34.1-3-605. Discharge of indorsers and accommodation parties.
(a) In this section, the term "indorser" includes a drawer having the obligation described in section 34.1-3-414(d).
(b) Discharge, under section 34.1-3-604, of the obligation of a party to pay an instrument does not discharge the obligation of an indorser or accommodation party having a right of recourse against the discharged party.
(c) If a person entitled to enforce an instrument agrees, with or without consideration, to an extension of the due date of the obligation of a party to pay the instrument, the extension discharges an indorser or accommodation party having a right of recourse against the party whose obligation is extended to the extent the indorser or accommodation party proves that the extension caused loss to the indorser or accommodation party with respect to the right of recourse.
(d) If a person entitled to enforce an instrument agrees, with or without consideration, to a material modification of the obligation of a party other than an extension of the due date, the modification discharges the obligation of an indorser or accommodation party having a right of recourse against the person whose obligation is modified to the extent the modification causes loss to the indorser or accommodation party with respect to the right of recourse. The loss suffered by the indorser or accommodation party as a result of the modification is equal to the amount of the right of recourse unless the person enforcing the instrument proves that no loss was caused by the modification or that the loss caused by the modification was an amount less than the amount of the right of recourse.
(e) If the obligation of a party to pay an instrument is secured by an interest in collateral and a person entitled to enforce the instrument impairs the value of the interest in collateral, the obligation of an indorser or accommodation party having a right of recourse against the obligor is discharged to the extent of the impairment. The value of an interest in collateral is impaired to the extent (1) the value of the interest is reduced to an amount less than the amount of the right of recourse of the party asserting discharge, or (2) the reduction in value of the interest causes an increase in the amount by which the amount of the right of recourse exceeds the value of the interest. The burden of proving impairment is on the party asserting discharge.
(f) If the obligation of a party is secured by an interest in collateral not provided by an accommodation party and a person entitled to enforce the instrument impairs the value of the interest in collateral, the obligation of any party who is jointly and severally liable with respect to the secured obligation is discharged to the extent the impairment causes the party asserting discharge to pay more than that party would have been obliged to pay, taking into account rights of contribution, if impairment had not occurred. If the party asserting discharge is an accommodation party not entitled to discharge under subsection (e), the party is deemed to have a right to contribution based on joint and several liability rather than a right to reimbursement. The burden of proving impairment is on the party asserting discharge.
(g) Under subsection (e) or (f), impairing value of an interest in collateral includes (1) failure to obtain or maintain perfection or recordation of the interest in collateral, (2) release of collateral without substitution of collateral of equal value, (3) failure to perform a duty to preserve the value of collateral owed, under article 9 or other law, to a debtor or surety or other person secondarily liable, or (4) failure to comply with applicable law in disposing of collateral.
(h) An accommodation party is not discharged under subsection (c), (d), or (e) unless the person entitled to enforce the instrument knows of the accommodation or has notice under section 34.1-3-419(c) that the instrument was signed for accommodation.
(j) A party is not discharged under this section if (1) the party asserting discharge consents to the event or conduct that is the basis of the discharge, or (2) the instrument or a separate agreement of the party provides for waiver of discharge under this section either specifically or by general language indicating that parties waive defenses based on suretyship or impairment of collateral.
(a) For purposes of this Part 9 a "deposited instrument" is an instrument which is:
(i) In the custody of a registered clearing corporation, another clearing corporation, a foreign clearing corporation, a custodian bank, a foreign custodian bank or a nominee of any of them subject to the instructions of the registered clearing corporation;
(ii) Payable to bearer or indorsed in blank by an appropriate person or is payable to the order of the registered clearing corporation, another clearing corporation, a foreign clearing corporation, a custodian bank, a foreign custodian bank or a nominee of any of them subject to the instructions of the registered clearing corporation; and
(iii) Shown on the books of the registered clearing corporation in the account of a party having a contractual relationship with the registered clearing corporation as a user or participant.
(b) For purposes of this Part 9 the registered clearing corporation "having control of a deposited instrument" is the registered clearing corporation on whose books it is shown as provided in subsection (a)(iii) of this section.
34.1-3-902. Variation of commercial paper provisions by agreement.
