4401-4407

COMMERCIAL CODE
SECTION 4401-4407




4401.  (a) A bank may charge against the account of a customer an
item that is properly payable from that account even though the
charge creates an overdraft. An item is properly payable if it is
authorized by the customer and is in accordance with any agreement
between the customer and bank.
   (b) A customer is not liable for the amount of an overdraft if the
customer neither signed the item nor benefited from the proceeds of
the item.
   (c) A bank may charge against the account of a customer a check
that is otherwise properly payable from the account, even though
payment was made before the date of the check, unless the customer
has given notice to the bank of the postdating describing the check
with reasonable certainty. The notice is effective for the period
stated in subdivision (b) of Section 4403 for stop-payment orders,
and shall be received at such time and in such manner as to afford
the bank a reasonable opportunity to act on it before the bank takes
any action with respect to the check described in Section 4303. If a
bank charges against the account of a customer a check before the
date stated in the notice of postdating, the bank is liable for
damages for the loss resulting from its act. The loss may include
damages for dishonor of subsequent items under Section 4402.
   (d) A bank that in good faith makes payment to a holder may charge
the indicated account of its customer according to either:
   (1) The original terms of the altered item.
   (2) The terms of the completed item, even though the bank knows
the item has been completed unless the bank has notice that the
completion was improper.



4402.  (a) Except as otherwise provided in this division, a payor
bank wrongfully dishonors an item if it dishonors an item that is
properly payable, but a bank may dishonor an item that would create
an overdraft unless it has agreed to pay the overdraft.
   (b) A payor bank is liable to its customer for damages proximately
caused by the wrongful dishonor of an item. Liability is limited to
actual damages proved and may include damages for an arrest or
prosecution of the customer or other consequential damages. Whether
any consequential damages are proximately caused by the wrongful
dishonor is a question of fact to be determined in each case.
   (c) A payor bank's determination of the customer's account balance
on which a decision to dishonor for insufficiency of available funds
is based may be made at any time between the time the item is
received by the payor bank and the time that the payor bank returns
the item or gives notice in lieu of return, and no more than one
determination need be made. If, at the election of the payor bank, a
subsequent balance determination is made for the purpose of
reevaluating the bank's decision to dishonor the item, the account
balance at that time is determinative of whether a dishonor for
insufficiency of available funds is wrongful.



4403.  (a) A customer or any person authorized to draw on the
account if there is more than one person may stop payment of any item
drawn on the customer's account or close the account by an order to
the bank describing the item or account with reasonable certainty
received at a time and in a manner that affords the bank a reasonable
opportunity to act on it before any action by the bank with respect
to the item described in Section 4303. If the signature of more than
one person is required to draw on an account, any of these persons
may stop payment or close the account.
   (b) A stop-payment order is effective for six months, but it
lapses after 14 calendar days if the original order was oral and was
not confirmed in writing within that period. A stop-payment order may
be renewed for additional six-month periods by a writing given to
the bank within a period during which the stop-payment order is
effective.
   (c) The burden of establishing the fact and amount of loss
resulting from the payment of an item contrary to a stop-payment
order or order to close an account is on the customer. The loss from
payment of an item contrary to a stop-payment order may include
damages for dishonor of subsequent items under Section 4402.



4404.  A bank is under no obligation to a customer having a checking
account to pay a check, other than a certified check, which is
presented more than six months after its date, but it may charge its
customer's account for a payment made thereafter in good faith.




4405.  (a) A payor or collecting bank's authority to accept, pay, or
collect an item or to account for proceeds of its collection, if
otherwise effective, is not rendered ineffective by incompetence of a
customer of either bank existing at the time the item is issued or
its collection is undertaken if the bank does not know of an
adjudication of incompetence. Neither death nor incompetence of a
customer revokes the authority to accept, pay, collect, or account
until the bank knows of the fact of death or of an adjudication of
incompetence and has reasonable opportunity to act on it.
   (b) Even with knowledge, a bank may, for 10 days after the date of
death, pay or certify checks drawn on or before that date unless
ordered to stop payment by a person claiming an interest in the
account.


