Galyen Petroleum Co. v. Hixson

Facts

Galyen was a wholesale supplier of fuels to Hixson, who had an account with Bank. Hixson owed Bank over $7,000 in promissory notes which had provisions permitting Bank to offset his account balance by the amount owed on the notes before the notes actually became due. On October 1, 1975, Hixson issued a check for $3,763.25 to Galyen which was returned unpaid for insufficient funds. Hixson wrote another check to Galyen on October 15 which was similarly returned unpaid. Hixson tried again on November 1, 1975, writing a check to Galyen for only $378.94, this was also returned unpaid. On November 12 and 13, 1975, Galyen went personally to present the checks to Bank and it refused payment on all three checks, despite Hixson having a balance at the time of $3,048.46. After Galyen presented the checks, Bank offset Hixson’s account for two items of $1,006.75 and $2,7000 that were credited to Hixson’s promissory notes, leaving him with a balance of $87.05. Galyen sued Hixson and Bank to recover on the checks. Hixson was dismissed as a defendant after declaring bankruptcy. Galyen argued that it was improper for Bank to offset Hixson’s accounts based on promissory notes that were not yet due, and that even if the set offs were valid, Galyen had presented the checks for payment before the set offs had been made.