Opinion ID: 2625176
Heading Depth: 2
Heading Rank: 2

Heading: wells fargo's duty of expeditious return was satisfied when it placed the woodson check in the hands of the federal reserve bank in salt lake city

Text: ¶ 20 Wells Fargo placed the Woodson check in the hands of a courier who transported it from the Wells Fargo central operations building located near Salt Lake International Airport to the Federal Reserve Bank in Salt Lake City sometime either before or shortly after midnight on August 6. No one disputes that Wells Fargo's choice of transport, a courier, was a highly expeditious means of delivery that would ordinarily result in delivery of the Woodson check to the Federal Reserve Bank in Salt Lake City on August 7. ¶ 21 From the standpoint of HMA, the delivery of the Woodson check to the Salt Lake Reserve Bank was irrelevant because under HMA's interpretation of the applicable authority the only delivery destination that mattered was U.S. Bank. That delivery occurred on Wednesday, August 8, a date too late even if Wells Fargo were to enjoy the benefit of the section 229.30(c) exception. To succeed, HMA's argument depends on designating the Boise Clearinghouse rules as the authority governing the manner in which Wells Fargo could return checks. Those rules, HMA asserts, required Wells Fargo to return the Woodson check directly to U.S. Bank without interrupting the journey with stops at intermediary banks including the Federal Reserve Bank. ¶ 22 Any restriction imposed on the method of returning dishonored checks by the Boise Clearinghouse rules must contend with and account for 12 C.F.R. section 210.12(a)(2) (regulation J), which states: A paying bank that receives a check as defined in Sec. 229.2(k) of this chapter (Regulation CC), other than from a Reserve Bank, and that determines not to pay the check, may send the returned check to any Reserve Bank (unless its Administrative Reserve Bank directs it to send the returned check to a specific Reserve Bank) in accordance with subpart C of part 229 of this chapter (Regulation CC), the Uniform Commercial Code, and the Reserve Banks' operating circulars. The Boise Clearinghouse rules surrender any claim as controlling authority, however, on the method of check return when this seemingly unambiguous grant of permission to return checks through the Federal Reserve System  checks like the Woodson check that were not presented for collection through the Federal Reserve System  is coupled with the assertion of the primacy of federal regulations over inconsistent provisions of the Uniform Commercial Code, any other state law, or regulation CC found in 12 C.F.R. section 210.3(f) of regulation J. The official commentary to regulation CC reinforces this point by explaining that section 229.30 supersedes provisions of the U.C.C. relating to the method of returning dishonored checks in that instead of returning a check through a clearinghouse or to the presenting bank, a paying bank may send a returned check to the depositary bank or to a returning bank. 12 C.F.R. pt. 229, app. E, § 229.30(a), cmt. 10.a (2001). ¶ 23 Federal regulations not only authorize check return through the Federal Reserve System even where clearinghouse rules might be construed to prohibit it, but they also make clear that the successful transfer of a returned check to a Federal Reserve Bank satisfies the paying bank's duty of expeditious return. The commentary to regulation CC notes that [a]ll Federal Reserve Banks agree to handle returned checks expeditiously. Id. at cmt. 5.b.i (2001). ¶ 24 HMA resists this conclusion by going to considerable lengths to show that the Woodson check was not delivered within the time limits established by either the two-day/four-day test or the forward collection test, the two standards by which regulation CC measures expeditious return. HMA's labors in this cause were to no avail because whether the Woodson check met either test is irrelevant. Liability for untimely return attaches to a bank upon its failure to make expeditious return of a dishonored check. By agreeing to handle returned checks in an expeditious manner, Federal Reserve Banks impliedly acknowledge that their handling of the check will conform to the two-day/four-day and forward collection tests. ¶ 25 None of the authorities cited by HMA in support of its conclusion that Wells Fargo was obliged to deliver the Woodson check directly to U.S. Bank and not to use the Federal Reserve System alters our conclusion that Wells Fargo satisfied its duty of expeditious return when it delivered the check to the Federal Reserve Bank in Salt Lake City. ¶ 26 HMA's selection of First National Bank of Chicago v. Standard Bank & Trust, 172 F.3d 472 (7th Cir.1999), as authority for the proposition that a paying bank can escape liability for untimely return if it misses the midnight deadline only by placing a dishonored check in the hands of the depositary bank before the close of the next banking day adds nothing to its argument. It is no surprise that First National Bank focused on the timeliness of the paying bank's return of checks to the depositary bank because the itinerary of the checks included no stop at an intermediary receiving bank. We have little doubt that had an intermediary receiving bank been used along the return route, the First National Bank court would have concluded that the section 229.30(c) exception would have applied inasmuch as the court noted that regulation CC removes the constraint of the midnight deadline if the check reaches either the depositary bank or the returning bank to which it is sent on the banking day following the expiration of the midnight deadline or other applicable time for return. Id. at 477. ¶ 27 HMA also points to a hypothetical scenario appearing in the Clark treatise to bolster its claim that expeditious return under regulation CC and access to the midnight deadline extension provided by the regulation requires direct and timely return to the presenting bank. In the hypothetical, the Federal Reserve Bank was the presenting bank. The hypothetical focuses on the paying bank's obligation to make timely return of a dishonored check to the Federal Reserve Bank in its status as the presenting bank. Whether the Federal Reserve Bank also served as the presenting bank is not the issue upon which the outcome of the Clark hypothetical turns. Rather, the hypothetical focuses on time and method of check transport. We would expect any hypothetical scenario that had as its central focus the question of check routing to include at least some mention of the provision in regulation J that expressly authorizes return through the Federal Reserve System and the agreement by the Federal Reserve System to handle those returns expeditiously. ¶ 28 We accordingly hold that the district court properly granted U.S. Bank summary judgment on the issue of the timeliness of the Woodson check's return.