Okla. Stat. tit. 12A § 3-411
Okla. Stat. tit. 12A, § 3-411
Oklahoma Code Comment
1. Section 3-411 gives financial institutions clear guidance with regard to their obligation to pay cashier's, teller's and certified checks, and also provides an incentive not to dishonor those types of instruments. This Section and Sections 3-412, 3-413 and 3-602 improve the acceptability of these types of bank obligations as cash equivalents by providing firm liability for wrongful dishonor. Liability can include consequential damages if the bank is put on notice of particular circumstances giving rise to potential damages but the bank still refuses to pay.
For example, X merchant orders a quantity of goods from Y. an out-of-state vendor. Y notifies X when the goods are ready for shipment and, as their contract provides, requests payment in the form of a bank obligation. Accordingly, X obtains a cashier's check drawn on X's bank and payable to Y. Prior to the time Y presents check for payment, the goods arrive at X's warehouse in a significantly damaged condition. A dispute arises between X and Y as to when and how the damages occurred and which of them must bear the loss. X contacts X's bank and asks the bank not to pay the check. Y contacts the bank and explains that the check proceeds are needed to pay for another order that will result in significant profit to Y. and therefore Y is likely to suffer substantial damages if the check is not paid. The bank may safely pay the check when presented by Y. even in the face of X's request. Se UCC § 3-602 and Official Comment 1 to this Section.
Furthermore, if the bank refuses to pay as an accommodation to X, its customer, the bank may be liable to Y not only on its drawer's contract but also for expenses, loss of interest and lost profit as consequential damages under sub section 3-411(b) (unless one of the exceptions in subsection (c) applies, which is unlikely here). Note that the liability standard for consequential damages in this Section is different, and less, than the standard under sub section 4A -404(a), which in addition requires some notice of the magnitude of the damages (that is, in this example, the amount of lost profit). See Official Comment 2 to Section 4A-404.
2. Consistent with the result of better-reasoned cases that have treated cashier's checks as the equivalent of cash, Section 3-411 permits a bank to refuse payment of a cashier's, teller's or certified check in the four instances enumerated in subsection on (c). Notably, those instances would permit refusal if the bank is uncertain of the presenter's identity, or the bank itself (as opposed to its customer) has a defense "that it has reasonable grounds to believe is available against the person entitled to enforce the instrument." This differs from the situation when the defense is not the bank's. For example, in the illustration in paragraph 1 above, X might have a defense to payment of its bill from Y based on the damaged goods; however, X's bank could not assert X's defense in refusing to pay the check, except as provided in Section 3-602. See UCC § 3-305(c).
3. An Oklahoma case illustrates how Section 3-411 will operate to ensure more definite outcomes in the types of situations discussed in the preceding paragraphs. In Hotel Riviera, Inc. v. First National Bank & Trust Co. of Okla. City, 768 F.2d 1201 (lOth Cir. 1985), a casino sued for wrongful dishonor of a cashier's check. The casino had allowed its customer to indorse a cashier's check payable to the customer in exchange for gambling credit. Unknown to the casino, or to the bank at the time of the customer's actions, the customer had placed forged indorsements on checks belonging to his employer, which he had deposited in his personal bank account in exchange for the cashier's check. Between the time the casino verified the cashier's check with the customer's bank and deposited it for collection, and the time the check arrived at the customer's bank for payment, the bank learned of the forged indorsements and the resulting dishonor of the employer's checks by the employer's bank. Consequently, the customer's bank, which was drawer of the cashier's check, refused to pay the check. Although the opinion is disjointed and largely inapplicable to the outcome, the court nevertheless concluded that the bank wrongfully dishonored (i.e., refused to pay) the check.
If the case were analyzed under Section 3-411, the customer's bank would be the "obligated bank" under subsection (a), obliged to pay the check according to its terms pursuant to Section 3-412, unless it had a claim or defense available against the casino. Its claim would be one in recoupment for breach of warranty against the original payee of the cashier's check under sub section 3-305(a)(3). Unless the casino was a holder in due course it would be subject to the claim under sub section 3-305(b). The casino would be a holder in due course if it gave value in a legal transaction. In that case, the casino would be enticed to compensation for expenses and loss of interest resulting from nonpayment pursuant to subsection (b) (again, unless the bank had a claim or defense against the casino pursuant to subsection (c)(ii)). Furthermore, if the casino had possible consequential damages and put the bank on notice of "particular circumstances" which could give rise to those consequential damages, then the casino also could recover those damages from the bank.
A parallel analysis exists under subsection (c)(iii). The subsection does not mean that if the customer's bank had a reasonable doubt as to whether the casino was entitled to enforce the instrument - for example, because the bank was familiar with a Nevada statute which prohibits acceptance of an instrument for a gambling debt - then the bank might refuse payment and be protected by subsection (c)(iii). On the contrary, subsection (c)(iii) was drafted to provide an escape mechanism if the bank reasonably doubts the presenter's identity, not the presenter's right otherwise to enforce the instrument.
See also Yukon Nat'l Bank v. Modern Builders Supply, Inc., 686 P.2d 307 (Okla. Ct. App. 1984) which is discussed in the introductory Commentary preceding Article 3 under the heading "Cashier's Checks."