Printable Format84-4-215. Final payment of item by payor bank; when provisional debits and credits become final; when certain credits become available for withdrawal. (a) An item is finally paid by a payor bank when the bank has first done any of the following:
(1) Paid the item in cash;
(2) settled for the item without having a right to revoke the settlement under statute, clearing-house rule, or agreement; or
(3) made a provisional settlement for the item and failed to revoke the settlement in the time and manner permitted by statute, clearing-house rule, or agreement.
(b) If provisional settlement for an item does not become final, the item is not finally paid.
(c) If provisional settlement for an item between the presenting and payor banks is made through a clearing house or by debits or credits in an account between them, then to the extent that provisional debits or credits for the item are entered in accounts between the presenting and payor banks or between the presenting and successive prior collecting banks seriatim, they become final upon final payment of the item by the payor bank.
(d) If a collecting bank receives a settlement for an item which is or becomes final, the bank is accountable to its customer for the amount of the item and any provisional credit given for the item in an account with its customer becomes final.
(e) Subject to (1) applicable law stating a time for availability of funds and (2) any right of the bank to apply the credit to an obligation of the customer, credit given by a bank for an item in a customer's account becomes available for withdrawal as of right:
(A) If the bank has received a provisional settlement for the item, when the settlement becomes final and the bank has had a reasonable time to receive return of the item and the item has not been received within that time;
(B) if the bank is both the depository bank and the payor bank, and the item is finally paid, at the opening of the bank's second banking day following receipt of the item.
(f) Subject to applicable law stating a time for availability of funds and any right of a bank to apply a deposit to an obligation of the depositor, a deposit of money becomes available for withdrawal as of right at the opening of the bank's next banking day after receipt of the deposit.
History: L. 1965, ch. 564, § 222; L. 1991, ch. 296, § 96; February 1, 1992.
KANSAS COMMENT, 1996
This section is identical to the 1995 Official Text except that the lower case roman numerals were replaced by arabic numbers and the arabic numbers were replaced by capital letters in the text of subsection (e). This section is an amended version of the former 84-4-213. The former 84-4-213(1)(c) has been deleted, subsection (b) has been added and additional technical amendments complying with federal regulations and stylistic amendments have been made.
This section answers most, but not all, questions as to when payment becomes final, an important factor in determining the priorities between items and notices, stop orders, legal process, and setoffs (84-4-303), and in fixing preferential rights under 84-4-216, and for the completion of the collection process, when provisional settlements become final. When provisional settlements are employed via a clearinghouse or Federal Reserve accounts, final payment by the drawee bank normally occurs when the payor no longer has the right to revoke settlement for the item. At that moment, usually the drawee bank's midnight deadline, provisional credits along the bank collection chain firm up and become final. What began as a series of agency relationships are transformed into a series of debtor-creditor relationships under which each bank is accountable for the amount of the item to its transferor. When the settlement becomes final, the bank is accountable to its customer for the amount of the item. 84-4-215(d).
The amendment of subsection (a), deleting the process of posting as a factor, has removed the subjective element from the definition of final payment, effectively adopting the decision in West Side Bank v. Marine National Exchange Bank, 155 N.W.2d 587 (Wis. 1968) allowing the payor bank the midnight deadline to act on the final payment of an item because its procedure was to retain the right to "correct or reverse an item until the midnight deadline" under the former 84-4-109(e). All payors now may do this.
Under the provisions of Article 4, the depositary bank normally does not receive any affirmative notice of final payment or settlement. Instead, the depositary and intermediary banks give and then receive provisional settlements which are not revoked if the item is not returned. Subsection (e) reflects this fact by providing that there is a final settlement a reasonable time after the provisional settlement when the item has not been returned. If the depositary bank is also the payor, the amount of the item is available for withdrawal at the opening of the business day following the midnight deadline, when the item is finally paid. Subsection (f) provides that a deposit of money (84-1-201(24)) is available for withdrawal the day following its deposit.
Revisor's Note:
In 1991 former section 84-4-213 was transferred and reassigned to this number as a conforming amendment in the revision of article 3 of the code.