Chapter 404

404.204(2)(b) (b) An item to a nonbank payer if authorized by its transferor.

404.204(2)(c) (c) An item other than documentary drafts to a nonbank payer, if authorized by federal reserve regulation or operating circular, clearinghouse rule or the like.

404.204(3) (3) Presentment may be made by a presenting bank at a place where the payer bank or other payer has requested that presentment be made.

404.204 History History: 1991 a. 304 s. 51; 1995 a. 449.

404.205 404.205 Depositary bank holder of unendorsed item. If a customer delivers an item to a depositary bank for collection, all of the following apply:

404.205(1) (1) The depositary bank becomes a holder of the item at the time that 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 endorses the item, and, if the bank satisfies the other requirements of s. 403.302, it is a holder in due course.

404.205(2) (2) The depositary bank warrants to collecting banks, the payer bank or other payer and the drawer that the amount of the item was paid to the customer or deposited to the customer’s account.

404.205 History History: 1995 a. 449.

404.205 Annotation The general rule is that accepting a check when the payee’s endorsement is missing is not in accordance with the reasonable commercial standards of banking and the acceptance by a depositary bank of such a check for deposit is commercially unreasonable as a matter of law. This section excepts from the general rule depositary banks that receive unendorsed checks from customers when the missing endorsement is that of the customer. Schmitz v. Firstar Bank Milwaukee, 2003 WI 83, 262 Wis. 2d 672, 664 N.W.2d 594, 01-2139.

404.206 404.206 Transfer between banks. Any agreed method that identifies the transferor bank is sufficient for the item’s further transfer to another bank.

404.206 History History: 1995 a. 449.

404.207 404.207 Transfer warranties.

404.207(1) (1) A customer or collecting bank that transfers an item and receives a settlement or other consideration warrants all of the following to the transferee and to any subsequent collecting bank:

404.207(1)(a) (a) The warrantor is a person entitled to enforce the item.

404.207(1)(b) (b) All signatures on the item are authentic and authorized.

404.207(1)(c) (c) The item has not been altered.

404.207(1)(d) (d) The item is not subject to a defense or claim in recoupment of any party that can be asserted against the warrantor.

404.207(1)(e) (e) 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.

404.207(1)(f) (f) If the item is a demand draft, the creation of the item according to the terms on its face was authorized by the person identified as the drawer.

404.207(2) (2) 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 according to the terms of the item at the time it was transferred or, if the transfer was of an incomplete item, according to its terms when completed as stated in ss. 403.115 and 403.407. 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 endorsement stating that it is made “without recourse” or otherwise disclaiming liability.

404.207(3) (3) A person to whom the warranties under sub. (1) 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.

404.207(4) (4) The warranties stated in sub. (1) cannot be disclaimed with respect to checks. Unless notice of a claim for breach of warranty is given to the warrantor within 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.

404.207(5) (5) A cause of action for breach of warranty under this section accrues when the claimant has reason to know of the breach.

404.207 History History: 1995 a. 449; 2003 a. 86.

404.208 404.208 Presentment warranties.

404.208(1) (1) If an unaccepted draft is presented to the drawee for payment or acceptance and the drawee pays or accepts the draft, the person obtaining payment or acceptance, at the time of presentment, and 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 all of the following conditions exist:

404.208(1)(a) (a) 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.

404.208(1)(b) (b) The draft has not been altered.

404.208(1)(c) (c) The warrantor has no knowledge that the signature of the purported drawer of the draft is unauthorized.

404.208(1)(d) (d) If the draft is a demand draft, the creation of the draft according to the terms on its face was authorized by the person identified as the drawer.

404.208(2) (2) 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, breach of warranty is a defense to the obligation of the acceptor, and 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.

404.208(3) (3) If a drawee asserts a claim for breach of warranty under sub. (1) based on an unauthorized endorsement of the draft or an alteration of the draft, the warrantor may defend by proving that the endorsement is effective under s. 403.404 or 403.405 or the drawer is precluded under s. 403.406 or 404.406 from asserting against the drawee the unauthorized endorsement or alteration.

404.208(4) (4) If a dishonored draft is presented for payment to the drawer or an endorser or 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.

404.208(5) (5) The warranties stated in subs. (1) and (4) cannot be disclaimed with respect to checks. Unless notice of a claim for breach of warranty is given to the warrantor within 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.

404.208(6) (6) A cause of action for breach of warranty under this section accrues when the claimant has reason to know of the breach.

404.208 History History: 1995 a. 449; 2003 a. 86.

404.209 404.209 Encoding and retention warranties.

404.209(1) (1) A person who encodes information on or with respect to an item after issue warrants to any subsequent collecting bank and to the payer bank or other payer that the information is correctly encoded. If the customer of a depositary bank encodes, that bank also makes the warranty.

404.209(2) (2) A person who undertakes to retain an item pursuant to an agreement for electronic presentment warrants to any subsequent collecting bank and to the payer bank or other payer 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.

404.209(3) (3) 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.

404.209 History History: 1995 a. 449.

404.210 404.210 Security interest of collecting bank in items, accompanying documents and proceeds.

