To help understand the structure and content of UCC Articles 3 & 4, the following list of citations to particular sections of those Articles that bear on the printed problems in the handout may be helpful. Please remember that the printed problems are your "homework." The questions presented in class will not necessarily be exactly the same as the printed problems but, if you understand the "how and why" of the printed problems, you should be able to answer the questions presented in class.

At the present time, Texas has adopted the most recent versions of Arts. 1, 3, 4 & 7. It has not adopted the revisions of Arts. 2 & 2A. The revision of Art. 1 became effective on September 1, 2003. The revisions of Arts. 3, 4 & 7 became effective on September 1, 2005.

Problem 1-01: §§ 1-201, 3-103, 3-104, 3-105, 3-108, 3-109 & 3-110.

Problem 1-02: §§ 3-103, 3-104, 3-108.

Problem 1-03: §§ 3-104. See also Official Comment 2 to that
              section.

Problem 1-04: § 3-109.

Problem 1-05: §§  3-104, 3-112.

Problem 1-06: §§ 3-104, 3-108, 3-401, 3-409. The bill of lading diagram may be helpful in
understanding how this instrument is used.

Problem 1-07(a): § 3-104.

Problem 1-07(b): § 3-104, 3-106.

Problem 1-07(c): § 3-104.

Problem 1-08(a): § 3-103.

Problem 1-08(b): § 3-103. See also 3-409.

Problem 1-08(c): § 3-104.

Problem 1-09: § 3-106.

Problem 1-10: § 3-104, 3-108, 3-113, 3-115.

Problem 1-11: § 3-106.

Problem 1-12: § 3-104, 3-108.

Problem 1-13: § 3-106, 3-108.

Problem 1-14: § 3-103, 3-104, 3-401.

Problem 1-15: § 3-106.

Problem 1-16: § 3-106 & Official Comment 1.

Problem 1-17: See § 3-113 in the Pre-1990 Revision version of
              Art. 3 in Appendix section of the Selected
              Commercial Statutes volume.

Problem 1-18: § 3-108. 3-409.

Problem 1-19: § 3-104, 3-108, 3-113 & 3-115.

Problem 1-20: § 3-108. But see Smith v. Gentilotti, 359 N.E.2d
              953 (Mass. 1979).

Problem 1-21: § 3-108.

Problem 1-22: § 3-108.

Problem 1-23: § 3-107.

Problem 1-24: § 1-201 & 3-107.

Problem 1-25: § 3-112. See also §§ 3-106 & 3-112 in the 1990
              Pre-Revision version of Art. 3 in Appendix section
              of the Selected Commercial Statutes volume.

Problem 1-26: §§ 1-309), 3-104 & 3-108. See also
              Tex. Civ. Prac. & Rem. Code § 30.001.

Problem 1-27(a): § 1-201(37) & 3-401.

Problem 1-27(b): § 3-308.

Problem 1-27(c): § 3-308.

Problem 1-28(a) & (b): § 3-402.

Problem 1-29: § 3-402.

Problem 1-30: § 3-402 & Official Comment 1.

Problem 1-31: § 3-403.

Problem 2-01: §§ 3-201, 3-202, 3-203, 3-205(b) & 3-302.

Problem 2-02: §§ 3-305(c) (and look up definition of "jus
              tertii").

Problem 2-03(a): § 3-414(f).

Problem 2-03(b): §§ 3-409(d) & 3-414(c).

Problem 2-04: §§ 3-104(e), 3-104(f), 3-414(f), 3-502(a)(2) &
              § 4-106.

Problem 2-05: §§ 3-301, 3-501(b)(2), 3-502, 3-602, 3-603(c).
              But consider also § 3-106(d) & Official Comment 3.

Problem 2-06(a): §§ 3-204, 3-205, 3-206, 3-301, 3-412, 3-415,
3-419, 3-502 & 3-503.

Problem 2-06(b): §§ 3-204, 3-205, 3-401, 3-415, 3-416 & 3-420.

