## Facts

- Lottie M. McGuire maintained an investment account and a checking account at Bank One, which was the payor bank on her checking account.
- McGuire agreed to provide $200,000 to Timothy P. Looney to purchase bonds for her and requested an internal transfer from her investment account to her checking account; she was told it would take two or three days.
- On August 26, 1996, McGuire wrote Looney a $200,000 check and told him not to cash it until August 28, 1996, so the transfer could complete.
- Looney deposited the check immediately; it was presented to Bank One on August 27, 1996, when McGuire’s checking account lacked sufficient funds.
- Bank One honored the check, creating an overdraft of approximately $188,198.79; Looney converted the funds and later pled guilty to fraud.
- McGuire sought to recover her loss from Bank One, alleging the bank failed to exercise ordinary care by paying a check that created a large overdraft.

## Issues

1. Whether a payor bank breaches its duty of ordinary care by honoring a customer’s properly payable check when payment creates a substantial overdraft.
2. Whether alleged banking usage, customs, or internal policies can restrict a bank’s statutory authority under U.C.C. § 4-401 to pay a properly payable item even if an overdraft results.

## Decision

- The court affirmed the trial court’s judgment sustaining Bank One’s peremptory exception of no cause of action and dismissing the suit.
- The check was “properly payable” because it was signed by McGuire and regular on its face; McGuire’s instruction to Looney not to deposit it early did not bind the bank.
- U.C.C. § 4-401 authorizes a bank to charge a properly payable item to a customer’s account even if the payment results in an overdraft.
- Because the bank’s conduct was expressly authorized by statute, payment of the check creating an overdraft, without additional wrongful conduct, could not constitute lack of ordinary care.
- General banking customs or practices could not override the statutory authorization to honor a properly payable check despite insufficient funds.

## Legal Principles

- Under U.C.C. § 4-401, a payor bank may pay and charge a properly payable check against a customer’s account even though an overdraft results.
- A check is properly payable when authorized by the customer and not irregular on its face; private restrictions between the drawer and the payee do not limit the bank absent notice that legally binds the bank.
- When the U.C.C. expressly authorizes a bank’s action (paying a properly payable item despite overdraft), that action, standing alone, does not support a negligence claim for lack of ordinary care.
- Industry customs, usage, or internal policies cannot convert statutorily authorized payment of a properly payable check into actionable misconduct.

## Conclusion

The court held that McGuire’s allegations failed to state a claim because Bank One’s payment of her properly payable $200,000 check—though it created a large overdraft—was expressly permitted by U.C.C. § 4-401, and banking customs could not impose additional liability for that authorized act.


McGuire v. Bank One, La., N.A., 744 So. 2d 714 (La. Ct. App. 2d Cir. 1999)