(a) The effect of the provisions of this article on parties who are users or participants having a contractual relationship with a registered clearing corporation may be varied by agreement with respect to the transfer, pledge, presentment, dishonor and payment of instruments or other activity covered by this article carried out through such registered clearing corporation if such relates to instruments which are deposited instruments in such registered clearing corporation.
(b) The rules, regulations, operating procedures and the like adopted or promulgated by a registered clearing corporation from time to time shall have the effect of agreements under subsection (a) of this section whether or not specifically assented to by all parties interested in the instruments handled.
34.1-3-903. Transfer or pledge within a central depository system.
(a) In addition to other methods, a transfer, pledge or release of a deposited instrument or any interest therein may be effected by the making of appropriate entries on the books of the registered clearing corporation having control of the deposited instrument reducing the account of the transferor, pledgor or pledgee and increasing the account of the transferee, pledgee or pledgor by the amount of the obligation or the instrument transferred, pledged or released in accordance with the rules, regulations, operating procedures and the like adopted or promulgated by the registered clearing corporation from time to time.
(b) Under this section entries may be with respect to like instruments or interests therein as part of a fungible bulk and may refer merely to a quantity of a particular instrument without reference to the name of the payee, number or the like and, in appropriate cases, may be on a net basis taking into account other transfers, pledges or releases of the same instrument.
(c) Except to the extent varied by section 34.1-3-905, or the rules, regulations, operating procedures and the like adopted or promulgated by a registered clearing corporation from time to time, or the contractual relations with such clearing corporation, a transfer, pledge or release under this section has the effect of a delivery of an instrument in bearer form or duly indorsed in blank representing the amount of the obligation or instrument being transferred, pledged or released. If a pledge or the creation of a security interest is intended, the making of entries has the effect of a taking of possession of the instrument by the pledgee or a secured party.
(d) That entries made on the books of the registered clearing corporation as provided in subsection (a) of this section are not appropriate, does not affect the validity or effect of the entries nor the liabilities or obligations of the registered clearing corporation to any person adversely affected thereby.
34.1-3-904. Presentment, dishonor, payment, or other activities within a central depository system.
(a) If both parties for whom or with respect to which a deposited instrument is to be presented, dishonored, paid or otherwise acted upon or with respect to in a manner covered by this article are users or participants having a contractual relationship with the registered clearing corporation having control of the deposited instrument, then, in addition to other methods, presentment, dishonor, or payment of or other activity covered by this article with respect to a deposited instrument or any interest therein may be effected by the making of appropriate entries on the books of the registered clearing corporation having control of the deposited instrument in accordance with the rules, regulations, operating procedures and the like adopted or promulgated by the registered clearing corporation from time to time.
(b) Under this section entries may be with respect to like instruments or interests therein as part of a fungible bulk and may refer merely to a quantity of a particular instrument without reference to the name of the payee, number or the like and, in appropriate cases, may be on a net basis taking into account other presentments, dishonors, or payments of, or other activities with respect to the same instrument.
(c) That entries on the books of the registered clearing corporation as provided in subsection (a) of this section are not appropriate does not affect the validity or effect of the entries or the liabilities or obligations of the registered clearing corporation to any person adversely affected thereby.
34.1-3-905. Clearing corporation entitled to holder in due course status.
(a) A registered clearing corporation can be a holder in due course with respect to a deposited instrument.
(b) The initial entry of an instrument which otherwise meets the requirements of a deposited instrument by a registered clearing corporation on its books for the account of a user or participant having a contractual relationship with the registered clearing corporation shall make the registered clearing corporation a holder under this article which has taken the instrument for value.
(c) Any notice or knowledge of a user or participant having a contractual relationship with a registered clearing corporation shall not be attributed to the registered clearing corporation for purposes of determining the clearing corporation's status as a holder in due course under this article.
(d) Any entries on the books of the registered clearing corporation with respect to a deposited instrument shall not affect its status as a holder or a holder in due course of an instrument.
(a) To the extent that items within this article are also within articles 3 and 8, they are subject to those articles. If there is conflict, this article governs article 3, but article 8 governs this article.
(b) The liability of a bank for action or nonaction with respect to an item handled by it for purposes of presentment, payment, or collection is governed by the laws of the place where the bank is located. In the case of action or nonaction by or at a branch or separate office of a bank, its liability is governed by the law of the place where the branch or separate office is located.