Problem 2-07: §§ 3-201, 3-306, 3-415 & 3-420.

Problem 2-08: §§ 1-202 & § 3-503.
              See also Shumway v. Horizon Credit Corp., 801 S.W.2d 890
              (Tex. 1991).

Problem 2-09: § 1-202 & § 3-311.

Problem 3-01: §§ 3-302 & 3-303.

Problem 3-02: § 1-202.

Problem 3-03(a): §§ 3-406 & 3-407.

Problem 3-03(b): § 3-303.

Problem 3-04(a): §§ 3-305 & 3-416.

Problem 3-04(b): § 3-202.

Problem 3-05: § 3-305.

Problem 3-06(a)&(b): §§ 3-302, 3-304, 3-305, 3-501 & 3-601.

Problem 3-07(a): § 3-402.

Problem 3-07(b): § 3-406 & 3-407.

Problem 3-07(c): § 3-417(d).

Problem 3-08(a)-(c): § 3-203.

Problem 3-08(d): §§ 3-207 & 3-415.

Problem 3-08(e): §§ 3-203 & 3-412.

Problem 3-09: § 3-416.

Problem 3-10: § 3-203.

Problem 3-11: §§ 3-106(d), 3-302(g), 3-305(e) & 9-403(d).

Problem 3-12: § 9-403 & FTC Holder in Due Course Rule (16 C.F.R.
              §§ 433.1 - 433.3). See also Kish v. Van Note, 692
              S.W.2d 593 (Tex. 1985).

Problem 4-01: §§ 3-116, 3-412, 3-415, 3-419.

Problem 4-02: § 3-605.

Problem 4-03: § 3-605(c) & (d).

Problem 4-04: § 3-605, Comm. 4.

Problem 4-05: § 3-605(f). See also Shumway v. Horizon Credit
              Corp., 801 S.W.2d 890 (Tex. 1991)

Problem 4-06: § 3-605(e) & (g).

Problem 4-07(a): See Notes below

Problem 4-07(b): § 3-118.

Problem 5-01(a) & (b): §§ 4-401, 4-402 & 4-203 (last para. of Comment).

Problem 5-01(c): § 3-501(b).

Problem 5-01(d): § 3-501(b) & 4-402.

Problem 5-02: §§ 4-104(a)(5) & 4-402, Comment 5.

Problem 5-03(a): § 4-401(b). See also Williams v. Cullen Center
                 Bank, 685 S.W.2d 311 (Tex. 1985).

Problem 5-03(b): §§ 3-106, 4-203 (last para. of Comment),
                 4-401(a), 4-407.

Problem 5-03(c): §§ 4-401(c) & 4-407.

Problem 5-03(d): § 4-404. See also §§ 3-118(c), 3-304(a) & 3-414(f).

Problem 5-04: § 3.408. Also see Notes below

Problem 5-05: See Tony's Tortilla Factory, Inc. v. First Bank,
              877 S.W.2d 285 (Tex. 1994).

Problem 5-06: § 4-103.

Problem 5-07 (Para. 1): § 3-411.

Problem 5-07 (Para. 2): §§ 3-309, 3-312

Problem 6-01 (Question 1): §§ 4-104(a)(10) & (11), 4-301 & 4-302. See also
              4-108.

Problem 6-01 (Question 2): §§ 4-303.

Problem 6-02(a): § 4-401(a). See also Tex. Penal Code §§ 31.06 &
                 32.41.

Problem 6-02(b): §§ 4-215(a) & 4-301(a).

Problem 6-02(c): § 4-215(a).

Problem 6-03(a): §§ 4-303 & 4-403. Non-Uniform Texas Amendment.

Problem 6-03(b): §§ 3-108, 4-303 & 4-403.

Problem 6-03(c): §§ 4-403(c) & 4-407.

Problem 6-03(d): §§ 3-415 & 3-503.

Problem 6-04(a)-(c): § 4-405.

