Farmers & Merchants State Bank, an Idaho Banking Corporation v. Western Bank, an Oregon Banking Corporation

Western Bank (“Western”) appeals from a decision of the district court, holding it liable to Farmers & Merchants State Bank (“F & M”) in the amount of $708,133.07 plus interest, costs, and attorney’s fees. Both banks were victims of a check-kiting scheme. F & M brought this diversity action to recover from Western the amount of a cashier’s check drawn by and on Western, payable to ah F & M customer. Western issued the check to F & M in settlement for thirteen checks drawn by a Western customer and presented for payment to Western by F & M. When Western refused to honor its cashier’s check, F & M filed suit.

We have jurisdiction under 28 U.S.C. § 1291 , and reverse.

FACTUAL BACKGROUND

Beginning in 1980 and continuing through July 1981, OK Livestock (“OK”) and Fred Currey were involved in a check-kiting scheme. OK maintained a custodial and fiduciary checking account at F & M’s Middleton, Idaho branch. Currey, a cattle broker and occasional employee of OK, maintained a combined checking/savings account at Western’s Treasure Valley (Ontario), Oregon branch. Pursuant to the scheme, Currey would write checks to OK in amounts exceeding the balance in his account. Currey would cover…