34.1-4-103. Variation by agreement; measure of damages; action constituting ordinary care.
(a) The effect of the provisions of this article may be varied by agreement, but the parties to the agreement cannot disclaim the responsibility of a bank, or a registered clearing corporation with respect to a user or participant with whom the registered clearing corporation has a contractual relationship, for its lack of good faith or failure to exercise ordinary care or limit the measure of damages for the lack or failure. However, the parties may determine by agreement the standards by which the bank's or registered clearing corporation's responsibility is to be measured if those standards are not manifestly unreasonable.
(b) Federal reserve regulations and operating circulars, or registered clearing corporation rules, regulations, operating procedures and the like adopted and promulgated by a registered clearing corporation from time to time, clearing-house rules, and the like have the effect of agreements under subsection (a) of this section, whether or not specifically assented to by all parties interested in items handled.
(c) Action or nonaction approved by this article or pursuant to federal reserve regulations or operating circulars, or registered clearing corporation rules, regulations, operating procedures and the like adopted or promulgated by a registered clearing corporation from time to time, is the exercise of ordinary care and, in the absence of special instructions, action or nonaction consistent with clearing-house rules and the like or with a general banking usage not disapproved by this article, is prima facie the exercise of ordinary care.
(d) The specification of [or] approval of certain procedures by this article is not disapproval of other procedures that may be reasonable under the circumstances.
(e) The measure of damages for failure to exercise ordinary care in handling an item is the amount of the item reduced by an amount that could not have been realized by the exercise of ordinary care. If there is also bad faith it includes any other damages the party suffered as a proximate consequence.
(a) In this article, unless the context otherwise requires:
(i) "Account" means any deposit or credit account with a bank, including a demand, time, savings, passbook, share draft, or like account, other than an account evidenced by a certificate of deposit;
(ii) "Afternoon" means the period of a day between noon and midnight;
(iii) "Banking day" means the part of a day on which a bank is open to the public for carrying on substantially all of its banking functions;
(iv) "Clearing house" means an association of banks or other payors regularly clearing items;
(v) "Customer" means a person having an account with a bank or for whom a bank has agreed to collect items, including a bank that maintains an account at another bank;
(vi) "Documentary draft" means a draft to be presented for acceptance or payment if specified documents, certificated securities (section 34.1-8-102) or instructions for uncertificated securities (section 34.1-8-102), or other certificates, statements, or the like are to be received by the drawee or other payor before acceptance or payment of the draft;
(vii) "Draft" means a draft as defined in section 34.1-3-104 or an item, other than an instrument, that is an order;
(viii) "Drawee" means a person ordered in a draft to make payment;
(ix) "Item" means an instrument or a promise or order to pay money handled by a bank for collection or payment. The term does not include a payment order governed by article 4.A or a credit or debit card slip;
(x) "Midnight deadline" with respect to a bank is midnight on its next banking day following the banking day on which it receives the relevant item or notice or from which the time for taking action commences to run, whichever is later;
(xi) "Settle" means to pay in cash, by clearing-house settlement, in a charge or credit or by remittance, or otherwise as agreed. A settlement may be either provisional or final;
(xii) "Suspends payments" with respect to a bank means that it has been closed by order of the supervisory authorities, that a public officer has been appointed to take it over or that it ceases or refuses to make payments in the ordinary course of business.
(b) Other definitions applying to this article and the sections in which they appear are: "Agreement for electronic presentment". W.S. 34.1-4-110. "Bank". W.S. 34.1-4-105. "Collecting bank". W.S. 34.1-4-105. "Depositary bank". W.S. 34.1-4-105. "Intermediary bank". W.S. 34.1-4-105. "Payor bank". W.S. 34.1-4-105. "Presenting bank". W.S. 34.1-4-105. "Presentment notice". W.S. 34.1-4-110.
(c) "Control" as provided in W.S. 34.1-7-106 and the following definitions in other articles apply to this article: "Acceptance". W.S. 34.1-3-409. "Alteration". W.S. 34.1-3-407. "Cashier's check". W.S. 34.1-3-104. "Certificate of deposit". W.S. 34.1-3-104. "Certified check". W.S. 34.1-3-409. "Check". W.S. 34.1-3-104. "Holder in due course". W.S. 34.1-3-302. "Instrument". W.S. 34.1-3-104. "Notice of dishonor". W.S. 34.1-3-503. "Order". W.S. 34.1-3-103. "Ordinary care". W.S. 34.1-3-103. "Person entitled to enforce". W.S. 34.1-3-301. "Presentment". W.S. 34.1-3-501. "Promise". W.S. 34.1-3-103. "Registered clearing corporation". W.S. 34.1-8-102. "Prove". W.S. 34.1-3-103. "Teller's check". W.S. 34.1-3-104. "Unauthorized signature". W.S. 34.1-3-403.
