpacker doing business in Denver, Colorado, seeks to recover damages from the defendant, National Bank of North America (the Bank), a national banking association, based upon a series of eight drafts totaling $181,638.80 drawn by plaintiff's predecessor *fn1" (Wilhelm), forwarded to the Bank, and intended to obtain payment for shipments of meat to DaFran Meat Co. (DaFran) in July and August 1971.

 Four separate causes of action are set forth. The first alleges that each of the drafts was mailed to and received by the Bank; that it was a "payor" bank; and that it is liable for the face amount of each draft because it neither paid, returned, nor sent notice of dishonor prior to the expiration of the "midnight deadline." *fn2" The second alleges that the Bank, which was a substantial secured creditor of DaFran, intentionally mishandled all such drafts in order to improve its position and to reap gains from DaFran's collateral as enhanced by the shipments of meat, and that as a result plaintiff will be unable to collect the amount of the drafts. The third cause of action charges that the Bank negligently handled the drafts thereby depriving Wilhelm of the opportunity of collecting the full amount thereof. The fourth cause of action alleges that the Bank's conduct was willful, wanton and malicious and seeks punitive damages.

 Defendant denies the essential allegations of the four causes of action and advances affirmative defenses of election of remedies, laches, estoppel and contributory negligence.

 The parties have taken extensive depositions of one another and of witnesses. The Bank moved for summary judgment on the ground that all four causes of action are barred by an election of remedies, and, alternatively, for summary judgment dismissing the first, third and fourth causes of action. Thereupon plaintiff crossmoved for summary judgment on the first and third causes of action. The court is of the view that realistically, as the parties appear to acknowledge in their extensive affidavits and briefs, only the first cause of action is ripe for summary judgment since the basic facts pertaining thereto are not in dispute although they differ as to the legal consequences. Accordingly, matters touching upon the other causes of action will not be referred to herein except to the extent they may bear upon the issues under the motions made with respect to the first cause of action.

 Prior to July 29, 1971, Wilhelm sold meats to DaFran, one of its largest customers, on open account on weekly credit terms, but as of that date DaFran was behind in its payments. Plaintiff, in an effort to assure prompt payment of future shipments, unilaterally decided, without notifying DaFran, *fn3" to draw "sight" drafts as a medium of collection of the purchase price for each shipment. Accordingly, commencing July 29 and up to August 13, 1971, plaintiff made shipments of meat to DaFran totaling over $181,000 and for each shipment drew a draft which it deposited with its local bank in Denver, Colorado, which the local bank then airmailed, along with a "transmittal letter," to the Bank in New York where DaFran maintained a checking account. The meat shipments were consigned and went directly to DaFran which could and did obtain delivery thereof without paying the drafts or producing the original bills of lading which Wilhelm retained. With each shipment, Wilhelm continued, as in the past, to send DaFran an invoice for the purchase price. The draft drawn by plaintiff in each instance was substantially the same. It was dated the date shipment was made, was payable at sight, was signed by Wilhelm as drawer, was payable to its local bank and, contained in the space for the drawee, the following:

 
"To: National Bank of North America
 
Seventh Avenue at 38th Street
 
New York, N. Y.
 
Account of: DaFran Meat Company
 
635 Brook Avenue
 
Bronx, New York" *fn4"

 Accompanying each draft transmitted to the Bank was a copy of the invoice for the corresponding shipment: the last three drafts were also accompanied by copies of the bill of lading. Upon receiving each draft with its attachments, the Bank's representative telephoned DaFran and was told to hold the drafts and not to pay them.

 During the period between August 6 and August 18, representatives of the Denver banks and of the plaintiff inquired of defendant whether the drafts would be paid but received no definite advice. The Bank did not pay the drafts and ...


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