Opinion ID: 2625176
Heading Depth: 2
Heading Rank: 1

Heading: wells fargo was eligible for an extension of the midnight deadline and dispatched the woodson check within the time authorized by the extension

Text: ¶ 13 A bank that seeks to return a check because of insufficient funds, a stop-payment order, and the like must normally dispatch the check before the midnight deadline. See Utah Code Ann. § 70A-4-301(1) (2001). The midnight deadline is defined by the U.C.C. as midnight on a bank's next banking day following the banking day on which it receives the relevant item or notice or from which the time for taking action commences to run, whichever is later. Id. § 70A-4-104(1)(j). ¶ 14 Wells Fargo received the Woodson check as part of its Friday, August 3 banking day. This meant that the midnight deadline would occur at midnight on the bank's next banking day, Monday, August 6. HMA contends that because Idaho law designates Saturday as a banking day, the midnight deadline was not Monday, but Saturday. Under both the Boise Clearinghouse rules and Utah law, Saturday is not a banking day. In our view, either of these sources of authority for establishing banking days is superior to applying Idaho law. HMA contends that because the Woodson check was not returned through the Boise Clearinghouse, its rules do not apply to any matter relating to the return of the Woodson check. We disagree. As the example of the conflicting treatment of Saturday's status as a banking day by Idaho and Utah amply illustrates, the laws of the various states in which the members of the Boise Clearinghouse do business may vary in their designation of banking days. The clearinghouse rule achieves the useful objective of bringing uniformity to the calendar of banking days among its member banks. ¶ 15 The parties agree that the Boise Clearinghouse banking day rule applied when the Woodson check was presented. HMA contends, however, that when Wells Fargo elected to return the Woodson check through the Federal Reserve System, the bank severed itself from the application of all Boise Clearinghouse rules. Unlike HMA, we believe that the Boise Clearinghouse's effort to provide uniformity in the designation of banking days is entitled to be afforded an enduring quality that extends to post-presentment events. It is apparent to us that this result was consistent with the reasonable expectation of the member banks. A comprehensive application of the Boise Clearinghouse banking day rule also permits member banks to avoid the need to undertake a choice of law analysis before engaging in transactions involving member banks. Moreover, we see no opportunity for paying banks to manipulate the Boise Clearinghouse banking day designation in a manner that would permit them to unilaterally impose unnecessary delays when returning checks outside the clearinghouse. Such manipulation might occur if the Boise Clearinghouse rule removed days from its banking day calendar that were otherwise uniformly recognized as banking days under the laws of its member banks. This is not the case here. ¶ 16 HMA contends that the affidavit and deposition testimony of Ms. LaTendresse support a finding that Wells Fargo did not meet the midnight deadline on August 6 and in fact dispatched the Woodson check on Tuesday, August 7. Were we to conclude that her testimony could reasonably be read to support this assertion, the question of whether Wells Fargo met the August 6 midnight deadline would be at issue and summary judgment would be placed out of the reach of U.S. Bank. We decline to reverse the district court on this issue, however, not because we interpret Ms. LaTendresse's affidavit differently than HMA, but rather because we conclude that as a matter of law Wells Fargo's midnight deadline was extended beyond midnight of August 6 to a time that would include the alternative dispatch times that may be extracted from Ms. LaTendresse's affidavit according to HMA. Our analysis therefore renders competing readings of Ms. LaTendresse's testimony immaterial. ¶ 17 If the U.C.C. were the exclusive authority governing the return of checks, as it largely was before Congress enacted the Expedited Funds Availability Act (the Act) in 1987, see Farm Credit Serv. of Am. v. Am. State Bank, 339 F.3d 764, 768 (8th Cir.2003), the obligations of a paying bank, like Wells Fargo, would begin and end with meeting the midnight deadline. Banks could focus their attention on the sole mission of getting checks out the door. What happened to the checks after dispatch was of little concern. The U.C.C. check return scheme was unpopular with bank customers. Because banks were not accountable for delays in returning checks to depositary banks, customers who had deposited checks were frequently denied access to funds for lengthy periods of time. See generally 1 Barkley Clark & Barbara Clark, The Law of Bank Deposits, Collections and Credit Cards ¶ 7.02, at 7-2 (rev. ed.2003). Customer unhappiness over these delays provided the primary impetus for congressional action. The Act empowered the Federal Board of Governors of the Federal Reserve System to promulgate regulations to implement the Act. The Federal Board exercised this grant of authority, mindful of its need to strike a balance between the interests of bank customers to enjoy speedier access to funds and the interests of banks in managing the risks they would assume by standing behind checks of dubious pedigree deposited by their customers. See 12 U.S.C. § 4008(b) (1987); see also Farm Credit Serv. of Am., 339 F.3d at 768. ¶ 18 The product of the Federal Board's efforts was regulation CC and, in particular, its subpart C at 12 C.F.R. sections 229.30 to 229.43 (2001). Along with its predecessor, regulation J, regulation CC created a federal check management protocol that loosened to some degree the constraints of the U.C.C. midnight deadline, but added the obligations of expeditious return and prompt notice of dishonor to banks returning checks. The effect of regulation CC was to expand the check return mission of banks beyond their U.C.C. task of monitoring dispatch before the midnight deadline to include an interest in when dishonored checks were delivered to depositary banks. 12 C.F.R. §§ 229.30-.31 (2001). Although it left the midnight deadline in place, regulation CC made its effect less Cinderella-like by authorizing an extension of the deadline to paying banks that met certain conditions. ¶ 19 Regulation CC at 12 C.F.R. section 229 extends the midnight deadline in two ways. First, a paying bank (of course, as Judge Posner has noted, a bank handling a dishonored check is more accurately viewed as the nonpaying bank), see Oak Brook Bank v. N. Trust Co., 256 F.3d 638 (7th Cir.2001), may escape the midnight deadline by seeing to it that it dispatches the check in time to ordinarily reach the receiving bank, here the Federal Reserve Bank, on or before the bank's next banking day after the imposed midnight deadline, provided the bank uses any means of delivery that would ordinarily accomplish the safe arrival of the check at a returning or depositary bank on that day. 12 C.F.R. § 229.30(c) (2001). As an even more generous alternative, regulation CC extends the midnight deadline beyond the next banking day to a paying bank using a highly expeditious means of transporting the check to the receiving bank. [1] Id. One commentator has plausibly suggested that the Federal Board's decision to provide for an extension of the midnight deadline was prompted by the Board's desire to encourage banks to abandon the practice of using the mail to convey returned items in favor of couriers and other means of more expeditious transport. 1 Barkley Clark & Barbara Clark, The Law of Bank Deposits, Collections and Credit Cards ¶ 8.01[4], at 8-6 (rev. ed.2006). Irrespective of its possible objectives, the extension to the midnight deadline authorized by section 229.30(c) clearly replaces the midnight deadline's compliance, measured based on time of dispatch, with compliance measured by delivery. As our upcoming discussion will reveal, the delivery contemplated in section 229.30(c) is not necessarily limited, as HMA asserts, to the depositary bank, but includes delivery to Federal Reserve Banks in the manner Wells Fargo employed.