(d) In addition article 1 contains general definitions and principles of construction and interpretation applicable throughout this article.
(a) In this article:
(i) "Bank" means a person engaged in the business of banking, including a savings bank, savings and loan association, credit union, or trust company;
(ii) "Depositary bank" means the first bank to take an item even though it is also the payor bank, unless the item is presented for immediate payment over the counter;
(iii) "Payor bank" means a bank that is the drawee of a draft;
(iv) "Intermediary bank" means a bank to which an item is transferred in course of collection except the depositary or payor bank;
(v) "Collecting bank" means a bank handling an item for collection except the payor bank;
(vi) "Presenting bank" means a bank presenting an item except a payor bank.
34.1-4-106. Payable through or payable at bank; collecting bank.
(a) If an item states that it is "payable through" a bank identified in the item, (1) the item designates the bank as a collecting bank and does not by itself authorize the bank to pay the item, and (2) the item may be presented for payment only by or through the bank.
(b) If an item states that it is "payable at" a bank identified in the item, the item is equivalent to a draft drawn on the bank.
(c) If a draft names a nonbank drawee and it is unclear whether a bank named in the draft is a co-drawee or a collecting bank, the bank is a collecting bank.
A branch or separate office of a bank is a separate bank for the purpose of computing the time within which and determining the place at or to which action may be taken or notices or orders must be given under this article and under article 3.
(a) For the purpose of allowing time to process items, prove balances, and make the necessary entries on its books to determine its position for the day, a bank may fix an afternoon hour of 2:00 p.m. or later as a cutoff hour for the handling of money and items and the making of entries on its books.
(b) An item or deposit of money received on any day after a cutoff hour so fixed or after the close of the banking day may be treated as being received at the opening of the next banking day.
(a) Unless otherwise instructed, a collecting bank in a good faith effort to secure payment of a specific item drawn on a payor other than a bank, and with or without the approval of any person involved, may waive, modify, or extend time limits imposed or permitted by this act for a period not exceeding two (2) additional banking days without discharge of drawers or indorsers or liability to its transferor or a prior party.
(b) Delay by a collecting bank or payor bank beyond time limits prescribed or permitted by this act or by instructions is excused if (1) the delay is caused by interruption of communication or computer facilities, suspension of payments by another bank, war, emergency conditions, failure of equipment, or other circumstances beyond the control of the bank, and (2) the bank exercises such diligence as the circumstances require.
(a) "Agreement for electronic presentment" means an agreement, clearing-house rule, or Federal Reserve regulation or operating circular, providing that presentment of an item may be made by transmission of an image of an item or information describing the item ("presentment notice") rather than delivery of the item itself. The agreement may provide for procedures governing retention, presentment, payment, dishonor, and other matters concerning items subject to the agreement.
(b) Presentment of an item pursuant to an agreement for presentment is made when the presentment notice is received.
(c) If presentment is made by presentment notice, a reference to "item" or "check" in this article means the presentment notice unless the context otherwise indicates.
An action to enforce an obligation, duty, or right arising under this article must be commenced within three (3) years after the cause of action accrues.
34.1-4-201. Status of collecting bank as agent and
provisional status of credits; applicability of article; item indorsed "pay any bank".
(a) Unless a contrary intent clearly appears and before the time that a settlement given by a collecting bank for an item is or becomes final, the bank, with respect to the item, is an agent or subagent of the owner of the item and any settlement given for the item is provisional. This provision applies regardless of the form of indorsement or lack of indorsement and even though credit given for the item is subject to immediate withdrawal as of right or is in fact withdrawn; but the continuance of ownership of an item by its owner and any rights of the owner to proceeds of the item are subject to rights of a collecting bank, such as those resulting from outstanding advances on the item and rights of recoupment or setoff. If an item is handled by banks for purposes of presentment, payment, collection, or return, the relevant provisions of this article apply even though action of the parties clearly establishes that a particular bank has purchased the item and is the owner of it.
