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Depositary Bank Disputed Forgery as Late Return

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Question: 
Our customer wrote two checks to the same payee, one was dated 2/10/12 the second was dated 4/10/12. Towards the end of July, the payee notified our customer that he did not receive the checks. He signed an Affidavit of Forged Endorsement and we returned the check as fraudulent along with the affidavit. The depositing back disputed the item as a late return. Is there anything we can do now? Can we possibly claim breach of warranty?
Answer: 

Filing a breach of presentment and transfer warranties is what you should have done in the first place, because you were well beyond your midnight deadline when you returned the checks. Under the UCC in effect in most states, you still have the right to file the warranty claim, but you may be disappointed in the result. Review your state's UCC section 4-208(e), and you'll likely find that the warranting bank (the depositary bank in this case) will be discharged to the extent that your delay beyond 30 days in notifying them of the claim caused them additional losses.

If you decide to pursue a claim at this late date and if the depositary bank disclaims liability because of the 30-day provision in 4-208(e), and if the sums involved warrant spending some more money to see if you may have an "out," you can discuss with a knowledgeable attorney (1) whether your first attempt to recover the funds was within the 30 day span starting when you learned of the forgery and (2) whether your flawed attempt at returning the check provided the depositary bank with sufficient notice of your claim to prevent its reliance upon the 30-day rule.

First published on BankersOnline.com 1/28/13

First published on 01/28/2013

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