Opinion ID: 2188463
Heading Depth: 1
Heading Rank: 3

Heading: discovery of the counterfeit

Text: On July 7, a corporate officer of Exchange Bank in Mount Sterling, Kentucky, called Louise Smith, head bookkeeper for Citizens, and told her that Exchange Bank, which maintained some type of deposit account for Greenwade, was having a large check returned to them because the check was counterfeit. Smith immediately notified all of Citizens' tellers that if Greenwade attempted any transaction concerning his account at Citizens, the tellers should alert a senior bank officer at Citizens. However, Greenwade had already withdrawn $70,000 from Citizens 15 minutes before Smith's instructions to the bank's tellers. Smith telephoned Southwest and spoke with Jacqueline Schneider. Smith inquired whether the Greenwade check had been paid, and Schneider replied that the check had been paid and cleared. Smith testified that after Schneider told her that the check had been paid, she believed it was unnecessary to tell Schneider that the check might be counterfeit. On July 9, Country Wide informed Smith that the Greenwade check was counterfeit. That same day, Southwest notified Citizens that Southwest refused to honor the check and returned the check to Citizens. The parties agree that Southwest's deadline for giving notice of dishonor under Neb.U.C.C. §§ 4-302(a) and 4-104(h) (Reissue 1980) was midnight July 7 and that Southwest did not give such notice until July 9. On August 5, Citizens demanded payment of $138,427, a demand rejected by Southwest. Citizens attempted to collect the funds withdrawn by Greenwade, but failed to recover proceeds from the counterfeit check. Citizens sued Southwest to recover the proceeds from the counterfeit check paid to Greenwade, claiming two theories of recovery: Southwest failed to give timely notice of dishonor in accord with § 4-302, and Citizens is a holder in due course under Neb.U.C.C. § 3-418 (Reissue 1980). As the result of a bench trial, the district court entered a $70,000 judgment against Southwest.