BANK OF AMERICA NATIONAL TRUST SAVINGS ASSOCIATION v. Cole's Check Service, Inc., a California corporation, Appellant.* (1956)

As recited in appellant's brief, ‘Involved in this appeal is the right of the respondent to attach trust funds in the possession of Cole's Check Service, Inc., appellant herein. Said trust funds consisted of two bank accounts in The Bank of Los Angeles at Westwood in appellant's name and designated as follows:

‘Said trust funds were attached in the above entitled action by respondent through service of a writ of garnishment or attachment on The Bank of Los Angeles at Westwood on April 1, 1955.

‘Respondent's Statement to Clerk on Attachment contained the following statement: ‘It is the intention of the plaintiff to instruct said Sheriff to attach the following described property belonging to the defendants Cole's Check Service, Inc.: monies, debts, credits, bank accounts, safe deposit boxes, and other debts due and credits belonging to the defendant Cole's Check Service, Inc.’

‘It was proved by the appellant and not denied by respondent that the funds in said Trust Account No. 1 and Trust Account No. 2 were deposited by appellant as trust funds pursuant to Section 12300.3 of the California Financial Code.

‘The gravamen of respondent's action is based on the claim that it is a holder in due course of ten (10) checks issued by appellant to Al Lichtman, agent, in the aggregate sum of $50,000.00 and endorsed by Al Lichtman to Pipermart who in turn deposited the checks in its bank account with respondent.

‘Respondent claims it gave credit to Pipermart to the extent of $50,000.00 in reliance on the deposit of said ten (10) checks in the bank account of Pipermart in respondent's bank.

‘Appellant stopped payment on said ten (10) checks and refused to pay the same, alleging no consideration and respondent attached the trust funds to recoup in part its losses. The ten (10) checks were not drawn on trust funds but were drawn on the general account of appellant and appellant claims that said checks were not sold in the usual course of business of check selling and cashing.

‘Respondent claims that the ten (10) checks were sold in the usual course of business by appellant and hence respondent was entitled to attach the trust funds as a holder in due course under the section.’

It is argued by appellant that two questions are involved, viz.:

‘(a) Are all checks issued by a check seller and casher deemed to be in the same category as checks and drafts and money orders sold by appellant as a check seller and casher under the Act?

‘(b) If the above question is answered in the affirmative, the trust funds would be subject to the levies of all purchasers, holders in due course, and payees of all checks issued by appellant whether drawn on trust funds or the general funds of appellant.

‘(c) If the answer to (a) above is in the negative, then only purchasers, holders in due course and payees of checks sold by appellant in its business as a check seller and casher would have the right to levy on trust funds.

‘From the above considerations it must be decided whether or not the trial court erred in refusing to grant the motion of appellant to release from the attachment the trust funds deposited pursuant to Section 12300.3 of the Financial Code.’

Section 12300.3 of the Financial Code provides that,

‘Nothing in this law shall be construed to prevent a purchaser, a holder in due course, the payee of a check, draft, or money order sold by the licensee in the usual course of his business, or an obligor for whom the licensee is acting as an agent in paying bills of the obligor, from taking any legal action necessary to enforce any claims which said purchaser, holder in due course, payee, or obligor may desire to take including the right to levy attachment or execution.’

Appellant's argument is highly technical whereas the above provision is general and comprehensive.

From a review of the record it is obvious that appellant's contentions lack support in the facts and the law.

The order appealed from is affirmed.

DORAN, Justice.

WHITE, P. J., and FOURT, J., concur.