404.210(1) (1) A collecting bank has a security interest in an item and any accompanying documents or the proceeds of either in any of the following situations:

404.210(1)(a) (a) In case of an item deposited in an account, to the extent to which credit given for the item has been withdrawn or applied.

404.210(1)(b) (b) In case of an item for which it has 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.

404.210(1)(c) (c) If it makes an advance on or against the item.

404.210(2) (2) If credit given for several items received at one 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.

404.210(3) (3) 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 ch. 409, but all of the following apply:

404.210(3)(a) (a) No security agreement is necessary to make the security interest enforceable.

404.210(3)(b) (b) No filing is required to perfect the security interest.

404.210(3)(c) (c) The security interest has priority over conflicting perfected security interests in the item, accompanying documents or proceeds.

404.210 History History: 1973 c. 336 s. 79; 1995 a. 449 s. 47; Stats. 1995 s. 404.210; 2009 a. 322.

404.211 404.211 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 that it has a security interest in an item, if the bank otherwise complies with s. 403.302 on what constitutes a holder in due course.

404.211 History History: 1995 a. 449 s. 49; Stats. 1995 s. 404.211.

404.212 404.212 Presentment by notice of item not payable by, through or at a bank; liability of drawer or endorser.

404.212(1) (1) 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 the bank must meet any requirement of the party to accept or pay under s. 403.501 by the close of the bank’s next banking day after it knows of the requirement.

404.212(2) (2) If presentment is made by notice and payment, acceptance or request for compliance with a requirement under s. 403.501 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 3rd banking day after notice was sent, the presenting bank may treat the item as dishonored and charge any drawer or endorser by sending it notice of the facts.

404.212 History History: 1991 a. 316; 1995 a. 449 s. 51; Stats. 1995 s. 404.212.

404.213 404.213 Medium and time of settlement by bank.

404.213(1) (1) With respect to settlement by a bank, the medium and time of settlement may be prescribed by federal reserve regulations or circulars, clearinghouse rules and the like, or agreement. In the absence of such prescription, all of the following apply:

404.213(1)(a) (a) 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.

404.213(1)(b) (b) The time of settlement is:

404.213(1)(b)1. 1. 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.

404.213(1)(b)2. 2. With respect to tender of settlement by credit in an account in a federal reserve bank, when the credit is made.

404.213(1)(b)3. 3. 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.

404.213(1)(b)4. 4. With respect to tender of settlement by a funds transfer, when payment is made pursuant to s. 410.406 (1) to the person receiving settlement.

404.213(2) (2) If the tender of settlement is not by a medium authorized by sub. (1) or the time of settlement is not fixed by sub. (1), no settlement occurs until the tender of settlement is accepted by the person receiving settlement.

404.213(3) (3) If settlement for an item is made by cashier’s check or teller’s check and the person receiving settlement, before its midnight deadline does any of the following:

404.213(3)(a) (a) Presents or forwards the check for collection, settlement is final when the check is finally paid.

404.213(3)(b) (b) Fails to present or forward the check for collection, settlement is final at the midnight deadline of the person receiving settlement.

404.213(4) (4) 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.

404.213 History History: 1995 a. 449.

404.214 404.214 Right of charge-back or refund; liability of collecting bank; return of item.

404.214(1) (1) 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 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 a 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.

404.214(2) (2) A collecting bank returns an item when it is sent or delivered to the bank’s customer or transferor or pursuant to its instructions.

404.214(3) (3) A depositary bank that is also the payer may charge back the amount of an item to its customer’s account or obtain refund in accordance with s. 404.301 governing return of an item received by a payer bank for credit on its books.

404.214(4) (4) The right to charge-back is not affected by any of the following:

404.214(4)(a) (a) Previous use of a credit given for the item.

404.214(4)(b) (b) Failure by any bank to exercise ordinary care with respect to the item, but a bank so failing remains liable.

404.214(5) (5) A failure to charge-back or claim refund does not affect other rights of the bank against the customer or any other party.

404.214(6) (6) If credit is given in dollars as the equivalent of the value of an item payable in a 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.

404.214 History History: 1987 a. 165; 1995 a. 449 ss. 53, 61; Stats. 1995 s. 404.214.

404.215 404.215 Final payment of item by payer bank; when provisional debits and credits become final; when certain credits become available for withdrawal.

404.215(1) (1) An item is finally paid by a payer bank when the bank has first done any of the following:

404.215(1)(a) (a) Paid the item in cash.

404.215(1)(b) (b) Settled for the item without having a right to revoke the settlement under statute, clearinghouse rule or agreement.

404.215(1)(c) (c) Made a provisional settlement for the item and failed to revoke the settlement in the time and manner permitted by statute, clearinghouse rule or agreement.

404.215(2) (2) If provisional settlement for an item does not become final, the item is not finally paid.

404.215(3) (3) If provisional settlement for an item between the presenting and payer banks is made through a clearinghouse 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 payer banks or between the presenting and successive prior collecting banks in a series, they become final upon final payment of the item by the payer bank.