Chapter 403

403.420 403.420 Conversion of instrument.

403.420(1) (1) The law applicable to conversion of personal property applies to instruments. An instrument is also converted if it is taken by transfer, other than a negotiation, from a person not entitled to enforce the instrument or a bank makes or obtains payment with respect to the instrument for a person not entitled to enforce the instrument or receive payment. An action for conversion of an instrument may not be brought by the issuer or acceptor of the instrument or by a payee or endorsee who did not receive delivery of the instrument either directly or through delivery to an agent or a copayee.

403.420(2) (2) In an action under sub. (1), the measure of liability is presumed to be the amount payable on the instrument, but recovery may not exceed the amount of the plaintiff’s interest in the instrument.

403.420(3) (3) A representative, other than a depositary bank, who has in good faith dealt with an instrument or its proceeds on behalf of one who was not the person entitled to enforce the instrument is not liable in conversion to that person beyond the amount of any proceeds that it has not paid out.

403.420 History History: 1995 a. 449.

subch. V of ch. 403 SUBCHAPTER V

DISHONOR

403.501 403.501 Presentment.

403.501(1) (1) “Presentment” means a demand made by or on behalf of a person entitled to enforce an instrument to do any of the following:

403.501(1)(a) (a) Pay the instrument made to the drawee or a party obliged to pay the instrument or, in the case of a note or accepted draft payable at a bank, to the bank.

403.501(1)(b) (b) Accept a draft made to the drawee.

403.501(2) (2) The following rules are subject to ch. 404, agreement of the parties, and clearinghouse rules and the like:

403.501(2)(a) (a) Presentment may be made at the place of payment of the instrument and shall be made at the place of payment if the instrument is payable at a bank in the United States; may be made by any commercially reasonable means, including an oral, written or electronic communication; is effective when the demand for payment or acceptance is received by the person to whom presentment is made; and is effective if made to any one of 2 or more makers, acceptors, drawees or other payers.

403.501(2)(b) (b) Upon demand of the person to whom presentment is made, the person making presentment shall do all of the following:

403.501(2)(b)1. 1. Exhibit the instrument.

403.501(2)(b)2. 2. Give reasonable identification and, if presentment is made on behalf of another person, reasonable evidence of authority to do so.

403.501(2)(b)3. 3. Sign a receipt on the instrument for any payment made or surrender the instrument if full payment is made.

403.501(2)(c) (c) Without dishonoring the instrument, the party to whom presentment is made may return the instrument for lack of a necessary endorsement or refuse payment or acceptance for failure of the presentment to comply with the terms of the instrument, an agreement of the parties or other applicable law or rule.

403.501(2)(d) (d) The party to whom presentment is made may treat presentment as occurring on the next business day after the day of presentment if the party to whom presentment is made has established a cutoff hour not earlier than 2 p.m. for the receipt and processing of instruments presented for payment or acceptance and presentment is made after the cutoff hour.

403.501 History History: 1995 a. 449.

403.502 403.502 Dishonor.

403.502(1) (1) Dishonor of a note is governed by the following rules:

403.502(1)(a) (a) If the note is payable on demand, the note is dishonored if presentment is duly made to the maker and the note is not paid on the day of presentment.

403.502(1)(b) (b) If the note is not payable on demand and is payable at or through a bank or the terms of the note require presentment, the note is dishonored if presentment is duly made and the note is not paid on the day on which it becomes payable or the day of presentment, whichever is later.

403.502(1)(c) (c) If the note is not payable on demand and par. (b) does not apply, the note is dishonored if it is not paid on the day on which it becomes payable.

403.502(2) (2) Dishonor of an unaccepted draft other than a documentary draft is governed by the following rules:

403.502(2)(a) (a) If a check is duly presented for payment to the payer bank otherwise than for immediate payment over the counter, the check is dishonored if the payer bank makes timely return of the check or sends timely notice of dishonor or nonpayment under s. 404.301 or 404.302, or becomes accountable for the amount of the check under s. 404.302.

403.502(2)(b) (b) If a draft is payable on demand and par. (a) does not apply, the draft is dishonored if presentment for payment is duly made to the drawee and the draft is not paid on the day of presentment.

403.502(2)(c) (c) If a draft is payable on a date stated in the draft, the draft is dishonored if presentment for payment is duly made to the drawee and payment is not made on the day on which the draft becomes payable or the day of presentment, whichever is later, or if presentment for acceptance is duly made before the day on which the draft becomes payable and the draft is not accepted on the day of presentment.