4406.  (a) A bank that sends or makes available to a customer a
statement of account showing payment of items for the account shall
either return or make available to the customer the items paid or
provide information in the statement of account sufficient to allow
the customer reasonably to identify the items paid. The statement of
account provides sufficient information if the item is described by
item number, amount, and date of payment. If the bank does not return
the items, it shall provide in the statement of account the
telephone number that the customer may call to request an item, a
substitute check, or a legible copy thereof pursuant to subdivision
(b).
   (b) If the items are not returned to the customer, the person
retaining the items shall either retain the items or, if the items
are destroyed, maintain the capacity to furnish legible copies of the
items until the expiration of seven years after receipt of the
items. A customer may request an item from the bank that paid the
item, and that bank shall provide in a reasonable time either the
item or, if the item has been destroyed or is not otherwise
obtainable, a legible copy of the item. If the paid item requested by
a customer was presented as a substitute check, the bank shall
provide, in a reasonable time, either the substitute check or, if the
substitute check has been destroyed or is not otherwise obtainable,
a legible copy of the substitute check. A bank shall provide, upon
request, and without charge to the customer, at least two items,
substitute checks, or legible copies thereof, with respect to each
statement of account sent to the customer.
   (c) If a bank sends or makes available a statement of account or
items pursuant to subdivision (a), the customer shall exercise
reasonable promptness in examining the statement or the items to
determine whether any payment was not authorized because of an
alteration of an item or because a purported signature by or on
behalf of the customer was not authorized. If, based on the statement
or items provided, the customer should reasonably have discovered
the unauthorized payment, the customer shall promptly notify the bank
of the relevant facts.
   (d) If the bank proves that the customer failed, with respect to
an item, to comply with the duties imposed on the customer by
subdivision (c), the customer is precluded from asserting any of the
following against the bank:
   (1) The customer's unauthorized signature or any alteration on the
item if the bank also proves that it suffered a loss by reason of
the failure.
   (2) The customer's unauthorized signature or alteration by the
same wrongdoer on any other item paid in good faith by the bank if
the payment was made before the bank received notice from the
customer of the unauthorized signature or alteration and after the
customer had been afforded a reasonable period of time, not exceeding
30 days, in which to examine the item or statement of account and
notify the bank.
   (e) If subdivision (d) applies and the customer proves that the
bank failed to exercise ordinary care in paying the item and that the
failure contributed to loss, the loss is allocated between the
customer precluded and the bank asserting the preclusion according to
the extent to which the failure of the customer to comply with
subdivision (c) and the failure of the bank to exercise ordinary care
contributed to the loss. If the customer proves that the bank did
not pay the item in good faith, the preclusion under subdivision (d)
does not apply.
   (f) Without regard to care or lack of care of either the customer
or the bank, a customer who does not within one year after the
statement or items are made available to the customer (subdivision
(a)) discover and report the customer's unauthorized signature on or
any alteration on the item is precluded from asserting against the
bank the unauthorized signature or alteration. If there is a
preclusion under this subdivision, the payer bank may not recover for
breach of warranty under Section 4208 with respect to the
unauthorized signature or alteration to which the preclusion applies.
   (g) As used in this section, "substitute check" shall have the
same meaning as used in Section 229.2 of Title 12 of the Code of
Federal Regulations.
   (h) This section shall remain in effect only until January 1,
2015, and as of that date is repealed, unless a later enacted
statute, which is enacted before January 1, 2015, deletes or extends
that date.



4406.  (a) A bank that sends or makes available to a customer a
statement of account showing payment of items for the account shall
either return or make available to the customer the items paid or
provide information in the statement of account sufficient to allow
the customer to identify the items paid. If the bank does not return
the items, it shall provide in the statement of account the telephone
number that the customer may call to request an item, a substitute
check, or a legible copy thereof pursuant to subdivision (b).
   (b) If the items are not returned to the customer, the person
retaining the items shall either retain the items or, if the items
are destroyed, maintain the capacity to furnish legible copies of the
items until the expiration of seven years after receipt of the
items. A customer may request an item from the bank that paid the
item, and that bank shall provide in a reasonable time either the
item or, if the item has been destroyed or is not otherwise
obtainable, a legible copy of the item. If the paid item requested by
a customer was presented as a substitute check, the bank shall
provide, in a reasonable time, either the substitute check or, if the
substitute check has been destroyed or is not otherwise obtainable,
a legible copy of the substitute check. A bank shall provide, upon
request, and without charge to the customer, at least two items,
substitute checks, or legible copies thereof, with respect to each
statement of account sent to the customer.
   (c) If a bank sends or makes available a statement of account or
items pursuant to subdivision (a), the customer shall exercise
reasonable promptness in examining the statement or the items to
determine whether any payment was not authorized because of an
alteration of an item or because a purported signature by or on
behalf of the customer was not authorized. If, based on the statement
or items provided, the customer should reasonably have discovered
the unauthorized payment, the customer shall promptly notify the bank
of the relevant facts.
   (d) If the bank proves that the customer failed, with respect to
an item, to comply with the duties imposed on the customer by
subdivision (c), the customer is precluded from asserting any of the
following against the bank:
   (1) The customer's unauthorized signature or any alteration on the
item if the bank also proves that it suffered a loss by reason of
the failure.
   (2) The customer's unauthorized signature or alteration by the
same wrongdoer on any other item paid in good faith by the bank if
the payment was made before the bank received notice from the
customer of the unauthorized signature or alteration and after the
customer had been afforded a reasonable period of time, not exceeding
30 days, in which to examine the item or statement of account and
notify the bank.
   (e) If subdivision (d) applies and the customer proves that the
bank failed to exercise ordinary care in paying the item and that the
failure contributed to loss, the loss is allocated between the
customer precluded and the bank asserting the preclusion according to
the extent to which the failure of the customer to comply with
subdivision (c) and the failure of the bank to exercise ordinary care
contributed to the loss. If the customer proves that the bank did
not pay the item in good faith, the preclusion under subdivision (d)
does not apply.
   (f) Without regard to care or lack of care of either the customer
or the bank, a customer who does not within one year after the
statement or items are made available to the customer (subdivision
(a)) discover and report the customer's unauthorized signature on or
any alteration on the item is precluded from asserting against the
bank the unauthorized signature or alteration. If there is a
preclusion under this subdivision, the payer bank may not recover for
breach of warranty under Section 4208 with respect to the
unauthorized signature or alteration to which the preclusion applies.
   (g) As used in this section, "substitute check" shall have the
same meaning as used in Section 229.2 of Title 12 of the Code of
Federal Regulations.
   (h) This section shall become operative on January 1, 2015.



4407.  If a payor bank has paid an item over the order of the drawer
or maker to stop payment, or after an account has been closed, or
otherwise under circumstances giving a basis for objection by the
drawer or maker, to prevent unjust enrichment and only to the extent
necessary to prevent loss to the bank by reason of its payment of the
item, the payor bank is subrogated to the rights of all of the
following:
   (a) Of any holder in due course on the item against the drawer or
maker.
   (b) Of the payee or any other holder of the item against the
drawer or maker either on the item or under the transaction out of
which the item arose.
   (c) Of the drawer or maker against the payee or any other holder
of the item with respect to the transaction out of which the item
arose.