Problem 7-01: §§ 3-418(c), 4-208(a) (compare § 3-417(a)), 4-401(a)
              & 4-406(c).

Problem 7-02(a): §§ 3-418(c), 4-208(a) (compare § 3-417(a)), 4-111,
                 4-401(a) & 4-406(c).

Problem 7-02(b): §§ 3-420(a) & (b), 4-208(a)(compare § 3-417(a)).

Problem 7-03: §§ 3-103(a)(9), 4-211, 4-406(c), (d) & (f).

Problem 7-04: §§ 3-418 & 4-208(d) (compare § 3-417(d)).

Problem 7-05: §§ 3-201, 3-202, 3-302, 3-306 & 3-418.

Problem 7-06: §§ 4-208(a), (compare 3-417(a)) & 3-418.

Problem 7-07: § 3-417. 4-208

Problem 8-01: § 3-404(b) & 3-418(c)

Problem 8-02: §§ 3-404(b) & 4-111.

Problem 8-03: §§ 3-404(b), 3-405(b) & 4-111.

Problem 8-04: § 3.404(a).

Problem 8-05(a): §§ 3-406 & 4-401(d).

Problem 8-05(b): §§ 4-208 (compare § 3-417) & 4-401(d).

Problem 8-06 §§ 4-208(d) (compare § 3-417), 3-406 & 3-418.

Problem 8-07: §§ 3-417, 4-208 & 4-401.

Problem 8-08: § 4-209.

Problem 8-09(a), (b) & (c): §§ 3-103, 3-406, 4-208(d) (compare § 3-417).

Problem 9-01: See the case summaries at the beginning of Chapter
9 and §§ 4-201 & 4-202.

Problem 9-02(a) § 4-213.

Problem 9-02(b) § 4-204.

Problem 9-03(a): §§ 4-213(c), 4-215(b) & 4-301.

Problem 9-03(b): §§ 3-420, 4-213(d), 4.215(c) & 4-214 & Official
Comment 4 to that section.

Problem 9-04: §§ 4-210, 4-211 & 4-216(a).

References for Chapter 10

See Letter of Credit Diagram (you can
click on a flow chart box in the diagram for more detail) and read
UCC Article 5, §§ 5-102, 5-103(d), 5-104, 5-106, 5-108, 5-109,
5-111, 5-116(c). See also Phillip Bros, Inc. v. Oil Country
Specialists, 787 S.W.2d 38 (Tex. 1990); New Braunfels Nat'l Bank
v. Odiorne, 780 S.W.2d 313 (Tex. App.--Austin 1987, writ denied);
& Tosco Corp. v. FDIC, 723 F.2d 1242 (6th Cir. 1987).

A stop-payment order is effective for six months and is binding on the bank only if it is in an authenticated record, dated, and signed and describes the item with certainty. A stop-payment order may be renewed for additional six-month periods by a writing given to the bank within a period during which the stop-payment order is effective.

The State Bar UCC Committee Comment to this section states:

Section 4.403(b) has been amended to carryover a special Texas change from the original uniform text of UCC section 4-403(2). This change reflects a longstanding Texas policy of requiring a written stop-payment order to obligate the bank to comply with its customer's instruction. Oral stop-payment orders raise uncertainties and significant questions of proof. For a discussion of this Texas policy, see Millard H. Ruud, "The Texas Legislative History of the Uniform Commercial Code," 44 Tex. L. Rev. 597, 605-06 (1966).

*SHAID OF THE PAST RETURNS [5TH CIR]
Copyright 1988 by the Texas Association of Bank Counsel.
Reprinted by permission from 22 Texas Bank Lawyer No. 4 (1988)

Willy Sutton once said he robbed banks "because that's where the money
is." Orrin Shaid, Jr. may have had much the same philosophy, but with a
twist. He made it a point to buy a bank before he robbed it, perhaps a
more genteel approach and one with a certain style but, in the end, it
was no more productive on a permanent basis.