403.502(2)(d) (d) If a draft is payable on elapse of a period of time after sight or acceptance, the draft is dishonored if presentment for acceptance is duly made and the draft is not accepted on the day of presentment.

403.502(3) (3) Dishonor of an unaccepted documentary draft occurs according to the rules stated in sub. (2) (b) to (d), except that payment or acceptance may be delayed without dishonor until no later than the close of the 3rd business day of the drawee following the day on which payment or acceptance is required by those paragraphs.

403.502(4) (4) Dishonor of an accepted draft is governed by the following rules:

403.502(4)(a) (a) If the draft is payable on demand, the draft is dishonored if presentment for payment is duly made to the acceptor and the draft is not paid on the day of presentment.

403.502(4)(b) (b) If the draft is not payable on demand, the draft is dishonored if presentment for payment is duly made to the acceptor and payment is not made on the day on which it becomes payable or the day of presentment, whichever is later.

403.502(5) (5) In any case in which presentment is otherwise required for dishonor under this section and presentment is excused under s. 403.504, dishonor occurs without presentment if the instrument is not duly accepted or paid.

403.502(6) (6) If a draft is dishonored because timely acceptance of the draft was not made and the person entitled to demand acceptance consents to a late acceptance, from the time of acceptance the draft is treated as never having been dishonored.

403.502 History History: 1995 a. 449.

403.503 403.503 Notice of dishonor.

403.503(1) (1) The obligation of an endorser stated in s. 403.415 (1) and the obligation of a drawer stated in s. 403.414 (4) may not be enforced unless the endorser or drawer is given notice of dishonor of the instrument complying with this section or notice of dishonor is excused under s. 403.504 (2).

403.503(2) (2) Notice of dishonor may be given by any person; may be given by any commercially reasonable means, including an oral, written or electronic communication; and is sufficient if it reasonably identifies the instrument and indicates that the instrument has been dishonored or has not been paid or accepted. Return of an instrument given to a bank for collection is sufficient notice of dishonor.

403.503(3) (3) Subject to s. 403.504 (3), with respect to an instrument taken for collection by a collecting bank, notice of dishonor shall be given by the bank before midnight of the next banking day following the banking day on which the bank receives notice of dishonor of the instrument or by any other person within 30 days following the day on which the person receives notice of dishonor. With respect to any other instrument, notice of dishonor shall be given within 30 days following the day on which dishonor occurs.

403.503 History History: 1995 a. 449.

403.504 403.504 Excused presentment and notice of dishonor.

403.504(1) (1) Presentment for payment or acceptance of an instrument is excused if any of the following conditions exists:

403.504(1)(a) (a) The person entitled to present the instrument cannot with reasonable diligence make presentment.

403.504(1)(b) (b) The maker or acceptor has repudiated an obligation to pay the instrument or is dead or in insolvency proceedings.

403.504(1)(c) (c) By the terms of the instrument, presentment is not necessary to enforce the obligation of endorsers or the drawer.

403.504(1)(d) (d) The drawer or endorser whose obligation is being enforced has waived presentment or otherwise has no reason to expect or right to require that the instrument be paid or accepted.

403.504(1)(e) (e) The drawer instructed the drawee not to pay or accept the draft or the drawee was not obligated to the drawer to pay the draft.

403.504(2) (2) Notice of dishonor is excused if, by the terms of the instrument, notice of dishonor is not necessary to enforce the obligation of a party to pay the instrument or if the party whose obligation is being enforced waived notice of dishonor. A waiver of presentment is also a waiver of notice of dishonor.

403.504(3) (3) Delay in giving notice of dishonor is excused if the delay was caused by circumstances beyond the control of the person giving the notice and the person giving the notice exercised reasonable diligence after the cause of the delay ceased to operate.

403.504 History History: 1995 a. 449.

403.505 403.505 Evidence of dishonor.

403.505(1) (1) The following are admissible as evidence and create a presumption of dishonor and of any notice of dishonor stated:

403.505(1)(a) (a) A document regular in form as provided in sub. (2) which purports to be a protest.

403.505(1)(b) (b) A purported stamp or writing of the drawee, payer bank or presenting bank on or accompanying the instrument stating that acceptance or payment has been refused unless reasons for the refusal are stated and the reasons are not consistent with dishonor.

403.505(1)(c) (c) A book or record of the drawee, payer bank or collecting bank kept in the usual course of business which shows dishonor, even if there is no evidence of who made the entry.

