Chapter 404

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.

404.215(4) (4) 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.

404.215(5) (5) Subject to applicable law stating a time for availability of funds and to 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:

404.215(5)(a) (a) 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.

404.215(5)(b) (b) If the bank is both the depositary bank and the payer bank and the item is finally paid, at the opening of the bank’s 2nd banking day following receipt of the item.

404.215(6) (6) 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.

404.215 History History: 1979 c. 110 s. 60 (8); 1985 a. 325; 1991 a. 304 s. 51; 1995 a. 336 s. 50; 1995 a. 449 ss. 55 to 58, 62; Stats. 1995 s. 404.215.

404.216 404.216 Insolvency and preference.

404.216(1) (1) If an item is in or comes into the possession of a payer 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.

404.216(2) (2) If a payer 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 payer bank.

404.216(3) (3) If a payer 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.

404.216(4) (4) 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.

404.216 History History: 1995 a. 449 s. 60; Stats. 1995 s. 404.216.

subch. III of ch. 404 SUBCHAPTER III

COLLECTION OF ITEMS: PAYER BANKS

404.301 404.301 Deferred posting; recovery of payment by return of items; time of dishonor; return of items by payer bank.

404.301(1) (1) If a payer 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 payer bank may revoke the settlement and recover the settlement if, before it has made final payment and before its midnight deadline, it does any of the following:

404.301(1)(a) (a) Returns the item.

404.301(1)(b) (b) Sends written notice of dishonor or nonpayment if the item is unavailable for return.

404.301(2) (2) If a demand item is received by a payer 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 sub. (1).

404.301(3) (3) 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.

404.301(4) (4) An item is returned:

404.301(4)(a) (a) As to an item presented through a clearinghouse, when it is delivered to the presenting or last collecting bank or to the clearinghouse or is sent or delivered in accordance with clearinghouse rules.

404.301(4)(b) (b) In all other cases, when it is sent or delivered to the bank’s customer or transferor or pursuant to instructions.

404.301 History History: 1991 a. 304 s. 51; 1991 a. 316; 1995 a. 449.

404.302 404.302 Payer bank’s responsibility for late return of item.

404.302(1) (1) If an item is presented to and received by a payer bank, the bank is accountable for the amount of any of the following:

404.302(1)(a) (a) A demand item, other than a documentary draft, whether properly payable or not, if the bank, in any case in which it is not also the depositary bank, retains the item beyond midnight of the banking day of receipt without settling for it or, whether or not it is also the depositary bank, does not pay or return the item or send notice of dishonor until after its midnight deadline.

404.302(1)(b) (b) Any other properly payable item, unless within the time allowed for acceptance or payment of that item, the bank either accepts or pays the item or returns it and accompanying documents.

404.302(2) (2) The liability of a payer bank to pay an item under sub. (1) is subject to defenses based on breach of a presentment warranty or proof that the person seeking enforcement of the liability presented or transferred the item for the purpose of defrauding the payer bank.

404.302 History History: 1983 a. 192; 1995 a. 449.

404.302 Annotation When a provisional settlement was not revoked by the payor bank before the midnight deadline under s. 404.301 (1), the payor bank became accountable under s. 404.302 for the value of the presented checks. Under the facts of the case, the payor bank had no defenses under s. 401.203, 403.418, or 403.511 (2) (b). Northwestern National Insurance Co. v. Midland National Bank, 96 Wis. 2d 155, 292 N.W.2d 591 (1980).