(b) After an item has been indorsed with the words "pay any bank" or the like, only a bank may acquire the rights of a holder until the item has been:
(i) Returned to the customer initiating collection; or
(ii) Specially indorsed by a bank to a person who is not a bank.
34.1-4-202. Responsibility for collection or return; when action timely.
(a) A collecting bank must exercise ordinary care in:
(i) Presenting an item or sending it for presentment;
(ii) Sending notice of dishonor or nonpayment or returning an item other than a documentary draft to the bank's transferor after learning that the item has not been paid or accepted, as the case may be;
(iii) Settling for an item when the bank receives final settlement; and
(iv) Notifying its transferor of any loss or delay in transit within a reasonable time after discovery thereof.
(b) A collecting bank exercises ordinary care under subsection (a) by taking proper action before its midnight deadline following receipt of an item, notice, or settlement. Taking proper action within a reasonably longer time may constitute the exercise of ordinary care, but the bank has the burden of establishing timeliness.
(c) Subject to subsection (a)(i), a bank is not liable for the insolvency, neglect, misconduct, mistake, or default of another bank or person or for loss or destruction of an item in the possession of others or in transit.
Subject to article 3 concerning conversion of instruments (section 34.1-3-420) and restrictive indorsements (section 34.1-3-206), only a collecting bank's transferor can give instructions that affect the bank or constitute notice to it, and a collecting bank is not liable to prior parties for any action taken pursuant to the instructions or in accordance with any agreement with its transferor.
34.1-4-204. Methods of sending and presenting; sending directly to payor bank.
(a) A collecting bank shall send items by a reasonably prompt method, taking into consideration relevant instructions, the nature of the item, the number of those items on hand, the cost of collection involved, and the method generally used by it or others to present those items.
(b) A collecting bank may send:
(i) An item directly to the payor bank;
(ii) An item to a nonbank payor if authorized by its transferor; and
(iii) An item other than documentary drafts to a nonbank payor, if authorized by federal reserve regulation or operating circular, clearing-house rule, or the like.
(c) Presentment may be made by a presenting bank at a place where the payor bank or other payor has requested that presentment be made.
34.1-4-205. Depositary bank holder of unindorsed item.
(a) If a customer delivers an item to a depositary bank for collection:
(i) The depositary bank becomes a holder of the item at the time it receives the item for collection if the customer at the time of delivery was a holder of the item, whether or not the customer indorses the item, and, if the bank satisfies the other requirements of section 34.1-3-302, it is a holder in due course; and
(ii) The depositary bank warrants to collecting banks, the payor bank or other payor, and the drawer that the amount of the item was paid to the customer or deposited to the customer's account.
(a) A customer or collecting bank that transfers an item and receives a settlement or other consideration warrants to the transferee and to any subsequent collecting bank that:
(i) The warrantor is a person entitled to enforce the item;
(ii) All signatures on the item are authentic and authorized;
(iii) The item has not been altered;
(iv) The item is not subject to a defense or claim in recoupment (section 34.1-3-305(a)) of any party that can be asserted against the warrantor; and
(v) The warrantor has no knowledge of any insolvency proceeding commenced with respect to the maker or acceptor or, in the case of an unaccepted draft, the drawer.
(b) If an item is dishonored, a customer or collecting bank transferring the item and receiving settlement or other consideration is obliged to pay the amount due on the item (1) according to the terms of the item at the time it was transferred, or (2) if the transfer was of an incomplete item, according to its terms when completed as stated in sections 34.1-3-115 and 34.1-3-407. The obligation of a transferor is owed to the transferee and to any subsequent collecting bank that takes the item in good faith. A transferor cannot disclaim its obligation under this subsection by an indorsement stating that it is made "without recourse" or otherwise disclaiming liability.
(c) A person to whom the warranties under subsection (a) are made and who took the item in good faith may recover from the warrantor as damages for breach of warranty an amount equal to the loss suffered as a result of the breach, but not more than the amount of the item plus expenses and loss of interest incurred as a result of the breach.
