Court Opinion

ID: 9709857
Source: CourtListenerOpinion
Date Created: 2023-08-26 03:56:12.023461+00
Date Added: 2024-06-11T18:22:52.083700
License: Public Domain

FINE, J.
(concurring). I join in the majority opinion except insofar as it holds that § 404.207, STATS., permits the maker of a check, the "drawer," to bring a direct action against a collecting bank.1 The clear lan*387guage of § 404.207 is to the contrary. Section 404.207 provides, as material to our discussion:
Warranties of customer and collecting bank on transfer or presentment of items; time for claims. (1) Each customer or collecting bank who obtains payment or acceptance of an item and each prior customer and collecting bank warrants to the payor bank or other payor who in good faith pays or accepts the item that:
(a) The customer or collecting bank has a good title to the item or is authorized to obtain payment or acceptance on behalf of one who has a good title; and
(b) The customer or collecting bank has no knowledge that the signature of the maker or drawee is unauthorized... and
(c) The item has not been materially altered, except that this warranty is not given by any customer or collecting bank that is a holder in due course and acts in good faith:
2. To the drawer of a draft whether or not the drawer is also the drawee.
Under this provision, the warranties flow to "the payor bank or other payor who in good faith pays or accepts the item." American Gasket is neither a "payor bank" nor a "payor who in good faith pa[id] or accept[ed]" the check it drew.2 Thus, in my view, § 404.207 does not apply.3
*388Although I do not believe that § 404.207, STATS., applies to American Gasket's claim in this case, I join in the result because § 403.419, Stats., does apply. Section 403.419 provides:
Conversion of instrument; innocent representative. (1) An instrument is converted when:
(a) A drawee to whom it is delivered for acceptance refuses to return it on demand; or
(b) Any person to whom it is delivered for payment refuses on demand either to pay or to return it; or
(c) It is paid on a forged indorsement.
(2) In an action against a drawee under sub. (1) the measure of the drawee's liability is the face amount of the instrument. In any other action under sub. (1) the measure of liability is presumed to be the face amount of the instrument.
(3) Subject to the provisions of chs. 401 to 411 concerning restrictive endorsements a representative, including a depositary or collecting bank, who has in good faith and in accordance with the reasonable commercial standards applicable to the business of such representative dealt with an instrument or its proceeds on behalf of one who was not the true owner is not liable in conversion or otherwise to the true owner beyond the amount of any proceeds remaining in bis or her hands.
(4) An intermediary bank or payor bank which is not a depositary bank is not liable in conversion solely by reason of the fact that proceeds of *389an item indorsed restrictively (ss. 403.205 and 403.206) are not paid or applied consistently with the restrictive indorsement of an indorser other than its immediate transferor.
As the majority notes, Wauwatosa Savings and Loan Association paid the American Gasket checks "on a forged indorsement," as that term is used in § 403.419. Majority op. at 376 n.5 (" 'There is no distinction between an unauthorized indorsement and a forgery. They are synonymous for the purpose of U.C.C. § 3-419.' ") (quoting 6A RONALD A. ANDERSON, ANDERSON ON the Uniform Commercial Code §§3-419:27 and 3-419:71) (1993 rev. ed. & Oct. 1995 supp.). Further, although § 403.419(3), Stats., limits the liability of a "representative, including a depository or collecting bank" to "the amount of any proceeds remaining" in their hands, that limitation applies only if the "representative" has dealt with the instrument "in good faith and in accordance with the reasonable commercial standards applicable to the business of such representative." We have already determined that Wauwatosa Savings and Loan did not so deal with the checks it accepted from Thomas Landisch and deposited into his account. Thus, in my view, Wauwatosa Savings and Loan is liable to American Gasket in conversion under § 403.419. See Allied Concord Financial Corp. v. Bank of America Nat'l Trust and Sav. Ass'n, 80 Cal. Rptr. 622, 624 (Cal. Ct. App. 1969) (alternate holding). This view is consistent with pre-U.C.C. Wisconsin law, see National Sur. Corp. v. City Bank & Trust Co., 248 Wis. 32, 34, 20 N.W.2d 559, 560-561 (1945); Evenson v. Waukesha Nat'l Bank, 189 Wis. 170, 174-175, 207 N.W. 405, 415 (1926), and with the general pre-U.C.C. rule elsewhere, 9 C.J.S. Banks and Banking § 356 at 738 (1938) ("Generally the drawer of a check can *390recover of a collecting bank for its payment and collection of the check on a forged indorsement, as for money had and received or for conversion, provided the drawer shows that he has title to the check or proceeds or the right to possession thereof.") (footnotes omitted).4

 I also do not join in footnote 7 of the majority opinion; I do not believe that its discussion of what Wauwatosa Savings and Loan could have done to prevent the loss is necessary to our decision. Additionally, contrary to periodic language in the majority opinion, under the circumstances here the person or entity writing a check is its "maker" or "drawer" — not its *387"payor." See Henry J. Bailey and Richard B. Hagedorn, Brady on Bank Checks ¶ 1.11 at 1-15 (7th ed. 1992).

 As noted in footnote 1, American Gasket is the maker or drawer of the checks at issue in this case.

 The cases upon which the majority relies for the proposition that a drawer of a check may recover against a collecting bank under U.C.C. § 4-207 permitted recovery on a third-party *388beneficiary theory, thereby recognizing, tacitly at least, that the warranties under § 4-207 do not flow directly to the drawer. See Sun 'n Sand, Inc. v. United Cal. Bank, 582 P.2d 920, 928 (Cal. 1978); Prudential Ins. Co. of America v. Marine Nat'l Exch. Bank, 315 F. Supp. 520, 521 (E.D. Wis. 1970). The majority here does not rely on the third-party-beneficiary theory.

I do not understand the materiality of either Production Credit Ass'n v. Equity Coop Livestock Sales Ass'n, 82 Wis. 2d 5, 261 N.W.2d 127 (1978), or Farm Credit Bank of St. Paul v. F & A Dairy, 165 Wis. 2d 360, 477 N.W.2d 357 (Ct. App. 1991), cited by the majority in footnote 8. Neither case concerned either checks or § 403.419, STATS. The majority's footnote 8 also ignores the clear language of § 403.419(1)(c) that "[a]n instrument is converted when . . . [i]t is paid on a forged indorsement." With all due respect, Comment 2 to § 403.419 has nothing to do with this case.