Summary
In Fromer Distributors, Inc. v. Bankers Trust Co., 36 A.D.2d 840 (N.Y.App. Div. 1971), the court held that once payment became final because payor bank had missed its midnight deadline, the payor bank no longer had the right to dishonor the check.
Summary of this case from Allen Trust v. FirstBank of LakewoodOpinion
April 19, 1971
In an action to recover damages allegedly sustained when defendant Bankers Trust Company failed to make payment on four checks drawn on it for $310.87, $540.99, $3,109.75 and $13,706.86 respectively, and the defendant Chemical Bank, as the collecting agency, failed to make a demand for payment from Bankers Trust for assertedly improperly returning the checks without payment, all parties appeal from an order of the Supreme Court, Kings County, dated December 1, 1970, which denied their respective motions and cross motions for summary judgment. Order modified (1) by inserting therein immediately after its provision that plaintiff's motion be "denied", the following: "except that said motion is granted on the cause of action relating to the check for $13,706.86 against both defendants", and (2) by inserting therein immediately after its provision that the cross motions be "denied", the following: "except that the cross motion of Chemical Bank for summary judgment is granted against plaintiff on that part of the cause of action relating to the other three checks." As so modified, the order is affirmed, with $10 costs and disbursements to plaintiff and to defendant Chemical Bank against defendant Bankers Trust Company. While we agree with the determination at Special Term that there are issues of fact between plaintiff and Bankers Trust Company concerning the three smaller checks, we find that no questions of fact exist as to the cause of action based on the check for $13,706.86. Bankers Trust Company failed to dishonor the check before the deadline provided by the Uniform Commercial Code and the Rules of the New York Clearing House (see Uniform Commercial Code, §§ 4-211, 4-213, 4-301). Accordingly, payment became final. Chemical Bank failed to exercise its right to charge back within the time provided by the statute. Consequently it lost that right. Once payment became final, Bankers Trust Company no longer had the right to dishonor the check and it became accountable for the amount thereof to Chemical Bank. The latter bank did not have a right to accept the return, nor to charge the amount of the check against plaintiff's account (Uniform Commercial Code, § 4-212). Thus, Bankers Trust Company is accountable to Chemical Bank for the amount of the check, and the latter bank is accountable to plaintiff (see Rock Is. Auction Sales v. Empire Packing Co., 32 Ill.2d 269). As to the three smaller checks, Chemical Bank has no liability to plaintiff. It received those checks in return marked dishonored before the deadline and it charged them against plaintiff's account before its deadline (Uniform Commercial Code, § 4-212). Rabin, P.J., Hopkins, Munder, Martuscello and Shapiro, JJ., concur.