403.505(2) (2) A protest is a certificate of dishonor made by a U.S. consul or vice consul, or a notary public or other person authorized to administer oaths by the law of the place where dishonor occurs. A protest may be made upon information satisfactory to that person. The protest shall identify the instrument and certify either that presentment has been made or, if not made, the reason why it was not made, and that the instrument has been dishonored by nonacceptance or nonpayment. The protest may also certify that notice of dishonor has been given to some or all parties.

403.505 History History: 1995 a. 449.

subch. VI of ch. 403 SUBCHAPTER VI

DISCHARGE AND PAYMENT

403.601 403.601 Discharge and effect of discharge.

403.601(1) (1) The obligation of a party to pay the instrument is discharged as stated in this chapter or by an act or agreement with the party which would discharge an obligation to pay money under a simple contract.

403.601(2) (2) Discharge of the obligation of a party is not effective against a person acquiring rights of a holder in due course of the instrument without notice of the discharge.

403.601 History History: 1995 a. 449.

403.602 403.602 Payment.

403.602(1) (1) Subject to sub. (2), an instrument is paid to the extent that payment is made by or on behalf of a party obliged to pay the instrument and to a person entitled to enforce the instrument. To the extent of the payment, the obligation of the party obliged to pay the instrument is discharged even though payment is made with knowledge of a claim to the instrument under s. 403.306 by another person.

403.602(2) (2) The obligation of a party to pay the instrument is not discharged under sub. (1) if any of the following applies:

403.602(2)(a) (a) A claim to the instrument under s. 403.306 is enforceable against the party receiving payment and payment is made with knowledge by the payer that payment is prohibited by injunction or similar process of a court of competent jurisdiction, or, in the case of an instrument other than a cashier’s check, teller’s check or certified check, the party making payment accepted, from the person having a claim to the instrument, indemnity against loss resulting from refusal to pay the person entitled to enforce the instrument.

403.602(2)(b) (b) The person making payment knows that the instrument is a stolen instrument and pays a person with knowledge that the person is in wrongful possession of the instrument.

403.602 History History: 1995 a. 449.

403.603 403.603 Tender of payment.

403.603(1) (1) If tender of payment of an obligation to pay an instrument is made to a person entitled to enforce the instrument, the effect of tender is governed by principles of law applicable to tender of payment under a simple contract.

403.603(2) (2) If tender of payment of an obligation to pay an instrument is made to a person entitled to enforce the instrument and the tender is refused, there is discharge, to the extent of the amount of the tender, of the obligation of an endorser or accommodation party having a right of recourse with respect to the obligation to which the tender relates.

403.603(3) (3) If tender of payment of an amount due on an instrument is made to a person entitled to enforce the instrument, the obligation of the obligor to pay interest after the due date on the amount tendered is discharged. If presentment is required with respect to an instrument and the obligor is able and ready to pay on the due date at every place of payment stated in the instrument, the obligor is considered to have made tender of payment on the due date to the person entitled to enforce the instrument.

403.603 History History: 1995 a. 449.

403.604 403.604 Discharge by cancellation or renunciation.

403.604(1) (1) A person entitled to enforce an instrument, with or without consideration, may discharge the obligation of a party to pay the instrument by doing any of the following:

403.604(1)(a) (a) An intentional voluntary act, such as surrender of the instrument to the party, destruction, mutilation or cancellation of the instrument, cancellation or striking out of the party’s signature or the addition of words to the instrument indicating discharge.

403.604(1)(b) (b) Agreeing not to sue or otherwise renouncing rights against the party by a signed writing.

403.604(2) (2) Cancellation or striking out of an endorsement pursuant to sub. (1) (a) does not affect the status and rights of a party derived from the endorsement.

403.604 History History: 1995 a. 449.

403.605 403.605 Discharge of endorsers and accommodation parties.

403.605(1) (1) In this section, “endorser” includes a drawer having the obligation described in s. 403.414 (4).

403.605(2) (2) Discharge, under s. 403.604, of the obligation of a party to pay an instrument does not discharge the obligation of an endorser or accommodation party having a right of recourse against the discharged party.

403.605(3) (3) 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 endorser or accommodation party having a right of recourse against the party whose obligation is extended to the extent that the endorser or accommodation party proves that the extension caused loss to the endorser or accommodation party with respect to the right of recourse.

403.605(4) (4) 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 endorser or accommodation party having a right of recourse against the person whose obligation is modified to the extent that the modification causes loss to the endorser or accommodation party with respect to the right of recourse. The loss suffered by the endorser 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.

403.605(5) (5) 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 endorser 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 that 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 to the extent that 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.

403.605(6) (6) 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 that 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 sub. (5), the party is considered 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.