First National Bank v. Colonial Bank

Facts

Both Plaintiff and Defendant were pawns in a check kiting scheme. Shelly International Marketing opened a checking account with Plaintiff. The principals of Shelly International Marketing also opened a checking account with Defendant under the name World Commodities, Inc. The principals then began writing checks on insufficient funds on one account then covering the overdraft by depositing checks drawn on insufficient funds from the other account. Plaintiff became suspicious of the scheme and froze Shelly International Marketing’s account. It then returned its checks to Defendant. Defendant learned of Plaintiff’s decision to return the checks at 2:45 pm and realized that in order to protect itself it must return its checks by midnight the same day. Defendant contacted World Commodities and was assured that the checks were good and should be redeposited. Defendant, in order to avoid disappointing the customer, delayed until the following day to notify Plaintiff it would be returning its checks. Plaintiff received those checks one day later and two days after Plaintiff returned its checks to Defendant.