The FDIC first became acquainted with Orrin in 1971 after he, along with
eight others, purchased the Chireno State Bank of Chireno, Texas. A few
months later, the same group also purchased the First State Bank of
Grandview in Grandview, Texas. The investment group put one of their own
members in charge of both banks. Various members of the group then
proceeded to borrow large sums of money from the banks against unsecured
notes. This activity came to the attention of the bank examiners and,
when a demand for payment proved fruitless, the notes were charged off.
The impact of the charge-off on the Chireno State Bank is reminiscent of
"Its A Wonderful Life." In U.S. v. Wilson, 500 F.2d 715 (5th Cir. 1974),
the court described it this way:

Directors of the Chireno State Bank and the state and federal bank
examiners . . . met on June 12, 1971, for the purpose of getting the
Board to sign a closure statement closing down the Chireno State Bank.
The statement provided that the bank was to be closed by 9:00 A.M., June
14, 1971, unless $275,000 in cash could be put back in the bank to
recapitalize it.  Two hundred thousand dollars was raised by a group of
19 Chireno townspeople not associated with these financial dealings and
was deposited in the bank.  For that reason, the bank remained open and
continued to do business as usual . . . .

The court upheld the conviction of Orrin Shaid, Jr. and five other
defendants on a sixty count indictment charging various unlawful acts in
the purchase and operation of the two banks.

Following this decision, Orrin disappeared from the law reports for a
few years but in 1984 he was back, this time for activities connected
with the Ranchlander National Bank in Melvin, Texas in 1981-82. In U.S.
v. Shaid, 730 F.2d 225 (5th Cir 1984), the court described his joie de
vivre upon his return to the banking business in these terms:

In May of 1981, Orrin Shaid, Jr., a convicted bank swindler described by
the prosecution as a "charismatic 300-pound east Texan", gained access
to the Ranchlander National Bank in Melvin, Texas and masterminded an
elaborate bank-fraud scheme that ultimately enabled him to generate a
high-rolling life style including two Rolls Royces, a yacht known as the
"African Queen", two airplanes, and a large lakehouse on fourteen acres.
Shaid's scheme resulted in losses of over $778,000 to banks in the Texas
cities of Abilene, Chandler, Corpus Christi, and Kilgore. Shaid's
enjoyment of his east Texas Camelot, however, was shortlived, for today
he comes before this Court convicted of nine counts of mail fraud, eight
counts of making false statements to a federally insured bank, and two
counts of entering a bank with intent to commit a felony.  We affirm
Shaid's convictions on all counts and affirm . . . .

The manner in which he gained control of Ranchlander is described in the
fairly well-known case of |FDIC v. McClanahan, 795 F.2d 512 (5th Cir.
1986)| where the court also described Orrin's technique for handling
"customer relations:"

The sad story of farmer Henry McClanahan began when he had the bad
fortune or bad judgment to get acquainted with a shady character named
Orrin Shaid, who has been described as a "charismatic 300-pound east
Texan" and who was certainly a crook. Though he knew that Shaid had been
convicted of bank fraud, McClanahan served briefly as a director of
Ranchlander Bank, which Shaid had purchased, in the name of his
paramour, with money he raised through a fraudulent loan-pyramiding
scheme. . .

Sometime after his brief service as a director, McClanahan sought a loan
of about $31,000 from Ranchlander Bank in order to purchase a tractor.
Shaid, representing himself as the owner of the bank, persuaded
McClanahan to sign a blank note with the understanding that the exact
terms would be filled in later. Shaid later told McClanahan that the
loan application had been turned down, and McClanahan financed the
tractor through separate bank loans to his brother and a friend.
McClanahan never requested the return of the blank note he had signed.
Meanwhile, Shaid filled out the blank note to reflect a $62,500 loan
from Ranchlander Bank to McClanahan, secured by cattle, and took the
money for himself.

