I. HOW DOES THE UCC TREAT “SAME AS CASH” INSTRUMENTS THAT ARE CLAIMED TO BE LOST, STOLEN OR DESTROYED?
A. Lost, stolen or destroyed, cashier’s, teller’s and certified checks, which traditionally have caused problems for banks and their customers. Since these types of checks are intended to be “same as cash” instruments, once they are issued, the remedy to stop payment is, for all practical purposes, not available. In the event that a cashier’s, teller’s or certified check is lost, stolen or destroyed, a customer will generally request that a new check be issued. This places the bank in the uncomfortable position of either having to refuse to issue a new check, to reissue a new check and accept the risk that the original check may resurface, thereby exposing the bank to potential double liability, or to request that the customer provide an indemnity agreement or post a bond to protect the bank against duplicate payment. None of these alternatives have proven to be totally acceptable for either the bank or its customers.
B. The provisions of revised § 3-312 of the Uniform Commercial Code are designed to provide a workable solution to the problems associated with lost, stolen or destroyed, cashier’s, teller’s, or certified checks, by providing a procedure for a person to make a claim for the amount of such a check (the term “check” shall refer to “cashier’s checks, teller’s checks or certified checks”).
C. Claims Procedure
Under § 3-312, a “claimant” (a person who is either the drawer or payee of a certified check or the remitter or payee of a cashier’s check or teller’s check), may assert a claim to the amount of the check by making a communication with the obligated bank (the issuer of a cashier’s or teller’s check or the acceptor of a certified check) which must (a) describe the check with reasonable certainty; and (b) request payment of the amount of the check.
The claimant’s communication to the obligated bank must be received at a time and in a manner which gives the bank a reasonable time to act on it before the check is paid and must be accompanied by a “declaration of loss” of the claimant with respect to the check.
The claimant’s “declaration of loss” is required to be (a) in the form of a written statement; (b) made under penalty of perjury; and (c) made to the effect that the declarer has lost possession of the check and that the declarer is either the drawer or payee of the check (in the case of a certified check) or the remitter or payee of the check (in the case of a cashier’s or teller’s check). The claimant is also required to provide reasonable identification, if requested by the obligated bank.
Once a proper claim has been made, it becomes enforceable at the later of 1) the time the claim is asserted or 2) the 90th day following the date of the check, in the case of a cashier’s or teller’s check, or the 90th day following the date of acceptance, in the case of a certified check. For example, on a cashier’s check dated January 1, if a claim is made on January 20, it does not become enforceable until 90 days after January 1; if, on the other hand, a claim is made on August 1 on a cashier’s check dated January 1, the claim becomes enforceable at the time it is asserted.
Until a claim becomes enforceable, it has no legal effect. Up until the time the claim becomes enforceable, the obligated bank is free to pay the check, or in the case of a teller’s check, may permit the drawee to pay the check, and payment to a person entitled to enforce the check discharges all liability of the obligated bank with respect to the check. However, once the claim becomes enforceable, if the check is presented for payment the obligated bank is not required to pay the check.
Once the claim becomes enforceable, the obligated bank becomes obliged to pay the amount of the check to the claimant if payment of the check has not previously been made to a person entitled to enforce it. Where the instrument has truly been lost or destroyed, all the proper party needs to do is make a claim in the required form and wait for the appropriate length of time to pass. If no one has found the check, forged it and cashed it in the meantime, the claimant will be able to get his or her money. The payment to the claimant, in most cases, will discharge all liability of the obligated bank.
Also, under this law, if the obligated bank pays a claimant and the check is later presented for payment by the person who has the rights of a holder in due course, the claimant must either refund the payment to the obligated bank if the check has been paid, or pay the amount of the check to the person having rights of a holder in due course if the check is dishonored by the obligated bank.
D. Sample claim forms follow this article and have been provided for our use by the Kansas Bankers Association for your review and consideration. You may also wish to review the claim forms which can no doubt be obtained from bank form houses.
E. A final word of caution for any bank accepting cashier’s, teller’s and certified checks for payment. While § 3-312 creates a procedure to eliminate the “indefinite exposure” to liability on lost, destroyed, or stolen cashier’s, teller’s, and certified checks, it can also result in situations where a bank issuing such a check will not be required to honor the check if it has made payment to a claimant pursuant to a properly enforceable claim. Banks accepting these types of checks for payment should check the date of issuance carefully and may need to follow-up to determine that a claim form has not been filed and that the check will be honored by the issuing bank.
CLAIM FORM: CASHIER’S/TELLER’S CHECK
Date of claim Date of check
Claimant Amount of check
Address Remitter
Telephone Payee
Check described herein has been: Lost - Destroyed - Stolen -
Discussion: Assume that the bank refused to recredit the account and the drawer sued. Under these set of facts, the drawer is likely to win the case. U.C.C. § 4-404 Comments state that the payment of a stale-dated check is made in “good faith” when the bank knows (acted honestly in fact) the drawer wants payment to be made. In this case the teller knew the check was stale but cashed it anyway without first checking whether the drawer wanted it paid. The teller probably cannot be considered to have acted in good faith.
Declaration of Loss
_________________________________, claimant under penalty of perjury hereby states that:
Claimant Date
Legal Effect of Claim
CLAIM FORM: CERTIFIED CHECK
Address Drawer
__________________________________, claimant under penalty of perjury hereby states that: