## Facts

- Merit Construction Co., Inc. maintained a checking account at Guaranty Bank & Trust.
- Merit issued a check for $18,198 payable to L.B. Smith Co., Inc., which was deposited by the payee.
- Merit submitted a stop-payment order on the $18,198 check, believing the amount was mistaken.
- Merit issued a replacement check for $18,171.85 to L.B. Smith Co., Inc., which the payee also deposited.
- Guaranty nonetheless paid the stopped $18,198 check when presented, resulting in the payee receiving both payments.
- L.B. Smith Co., Inc. refused to return the duplicate payment, asserting Merit owed additional amounts from other dealings.
- Guaranty sued L.B. Smith Co., Inc. and its president/sole shareholder, Lawrence Lee Smith, to recover the funds paid contrary to the stop-payment order.
- The trial court granted summary judgment for Guaranty against both defendants.

## Issues

1. Whether UCC § 4-407 displaced common-law restitution/unjust enrichment for a payor bank that paid a check over a stop-payment order.
2. Whether, under UCC § 4-407, the bank’s recovery was limited to subrogation to the drawer’s rights and defenses.
3. Whether the payee’s claim that the drawer owed other debts created a material fact dispute or a defense to restitution for the duplicate payment.

## Decision

- The appellate court affirmed summary judgment for Guaranty.
- UCC § 4-407 did not eliminate the bank’s common-law restitution remedy; supplemental principles of law and equity remained available absent clear displacement.
- The payee’s retention of both payments constituted unjust enrichment, entitling Guaranty to restitution of the amount paid on the stopped check.
- Any separate indebtedness between Merit and the payee did not justify keeping funds received solely because Guaranty honored a check in violation of the stop-payment order.
- No genuine dispute of material fact existed as to the stop-payment order, the duplicate payment, and the payee’s retention of both checks.

## Legal Principles

- UCC provisions are supplemented by common-law and equitable doctrines unless a specific Code provision clearly displaces them.
- Under UCC § 4-407, a payor bank that pays over a stop-payment order may assert subrogation rights to prevent unjust enrichment and shift loss to the party who should bear it.
- Restitution/unjust enrichment permits recovery when a party retains a mistaken or wrongful payment without legal justification.
- Unrelated debts between drawer and payee do not permit the payee to retain a duplicate payment caused by the bank’s wrongful honor of a stopped item; such claims must be pursued separately.

## Conclusion

The court held that a payor bank that wrongfully honors a check subject to a stop-payment order may recover the resulting duplicate payment from the payee through common-law restitution and, independently, through UCC § 4-407 subrogation, and that unrelated indebtedness does not bar recovery where the material facts of the duplicate payment are undisputed.


Guaranty Bank & Trust v. Smith, 952 S.W.2d 787 (Mo. Ct. App. S.D. 1997)