Some months later, McClanahan received a notice from Ranchlander Bank
informing him that a $62,500 note was due and that he should come in to
sign a renewal note. Rather than doing so, McClanahan told Shaid about
the notice, and Shaid said he would take care of it.  Take care of it he
did: Shaid, or someone with whom he was in cahoots, forged McClanahan's
signature to a renewal and extension note in the amount of $86,000.
After an accomplice turned Shaid in to the FBI, Ranchlander Bank was
declared insolvent.  The FDIC was appointed receiver of the bank, and it
brought the present action against McClanahan on the $62,500 promissory
note that bore his signature.  McClanahan raised the affirmative
defenses of failure of consideration and fraudulent inducement.  The
FDIC responded by asserting that McClanahan was estopped from relying on
these defenses by |D'Oench, Duhme & Co. v. FDIC, 315 U.S. 447, 62 S.Ct.
676, 86 L.Ed. 956 (1942)|. . . . [and we all know how this comes out].

Orrin certainly ran a full-service bank; customers didn't even have to
sign their own notes.

Orrin once again disappears from the law reports until he revisited the
Fifth Circuit in |U.S. v. Shaid, 925 F.2d 827 (5th Cir. 1991)| and in
|916 F.2d 984 (5th Cir. 1990)| in an unsuccessful attempt to have his
conviction overturned, though his arguments did manage to get an en banc
hearing.

His most recent appearance is on the civil side of the docket as a
result of the long memory of the FDIC which seems unwilling to let Orrin
out of its sight. In FDIC v. SHAID, 142 F.3d 260 (5th Cir. 1998), the
FDIC sought to revive a five million dollar judgment it received against
Orrin as part of the Ranchlander closing on October 9, 1985 but which
had since become dormant. The FDIC attempted to revive this dormant
judgment on April 15, 1997. Orrin claimed a defense under the applicable
statute of limitations and further claimed that TEX. CIV. PRAC. & REM.
CODE ANN. Sec. 31.006 (Vernon 1997) authorizing revival of the judgment
was unconstitutional.

Under sec. 31.006, a dormant judgment must be revived within 2 years of
becoming dormant. At issue was a 1995 amendment to sec. 31.006. Orrin
argued that the prior terms of the statute were to be in effect until
December of 1996, despite the wording of the statute, which indicated
that the amendment was to take effect in September of 1995. Orrin
claimed that, under his interpretation of the statute, his right to rely
on the statute of limitations had already vested. He further claimed
that sec. 31.006 was unconstitutional because it retroactively impaired
his rights. The court ruled that an examination of the plain language of
the statute demonstrated the legislature's intent that the amendment
become effective in September of 1995. As such, the FDIC had filed its
claim in time to revive the judgment.

Although this is the latest chapter in the saga of Orrin Shaid, one
somehow has the feeling that it may not be the last.



Bank Gives "Thumbs-Up" to Check Cashers |[MD APP]|
Copyright 2003 by the Texas Association of Bank Counsel.
Reprinted by permission from 27 Texas Bank Lawyer No. 1 (2003)

MESSING v. BANK OF AMERICA, N.A., ___ A.2d ___, 2003 WL 1793353
(Md. App. April 7, 2003) (Opinion Not Yet Released for
Publication).

Court of Special Appeals Opinion Reported at 143 Md. App. 1, 792
A.2d 312 (2002)

Harrell, J.

