Woody v.

National Bank of Rocky Mount

194 N.C. 549, 140 S.E. 150 (1927); Connor, J.
Digest prepared by Carlo Roman
I.
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Facts
Plaintiff-drawer Woody, a resident of the city of Rocky Mount, NC, drew his check for $6
on defendant-drawee bank, payable to the order of E.L. Hollingworth.
Payee Hollingworth negotiated the check to the Kingston Garage, which deposited it
in a Kingston Bank. Upon presentment to the drawee bank, the check was
dishonored in spite of the fact that Woody had on deposit in said drawee
bank the sum of $50.
Subsequently, Woody was arrested, confined in jail, and tried on the charge of having
given a worthless check. He was acquitted.
Woody now brings suit for compensatory and punitive damages against the drawee bank,
charging that the latters act was willful, negligent, wanton, and malicious.
Drawee bank demurred and was sustained in the trial court. Woody appeals.

II.
Issue
- W/N the drawee bank is liable to Woody for damages. YES.
III.
Ratio
- Upon the refusal or failure of the bank to pay the check of its depositor, the bank is liable
for a breach of its contract.
While generally a debtors refusal or failure to pay his debt does not render him
liable to the creditor for damages in an action in tort, it has been held that a bank
may be liable in tort to its depositor whose check it has wrongfully refused
or failed to pay. (Marzetti v. Williams)
In Rolin v. Steward, it was held that substantial damages may be recovered of
a banker for dishonoring the checks of his customer, there being sufficient
funds in his hands at the time to meet them.
- The law in England, as expressed by the two abovementioned cases, makes a distinction
between damages assessed when plaintiff is a merchant or trader (nominal and
substantial damages) and when he is not (special damages). In both cases, nominal
damages are awarded.
However, the Court does not deem this distinction to be well-founded. A plaintiffs
right to maintain this action ought not to be dependent upon his business or
occupation. Men not engaged in business as merchants and traders are now quite
generally bank depositors, and as such avail themselves of banks as a means of
conducting financial transactions.
- The law in the US, as stated in Morse on Banks and Banking, states that if the bank
refuses, without sufficient justification, to pay check of the depositor, the latter
has an action for damages against the bank.
Even if actual loss or injury to the depositor were not shown, more than nominal
damages shall be given. The wrongful refusal of payment of a depositors
check results in impeachment of his credit which must in fact be an actual
injury, though he cannot from the nature of the case furnish independent,
distinct proof thereof. As in the cases of libel and slander, it is a practical slur
upon the plaintiffs credit and repute in the business world.
Special damages may be shown if plaintiff is able; if not, temperate damages as
would be reasonable compensation for the mischief inflicted will be awarded.
Exemplary damages may be given when failure to pay is malicious.
- In the case at bar, there was error in sustaining the demurrer and dismissing plaintiffs
action. Plaintiff is entitled to nominal damages, at least.
IV.

Held

Judgment REVERSED, action REMANDED to the end that defendant may file an answer to
the complaint.