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The following opinion is presented on-line for informational use only and does not replace the official version. (Mich Dept of Attorney General Web Site - www.ag.state.mi.us) STATE OF MICHIGAN FRANK J. KELLEY, ATTORNEY GENERAL Opinion No. 5867 April 13, 1981 BANKS AND BANKING: Authority to impose fee on stop payment order UNIFORM COMMERCIAL CODE: Stop payment of check A bank or other financial institution may not burden or otherwise condition the right of the bank customer to direct the stop payment of a check by requiring the payment of a fee by the customer. Honorable Steve Andrews State Representative The Capitol Lansing, Michigan You have requested my opinion on the following question: May a bank/lending institution charge a customer a fee on a stop payment order? The Uniform Commercial Code, 1962 PA 174, Sec. 4403; MCLA 440.4403; MSA 19.4403, provides as follows: '(1) A customer may by order to his bank stop payment of any item payable for his account but the order must be received at such time and in such manner as to afford the bank a reasonable opportunity to act on it prior to any action by the bank with respect to the item described in section 4303. '(2) An oral order is binding upon the bank only for 14 calendar days unless confirmed in writing within that period. A written order is effective for only 6 months unless renewed in writing. '(3) The burden of establishing the fact and amount of loss resulting from the payment of an item contrary to a binding stop payment order is on the customer.' With respect to the intent of 1962 PA 174, Sec. 4403, supra, the drafters of the Uniform Commercial Code provided the following commentary: '2. The position taken by this section is that stopping payment is a service which depositors expect and are entitled to receive from banks notwithstanding its difficulty, inconvenience, and expense. The inevitable occasional losses through failure to stop payment should be borne by the banks as a cost of the business of banking.' (Emphasis added.) MCLA, Vol 22, p 573-574 (1967 ed.); MSA, Vol 14, p 776 (1975 ed.) At the common law, the drawer of a check has the absolute right to order a stop payment of the check. Universal C.I.T. Credit Corp v Guarantee Bank & Trust Co, 161 F Supp 790 (DC Mass 1958). In Michigan, the right to stop payment was recognized long before the enactment of the Uniform Commercial Code and has been described in the following terms: 'A check is but an order on a bank to pay out money from the depositor's account. The drawer of a check may, before presentation to the bank and payment thereof, stop payment altogether, or direct the withholding of payment until he gives direction the contrary.' (Emphasis added.) Olds Motor Works v First State Savings Bank of Morenci, 258 Mich 269, 272; 241 NW 813, 814 (1932) In addition, commentators on the subject have recognized that not only do bank customers have the right to issue stop payment orders, but since the Uniform Commercial Code does not specify any grounds on which the drawer may order the stop payment, '[t]he drawer has an unlimited choice of discretion to stop payment of his check as he sees fit.' Anderson on the Uniform Commercial Code, (2d ed, 1971), Vol 3, Sec. 4403:4, p 312. The rationale for a customer's right to stop payment has also been explained in the following terms: 'In accepting the checking account, the bank agrees to honor checks drawn upon it to the amount of the indebtedness. A check is an order. Orders may be revoked until acted upon. Therefore, an implied term of the deposit contract must be the right of revocation, or stopping payment, and any payment made by the bank over a timely stop order is unauthorized.' 'Stop Payment: An Ailing Service to the Business Community', 20 U. Chi. L. Rev., p 667, 670 (1953) The practice of some banks to condition the exercise of the right to stop payment on payment of a fee limits or penalizes the use of stop payment orders and, in effect, reallocates the bank's risk in the event it should fail to honor the order. Such attempts to reallocate risk directly contravene 1962 PA 174, Sec. 4403, supra, as well as 1962 PA 174, Sec. 4407; MCLA 440.4407; MSA 19.4407, which impose the risk for the failure to properly honor a stop payment order directly on the bank. Imposition of a fee would obviously reduce the use of stop payment orders and consequently reduce the bank's risk. This scheme of risk reallocation may be contrasted with other sections of the Uniform Commercial Code which place the risk of loss directly on the issuer of a negotiable instrument for such things as negligently contributing to the alteration or forgery of a check, 1962 PA 174; Sec. 3406; MCLA 440.3406; MSA 19.3406, and improper transmission, translation, or interpretation of messages relating to a bank letter of credit, 1962 PA 174, Sec. 5107; MCLA 440.5107; MSA 19.5107. In providing customers with the power to order a bank to stop payment on an instrument, 1962 PA 174, Sec. 4403, supra, conditions its exercise on (1) the order being directed to a specific identifiable item; (2) the order being received by the bank in such a manner and at such a time as to afford a reasonable opportunity to act upon it; and (3) the order having a limited life span of 14 days of made orally or six months if reduced to writing, subject to renewal. Application of the rule of statutory construction of 'expressio unius est exclusio alterius' (1) suggests that no further legal conditions, such as the payment of a fee, may be placed on the exercise of a stop payment order. Therefore, it is my opinion that a bank or other financial institution may not burden or otherwise condition the exercise of the right to stop payment by requiring a customer to pay a fee. Frank J. Kelley Attorney General (1)
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