(d) The warranties stated in subsection (a) cannot be disclaimed with respect to checks. Unless notice of a claim for breach of warranty is given to the warrantor within thirty (30) days after the claimant has reason to know of the breach and the identity of the warrantor, the warrantor is discharged to the extent of any loss caused by the delay in giving notice of the claim.
(e) A cause of action for breach of warranty under this section accrues when the claimant has reason to know of the breach.
(a) If an unaccepted draft is presented to the drawee for payment or acceptance and the drawee pays or accepts the draft, (1) the person obtaining payment or acceptance, at the time of presentment, and (2) a previous transferor of the draft, at the time of transfer, warrant to the drawee that pays or accepts the draft in good faith that:
(i) The warrantor is, or was, at the time the warrantor transferred the draft, a person entitled to enforce the draft or authorized to obtain payment or acceptance of the draft on behalf of a person entitled to enforce the draft;
(ii) The draft has not been altered; and
(iii) The warrantor has no knowledge that the signature of the purported drawer of the draft is unauthorized.
(b) A drawee making payment may recover from a warrantor damages for breach of warranty equal to the amount paid by the drawee less the amount the drawee received or is entitled to receive from the drawer because of the payment. In addition, the drawee is entitled to compensation for expenses and loss of interest resulting from the breach. The right of the drawee to recover damages under this subsection is not affected by any failure of the drawee to exercise ordinary care in making payment. If the drawee accepts the draft (1) breach of warranty is a defense to the obligation of the acceptor, and (2) if the acceptor makes payment with respect to the draft, the acceptor is entitled to recover from a warrantor for breach of warranty the amounts stated in this subsection.
(c) If a drawee asserts a claim for breach of warranty under subsection (a) based on an unauthorized indorsement of the draft or an alteration of the draft, the warrantor may defend by proving that the indorsement is effective under section 34.1-3-404 or 34.1-3-405 or the drawer is precluded under section 34.1-3-406 or 34.1-4-406 from asserting against the drawee the unauthorized indorsement or alteration.
(d) If (1) a dishonored draft is presented for payment to the drawer or an indorser or (2) any other item is presented for payment to a party obliged to pay the item, and the item is paid, the person obtaining payment and a prior transferor of the item warrant to the person making payment in good faith that the warrantor is, or was, at the time the warrantor transferred the item, a person entitled to enforce the item or authorized to obtain payment on behalf of a person entitled to enforce the item. The person making payment may recover from any warrantor for breach of warranty an amount equal to the amount paid plus expenses and loss of interest resulting from the breach.
(e) The warranties stated in subsections (a) and (d) cannot be disclaimed with respect to checks. Unless notice of a claim for breach of warranty is given to the warrantor within thirty (30) days after the claimant has reason to know of the breach and the identity of the warrantor, the warrantor is discharged to the extent of any loss caused by the delay in giving notice of the claim.
(f) A cause of action for breach of warranty under this section accrues when the claimant has reason to know of the breach.
(a) A person who encodes information on or with respect to an item after issue warrants to any subsequent collecting bank and to the payor bank or other payor that the information is correctly encoded. If the customer of a depositary bank encodes, that bank also makes the warranty.
(b) A person who undertakes to retain an item pursuant to an agreement for electronic presentment warrants to any subsequent collecting bank and to the payor bank or other payor that retention and presentment of the item comply with the agreement. If a customer of a depositary bank undertakes to retain an item, that bank also makes this warranty.
(c) A person to whom warranties are made under this section and who took the item in good faith may recover from the warrantor as damages for breach of warranty an amount equal to the loss suffered as a result of the breach, plus expenses and loss of interest incurred as a result of the breach.
34.1-4-210. Security interest of collecting bank in items accompanying documents and proceeds.
(a) A collecting bank has a security interest in an item and any accompanying documents or the proceeds of either:
(i) In case of an item deposited in an account, to the extent to which credit given for the item has been withdrawn or applied;
(ii) In case of an item for which it has been given credit available for withdrawal as of right, to the extent of the credit given, whether or not the credit is drawn upon or there is a right of charge-back; or
(iii) If it makes an advance on or against the item.
(b) If credit given for several items received at one (1) time or pursuant to a single agreement is withdrawn or applied in part, the security interest remains upon all the items, any accompanying documents or the proceeds of either. For the purpose of this section, credits first given are first withdrawn.
