Gentner and Company, Inc. v. Wells Fargo Bank

This case presents the issue of whether a bank that erroneously accepts an endorsed check on which a stop payment order has been placed, and issues a cashier’s check to the payee in the same amount, can thereafter refuse to pay the cashier’s check. We conclude that as between the bank and a payee who acts in good faith, the Commercial Code clearly requires the bank to suffer the loss occasioned by its error in accepting or paying a check covered by a stop payment order, and that the result is the same whether the check is paid in cash or exchanged for a cashier’s check.

Factual and Procedural Background

With one notable exception, the parties do not dispute the essential facts. L&M Home Health Corporation (L&M) had a checking account with appellant Wells Fargo Bank. L&M engaged respondent Centner and Company, Inc. (Centner) to provide consulting services, and paid Centner for services rendered with a check drawn on its Wells Fargo account in the amount of $60,000, dated September 23, 1996. Eleven days later, on October 4, 1996, L&M orally instructed Wells Fargo to stop payment on the check. Eleven days after that, on October 15, 1996, Centner presented the L&M check to…