John, thanks for clarifying that. I guess I am still confused (but in no way do I want to tell people the wrong information).
I was focusing on another section, mainly "defenses under the UCC on an item that was paid not properly payable" and section 3-404. I took it to clearly mean that if the depository bank takes in a deposit that it shouldn't have, it may be liable for the loss.
"The person bearing the loss (usually the drawer) may recover from the person failing to exercise ordinary care (usually the depositary bank) to the extent the failure to exercise ordinary care contributed to the loss."
I've ran into this before and always thought that it worked like this:
1) missing maker signature; visibly altered item = responsibility on depository bank
2) forged maker signature = responsibility on drawer bank (since depository bank has no way of knowing the maker signature is a forgery)
Is that correct? I know the midnight deadline applies to virtually all transactions, but I was always told that in instances of negligence on our end (as a depositary bank) we may be hit with a claim on an item we shouldn't have accepted and it can go beyond the midnight deadline.
Any clarification would be great, thanks!