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#1123366 - 02/05/09 01:54 PM Deposit or cash?
ComplianceGurl, CRCM Offline
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Joined: Jul 2007
Posts: 498
We have a debate going on. A father presented a check made payable to John Doe Sr. custodian for John Doe Jr. UTMA-MI. Both Sr. and Jr. were present and wanted to cash the check. Teller A said it's ok to do so. Teller B said they need to deposit it into an account with that title, then they can do a withdrawal. What do you think? Thanks!!!

Ok..so the teller cashed the check for $1500 and John Doe Sr. deposited $1000 into his personal checking account and kept the $500 cash. This doesn't seem right...help!! Thanks!
Last edited by BSA Rookie; 02/05/09 04:54 PM.
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Deposits and Payments
#1123714 - 02/05/09 04:45 PM Re: Deposit or cash? ComplianceGurl, CRCM
ahanna Offline
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Joined: Aug 2008
Posts: 380
Texas
Check your state law. Most likely, the bank was put on notice of a breach of fiduciary duty when it allowed the father to deposit the check into his personal account and keep a portion in cash (according to the commentary, obtaining the proper endorsements is irrelevant in this case). Basically, if the son were to make a claim on those funds, the bank would be liable to him for the $1,500.

Teller B is correct. In order for the bank to be considered a holder in due course for the item, it needs to be deposited into an account of the father as custodian for the son. What the father does with the funds after they have been deposited is his responsibility... the bank is only put on notice at the time the check is presented.


Texas UCC 3.307
(b) If (i) an instrument is taken from a fiduciary (THE FATHER AS CUSTODIAN) for payment or collection or for value, (ii) the taker (THE BANK) has knowledge of the fiduciary status of the fiduciary, and (iii) the represented person (THE MINOR SON) makes a claim to the instrument or its proceeds on the basis that the transaction of the fiduciary is a breach of fiduciary duty, the following rules apply:

(2) in the case of an instrument payable to the represented person or the fiduciary as such, the taker (THE BANK) has notice of the breach of fiduciary duty if the instrument is:

(B) taken in a transaction known by the taker to be for the personal benefit of the fiduciary; or

(C) deposited to an account other than an account of the fiduciary, as such (MEANING ANOTHER UTMA ACCOUNT), or an account of the represented person;
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In the end, it's all just a bunch of paper....

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#1123730 - 02/05/09 04:54 PM Re: Deposit or cash? ahanna
ComplianceGurl, CRCM Offline
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Joined: Jul 2007
Posts: 498
Thank you for responding!

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#1123735 - 02/05/09 04:59 PM Re: Deposit or cash? ComplianceGurl, CRCM
ahanna Offline
Gold Star
Joined: Aug 2008
Posts: 380
Texas
No problem. FWIW, the same logic applies to checks payable to a partnership or corporation when one of the partners or coporate officers is trying to cash the check or deposit it into an account other than the business account. They are acting as a fiduciary for the business and should follow the same rules.
_________________________
In the end, it's all just a bunch of paper....

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#1123951 - 02/05/09 07:10 PM Re: Deposit or cash? ahanna
ComplianceGurl, CRCM Offline
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Joined: Jul 2007
Posts: 498
That makes perfect sense! Thanks!

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