## Facts

- Lynnwood Sand & Gravel, Inc. (drawer) issued a check on December 23, 1977, drawn on Bank of Everett (payor/drawee), payable to Western Cedar Products (payee).
- Western deposited the check at Peoples National Bank (depositary bank), which gave provisional credit and applied the full amount to reduce Western’s existing overdraft.
- On December 27, 1977, Lynnwood gave Bank of Everett a stop-payment order on the check.
- On December 28, 1977, Bank of Everett returned the check to Peoples with the notation “non-collected funds, refer to the maker.”
- On January 5, 1978, Peoples re-presented the check, and Bank of Everett paid it, debiting Lynnwood’s account despite the stop-payment order.
- Lynnwood sued Bank of Everett to recover the amount paid; the trial court granted summary judgment for the bank.

## Issues

1. Whether the drawer could recover from the payor bank for paying a check after a stop-payment order where the item was later finally paid under UCC Article 4.
2. Whether the drawer proved a compensable “loss resulting from the payment” required for stop-payment remedies under the UCC.
3. Whether the initial return of the item affected the payor bank’s liability once the check was later paid on re-presentment.

## Decision

- The Court of Appeals of Washington affirmed summary judgment for Bank of Everett.
- The court treated the January 5 payment as final payment under Article 4, fixing the allocation of rights and foreclosing the drawer’s recovery from the payor bank on these facts.
- Lynnwood failed, as a matter of law, to show a recoverable loss attributable to the bank’s payment over the stop-payment order given the collection and credit mechanics already in place.

## Legal Principles

- Under UCC Article 4, a payor bank’s final payment of an item makes payment final and generally ends the ability to undo the transaction through dishonor or revocation.
- Depositary bank credits are typically provisional and subject to charge-back if an item is not finally paid; once final payment occurs, the credit becomes final and charge-back rights end.
- A customer seeking to hold a bank liable for paying over a stop-payment order must show actual loss resulting from the payment; a technical violation without provable loss does not establish recovery.
- Article 4’s loss-allocation and finality rules govern disputes arising from the collection and payment process and may limit alternative recovery theories against the payor bank.

## Conclusion

The court held that, after the check was re-presented and finally paid, the UCC’s final payment and loss-allocation rules controlled; because the drawer did not show a compensable loss tied to the payor bank’s payment over the stop-payment order, the payor bank was not liable and summary judgment was properly affirmed.


Lynnwood Sand & Gravel, Inc. v. Bank of Everett, 29 Wash. App. 686, 630 P.2d 489 (Wash. Ct. App. 1981)