(c) Receipt by a collecting bank of a final settlement for an item is a realization on its security interest in the item, accompanying documents, and proceeds. So long as the bank does not receive final settlement for the item or give up possession of the item or possession or control of the accompanying documents for purposes other than collection, the security interest continues to that extent and is subject to article 9, but:
(i) No security agreement is necessary to make the security interest enforceable (section 34.1-9-203);
(ii) No filing is required to perfect the security interest; and
(iii) The security interest has priority over conflicting perfected security interests in the item, accompanying documents, or proceeds.
34.1-4-211. When bank gives value for purposes of holder in due course.
For purposes of determining its status as a holder in due course, a bank has given value to the extent it has a security interest in an item, if the bank otherwise complies with the requirements of section 34.1-3-302 on what constitutes a holder in due course.
34.1-4-212. Presentment by notice of item not payable by, through, or at a bank; liability of drawer or indorser.
(a) Unless otherwise instructed, a collecting bank may present an item not payable by, through, or at a bank by sending to the party to accept or pay a written notice that the bank holds the item for acceptance or payment. The notice must be sent in time to be received on or before the day when presentment is due and bank must meet any requirement of the party to accept or pay under section 34.1-3-501 by the close of the bank's next banking day after it knows of the requirement.
(b) If presentment is made by notice and payment, acceptance, or request for compliance with a requirement under section 34.1-3-501 is not received by the close of business on the day after maturity or, in the case of demand items, by the close of business on the third banking day after notice was sent, the presenting bank may treat the item as dishonored and charge any drawer or indorser by sending it notice of the facts.
34.1-4-213. Medium and time of settlement by bank.
(a) With respect to settlement by a bank, the medium and time of settlement may be prescribed by Federal Reserve regulations or circulars, clearing-house rules, and the like, or agreement. In the absence of such prescription:
(i) The medium of settlement is cash or credit to an account in a Federal Reserve Bank of or specified by the person to receive settlement; and
(ii) The time of settlement, is:
(A) With respect to tender of settlement by cash, a cashier's check, or teller's check, when the cash or check is sent or delivered;
(B) With respect to tender of settlement by credit in an account in a Federal Reserve Bank, when the credit is made;
(C) With respect to tender of settlement by a credit or debit to an account in a bank, when the credit or debit is made or, in the case of tender of settlement by authority to charge an account, when the authority is sent or delivered; or
(D) With respect to tender of settlement by a funds transfer, when payment is made pursuant to section 34.1-4.A-406(a) to the person receiving settlement.
(b) If the tender of settlement is not by a medium authorized by subsection (a) or the time of settlement is not fixed by subsection (a), no settlement occurs until the tender of settlement is accepted by the person receiving settlement.
(c) If settlement for an item is made by cashier's check or teller's check and the person receiving settlement, before its midnight deadline:
(i) Presents or forwards the check for collection, settlement is final when the check is finally paid; or
(ii) Fails to present or forward the check for collection, settlement is final at the midnight deadline of the person receiving settlement.
(d) If settlement for an item is made by giving authority to charge the account of the bank giving settlement in the bank receiving settlement, settlement is final when the charge is made by the bank receiving settlement if there are funds available in the account for the amount of the item.
34.1-4-214. Right of charge-back or refund; liability of collecting bank; return of item.
(a) If a collecting bank has made provisional settlement with its customer for an item and fails by reason of dishonor, suspension of payments by a bank, or otherwise to receive a settlement for the item which is or becomes final, the bank may revoke the settlement given by it, charge-back the amount of any credit given for the item to its customer's account, or obtain refund from its customer, whether or not it is able to return the item, if by its midnight deadline or within a longer reasonable time after it learns the facts it returns the item or sends notification of the facts. If the return or notice is delayed beyond the bank's midnight deadline or a longer reasonable time after it learns the facts, the bank may revoke the settlement, charge-back the credit, or obtain refund from its customer, but it is liable for any loss resulting from the delay. These rights to revoke, charge-back, and obtain refund terminate if and when a settlement for the item received by the bank is or becomes final.
(b) A collecting bank returns an item when it is sent or delivered to the bank's customer or transferor or pursuant to its instructions.
(c) A depositary bank that is also the payor may charge-back the amount of an item to its customer's account or obtain refund in accordance with the section governing return of an item received by a payor bank for credit on its books (section 34.1-4-301).