The case |sub judice| involves a bank check. A check is defined
as a draft payable on demand and drawn on a bank. Maryland Code
(1974, 2002 Repl. Vol.), Commercial Law Article, sec.
3-104(f)(i).  The circumstances which gave rise to the case
before us are, in terms of its genesis, reminiscent of those
described in the case of |Board of Inland Revenue v. Haddock|
[A.P. Herbert, Uncommon Law: Being sixty-six Misleading Cases
revised and collected in one volume, 201-206 (Dorset Press,
1991)]. In that case, the protagonist, Mr. Haddock, after some
dispute involving uncollected income-taxes owed, elected to test
the limits of the law of checks as it existed at British common
law at the time. Operating on the proposition that a check was
only an order to a bank to pay money to the person in possession
of the check or a person named on the check, and observing that
there was nothing in statute or custom at the time specifying
that a check must be written on paper of certain dimensions, or e
ven paper at all, Haddock elected to tender payment to the tax
collector by a check written on the back of a cow. The Collector
of Taxes at first attempted to endorse the check, but, we are
informed, the check "appeared to resent endorsement and adopted a
menacing posture" at which point the Collector abandoned the
attempt and refused to accept the check. Mr. Haddock then led the
check away and was subsequently arrested in Trafalgar Square for
causing an obstruction, upon which he was said to have observed
that "it was a nice thing if in the heart of the commercial
capital of the world a man could not convey a negotiable
instrument down the street without being arrested." He
subsequently was summoned by the Board of Inland Revenue for
non-payment of income-tax.

The case |sub judice| arises from Petitioner's irritation with
the Bank of America's Thumbprint Signature Program. Under the
Thumbprint Signature Program, a bank requests non-customer
presenters of checks over the counter to place an "inkless"
thumbprint or fingerprint on the face of the check as part of the
identification process. . . .

At some point in time prior to 3 August 2000, Petitioner, as a
holder, came into possession of a check in the amount of Nine
Hundred Seventy-Six Dollars ($976.00)(the check) from Toyson J.
Burruss, the drawer, doing business as Prestige Auto Detail
Center. Instead of depositing the check into his account at his
own bank, Petitioner elected to present the check for payment at
a branch of Mr. Burruss' bank, Bank of America, the drawee. On 3
August 2000, Petitioner approached a teller at Bank of America's
10 L ight Street Banking Center in Baltimore City and asked to
cash the check. The teller, by use of a computer, confirmed the
availability of funds on deposit, and placed the check into the
computer's printer slot. The computer stamped certain data on the
back of the check, including the time, date, amount of the check,
account number, and teller number. The computer also effected a
hold on the amount of $976.00 in the customer's account. The
teller gave the check back to the Petitioner, who endorsed it. The
teller then asked for Petitioner's identification. Petitioner
presented his driver's license and a major credit card. The
teller took the endorsed check from Petitioner and manually
inscribed the driver's license information and certain credit
card information on the back of the check.

At some point during the transaction, the teller counted out
$976.00 in cash from her drawer in anticipation of completing the
transaction. She asked if the Petitioner was a customer of Bank
of America. The Petitioner stated that he was not. The teller
returned the check to Petitioner and requested, consistent with
bank policy when cashing checks for non-customers, that
Petitioner place his thumbprint on the check. Petitioner refused
and the teller informed him that she would be unable to complete
the trans action without his thumbprint.

Petitioner requested, and was referred to, the branch manager.
Petitioner presented the check to the branch manager and demanded
that the check be cashed notwithstanding Petitioner's refusal to
place his thumbprint on the check. The branch manager examined
the check and returned it to the Petitioner, informing him that,
because Petitioner was a non-customer, Bank of America would not
cash the check without Petitioner's thumbprint on the instrument.
After some additional exchanges [Ed. Note: probably heated] ,
Petitioner left the bank with the check in his possession. The
branch manager advised the teller that Petitioner had left the
bank with his check. In response, the teller released the hold on
the customer's funds, voided the transaction in the computer, and
placed the cash back in her teller drawer.

