Murphy v. National City Bank

Juliet M. Murphy filed a class action suit against National City Bank (a national banking association), claiming that the bank's practice of charging fees for the cashing of its teller's checks violated provisions of the Michigan Uniform Commercial Code (MUCC). The U.S. District Court for the Eastern District of Michigan granted the bank summary judgment based on pre-emption of the state law by the National Banking Act. On appeal, the U. S. Court of Appeals for the Sixth Circuit affirmed the summary judgment for the bank, but for the reasons that the MUCC is not violated when a bank charges a non-accountholder a fee to cash its teller's check.

The bank issued teller's checks drawn on Citibank, N.A. A branch of the bank charged Murphy a $10 fee for the service of cashing such a check payable to Murphy. Murphy's suit argued that the MUCC provision at 440.3414 (which tracks section 3-414 of the "model" UCC) required the bank to pay its teller's check "according to its terms at the time it was issued."

The court found for the bank because the check was not drawn on the bank itself, but on Citibank. Accordingly, the provisions of 3-414 would not apply because its requirements are conditioned upon dishonor of the check: "If an unaccepted draft is dishonored, the drawer is obliged to pay the draft ... according to its terms at the time it was issued ...." Dishonor of a draft (including the teller's check) requires "presentment for payment ... to the drawee," [UCC 3-502(b)(2)] and Murphy had not presented the check to Citibank, but to the drawer, National City Bank. The court also found that imposition of the check-cashing fee was not a waiver of presentment by the bank (which could have triggered the provisions of 3-414).

In this case, the Court of Appeals addressed the question of applicability of the MUCC provision to the bank's actions. It did not address the question of pre-emption by the National Bank Act. It is also important to note that the decision applies only to teller's checks (drawn on another bank), and not to cashier's checks. Had National City Bank issued cashier's checks, it's arguable that UCC 3-412 would require payment of the check "according to its terms." In such a case, the question of pre-emption by the National Bank Act might affect the outcome.