(d) The right to charge-back is not affected by:
(i) Previous use of a credit given for the item; or
(ii) Failure by any bank to exercise ordinary care with respect to the item, but a bank so failing remains liable.
(e) A failure to charge-back or claim refund does not affect other rights of the bank against the customer or any other party.
(f) If credit is given in dollars as the equivalent of the value of an item payable in foreign money, the dollar amount of any charge-back or refund must be calculated on the basis of the bank-offered spot rate for the foreign money prevailing on the day when the person entitled to the charge-back or refund learns that it will not receive payment in ordinary course.
34.1-4-215. Final payment of item by payor bank; when
provisional debits and credits become final; when certain credits become available for withdrawal.
(a) An item is finally paid by a payor bank when the bank has first done any of the following:
(i) Paid the item in cash;
(ii) Settled for the item without having a right to revoke the settlement under statute, clearing-house rule, or agreement; or
(iii) Made a provisional settlement for the item and failed to revoke the settlement in the time and manner permitted by statute, clearing-house rule or agreement.
(b) If provisional settlement for an item does not become final, the item is not finally paid.
(c) If provisional settlement for an item between the presenting and payor banks is made through a clearing-house or by debits or credits in an account between them, then to the extent that provisional debits or credits for the item are entered in accounts between the presenting and payor banks or between the presenting and successive prior collecting banks seriatim, they become final upon final payment of the item by the payor bank.
(d) If a collecting bank receives a settlement for an item which is or becomes final, the bank is accountable to its customer for the amount of the item and any provisional credit given for the item in an account with its customer becomes final.
(e) Subject to (1) applicable laws stating a time for availability of funds and (2) any right of the bank to apply the credit to an obligation of the customer, credit given by a bank for an item in a customer's account becomes available for withdrawal as of right:
(i) If the bank has received a provisional settlement for the item, when the settlement becomes final and the bank has had a reasonable time to receive return of the item and the item has not been received within that time;
(ii) If the bank is both the depositary bank and the payor bank, and the item is finally paid, at the opening of the bank's second banking day following receipt of the item.
(f) Subject to applicable law stating a time for availability of funds and any right of a bank to apply a deposit to an obligation of the depositor, a deposit of money becomes available for withdrawal as of right at the opening of the bank's next banking day after receipt of the deposit.
(a) If an item is in or comes into the possession of a payor or collecting bank that suspends payment and the item has not been finally paid, the item must be returned by the receiver, trustee, or agent in charge of the closed bank to the presenting bank or the closed bank's customer.
(b) If a payor bank finally pays an item and suspends payments without making a settlement for the item with its customer or the presenting bank which settlement is or becomes final, the owner of the item has a preferred claim against the payor bank.
(c) If a payor bank gives or a collecting bank gives or receives a provisional settlement for an item and thereafter suspends payments, the suspension does not prevent or interfere with the settlement's becoming final if the finality occurs automatically upon the lapse of certain time or the happening of certain events.
(d) If a collecting bank receives from subsequent parties settlement for an item, which settlement is or becomes final and the bank suspends payments without making a settlement for the item with its customer which settlement is or becomes final, the owner of the item has a preferred claim against the collecting bank.
34.1-4-301. Deferred posting; recovery of payment by
return of items; time of dishonor; return of items by payor bank.
(a) If a payor bank settles for a demand item other than a documentary draft presented otherwise than for immediate payment over the counter before midnight of the banking day of receipt, the payor bank may revoke the settlement and recover the settlement if, before it has made final payment and before its midnight deadline, it:
(i) Returns the item; or
(ii) Sends written notice of dishonor or nonpayment if the item is unavailable for return.
(b) If a demand item is received by a payor bank for credit on its books, it may return the item or send notice of dishonor and may revoke any credit given or recover the amount thereof withdrawn by its customer, if it acts within the time limit and in the manner specified in subsection (a).
(c) Unless previous notice of dishonor has been sent, an item is dishonored at the time when for purposes of dishonor it is returned or notice sent in accordance with this section.
(d) An item is returned:
(i) As to an item presented through a clearing house, when it is delivered to the presenting or last collecting bank or to the clearing house or is sent or delivered in accordance with clearing-house rules; or
(ii) In all other cases, when it is sent or delivered to the bank's customer or transferor or pursuant to instructions.