Rather than take the check to his own bank and deposit it there,
or returning it to Burruss, the drawer, as dishonored and
demanding payment, Petitioner, two months later, on 10 October
2000, filed a declaratory judgment action against Bank of America
(the Bank) in the Circuit Court for Baltimore City. Petitioner
claimed that the Bank had violated the Maryland Uniform
Commercial Code (UCC) and had violated his personal privacy when
the teller asked Petitioner to place an "inkless" thumbprint on
the face of the check at issue. Petitioner asked the trial court
to declare that: 1) Petitioner had provided "reasonable
identification" without his thumbprint; 2) under sec.
3-501(b)(2), a thumbprint is not reasonable identification; 3)
requiring a thumbprint of non-customers to cash a check is
illegal, inappropriate, and unnecessary; 4) requiring
non-customers to provide a thumbprint is a violation of the
personal privacy of non-customers; 5) the Bank be required to
cease requiring thumbprints in Maryland ; 6) the Ban k had
"accepted" the check when presented by Petitioner; 7) the Bank
"wrongfully dishonored" the check; and 8) the Bank wrongfully
converted the check. Petitioner also sought injunctive relief
directing Bank of America to cease participation in the
Thumbprint Signature Program.

On 15 November 2000, the Bank filed a Motion to Dismiss or, in
the alternative, for Summary Judgment. Petitioner opposed the
Bank's Motion and filed a "cross" Motion for Summary Judgment.
After the Circuit Court heard oral arguments on the pending
motions, it denied Petitioner's request for injunctive relief and
entered summary judgment in favor of the Bank, dismissing the
Complaint with prejudice. [Footnotes omitted.]

The above quotation has been reprinted directly from the opinion
since the court described the situation as well as it can be
described.

On the legal side, the court reasoned that the holder of a check
has no direct claim against a payor bank because a check is
merely an order to the bank to pay the check upon proper
presentment. Section 3-501 allows the payor to require reasonable
identification and the requirement that the holder provide a
thumbprint was reasonable and was not an invasion of the holder's
privacy because the bank was under no duty to cash the check in
the first instance and, furthermore, the bank was entitled to
protect its elf against, |inter alia|, counterfeit checks, forged
indorsements, or forged or altered checks and nothing in the UCC
requires a bank to assume those risks as against the holder. The
court also pointed out that the bank never "accepted" the check
as defined in sec. 3-409(a) merely by having its computer stamp
account data on the back of the check because the check was not
returned to the holder "for the purpose of giving rights on the
acceptance to any person" as required by that section. Becau se
the check was returned by the bank (but not for the purpose of
"acceptance"), the court further held that a conversion action
would not lie because the bank did not exercise dominion or
control over the check so as to deprive the holder of its rights
of ownership.

Summary judgment in favor of the bank was upheld.

[Ed. Note: The sharp-eyed reader will no doubt have noted that
there is a slight legal mischaracterization in the court's
description of the facts surrounding the events that took place
at the teller's counter. The court stated, "The teller gave the
check back to the Petitioner, who endorsed it." In fact, having
the presenter sign a check is not an "indorsement" because the
payor bank is not a transferee of a check but is, instead, the
drawee. This, in fact, is the reason for the subrogation
provisions in s ec. 4-407(1) & (2) since those provisions would
not otherwise be necessary. This also explains the reason for the
existence of different sections for transfer warranties and
presentment warranties as well as the reason for secs. 4-210 and
4-211 giving collecting banks a security interest in items that
are in the process of collection.

The request by a payor bank to a holder to have the holder sign a
check is actually a request that the holder provide "a receipt on
the instrument for any payment made," sec. 3-501(b)(2). If full
payment is made, the same section requires the holder to
surrender the instrument. Note that, in MESSING, the petitioner
signed what was, in legal effect, a receipt before any payment
was made. Had the petitioner known a little more about the Code
when the teller made the request for an "endorsement," he could
have refused to give it until the teller handed over the money.
While this would, no doubt, have led to an interesting
conversation with the teller and the branch manager (or even
higher authority) with an end result that might have been the
same, it would have confused things even further. However, a
refusal to pay under these circumstances might have led to a
claim by the holder against the drawer for the amount of the
check and a subsequent action by the drawer against the bank for
wrongful dishonor (perhaps paid for by the petitioner since this
seems to have been one of those cases brought "for the principle
of the thing.")

Oh, what a tangled web we weave
When we begin reading
the UCC.]