Office of the Revisor of Statutes
Minnesota Session Laws - 2003, Regular Session
Key: (1) language to be deleted (2) new language
CHAPTER 81-S.F.No. 28
An act relating to commerce; modifying and enacting
the amendments to Articles 3 and 4 of the Uniform
Commercial Code recommended by the National Conference
of Commissioners on Uniform State Laws; amending
Minnesota Statutes 2002, sections 336.3-103;
336.3-106; 336.3-116; 336.3-119; 336.3-305; 336.3-309;
336.3-312; 336.3-416; 336.3-417; 336.3-419; 336.3-602;
336.3-604; 336.3-605; 336.4-104; 336.4-207; 336.4-208;
336.4-212; 336.4-301; 336.4-403.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
ARTICLE 1
AMENDMENTS TO UNIFORM COMMERCIAL CODE ARTICLE 3
Section 1. Minnesota Statutes 2002, section 336.3-103, is
amended to read:
336.3-103 [DEFINITIONS.]
(a) In this article:
(1) "Acceptor" means a drawee who has accepted a draft.
(2) "Consumer account" means an account established by an
individual primarily for personal, family, or household purposes.
(3) "Consumer transaction" means a transaction in which an
individual incurs an obligation primarily for personal, family,
or household purposes.
(4) "Drawee" means a person ordered in a draft to make
payment.
(3) (5) "Drawer" means a person who signs or is identified
in a draft as a person ordering payment.
(4) (6) "Good faith" means honesty in fact and the
observance of reasonable commercial standards of fair dealing.
(5) (7) "Maker" means a person who signs or is identified
in a note as a person undertaking to pay.
(6) (8) "Order" means a written instruction to pay money
signed by the person giving the instruction. The instruction
may be addressed to any person, including the person giving the
instruction, or to one or more persons jointly or in the
alternative but not in succession. An authorization to pay is
not an order unless the person authorized to pay is also
instructed to pay.
(7) (9) "Ordinary care" in the case of a person engaged in
business means observance of reasonable commercial standards,
prevailing in the area in which the person is located, with
respect to the business in which the person is engaged. In the
case of a bank that takes an instrument for processing for
collection or payment by automated means, reasonable commercial
standards do not require the bank to examine the instrument if
the failure to examine does not violate the bank's prescribed
procedures and the bank's procedures do not vary unreasonably
from general banking usage not disapproved by this article or
article 4.
(8) (10) "Party" means a party to an instrument.
(11) "Principal obligor," with respect to an instrument,
means the accommodated party or any other party to the
instrument against whom a secondary obligor has recourse under
this article.
(9) (12) "Promise" means a written undertaking to pay money
signed by the person undertaking to pay. An acknowledgment of
an obligation by the obligor is not a promise unless the obligor
also undertakes to pay the obligation.
(10) (13) "Prove" with respect to a fact means to meet the
burden of establishing the fact (section 336.1-201(8)).
(14) "Record" means information that is inscribed on a
tangible medium or that is stored in an electronic or other
medium and is retrievable in perceivable form.
(11) (15) "Remitter" means a person who purchases an
instrument from its issuer if the instrument is payable to an
identified person other than the purchaser.
(16) "Remotely-created item" means an item that is not
created by the payor bank and does not bear a handwritten or
facsimile signature purporting to be the signature of the drawer.
(17) "Secondary obligor," with respect to an instrument,
means (a) an endorser or an accommodation party, (b) a drawer
having the obligation described in section 336.3-414(d), or (c)
any other party to the instrument that has recourse against
another party to the instrument pursuant to section 336.3-116(b).
(b) Other definitions applying to this article and the
sections in which they appear are:
"Acceptance," section 336.3-409.
"Accommodated party," section 336.3-419.
"Accommodation party," section 336.3-419.
"Account," section 336.4-104.
"Alteration," section 336.3-407.
"Anomalous endorsement," section 336.3-205.
"Blank endorsement," section 336.3-205.
"Cashier's check," section 336.3-104.
"Certificate of deposit," section 336.3-104.
"Certified check," section 336.3-409.
"Check," section 336.3-104.
"Consideration," section 336.3-303.
"Draft," section 336.3-104.
"Endorsement," section 336.3-204.
"Endorser," section 336.3-204.
"Holder in due course," section 336.3-302.
"Incomplete instrument," section 336.3-115.
"Instrument," section 336.3-104.
"Issue," section 336.3-105.
"Issuer," section 336.3-105.
"Negotiable instrument," section 336.3-104.
"Negotiation," section 336.3-201.
"Note," section 336.3-104.
"Payable at a definite time," section 336.3-108.
"Payable on demand," section 336.3-108.
"Payable to bearer," section 336.3-109.
"Payable to order," section 336.3-109.
"Payment," section 336.3-602.
"Person entitled to enforce," section 336.3-301.
"Presentment," section 336.3-501.
"Reacquisition," section 336.3-207.
"Special endorsement," section 336.3-205.
"Teller's check," section 336.3-104.
"Transfer of instrument," section 336.3-203.
"Traveler's check," section 336.3-104.
"Value," section 336.3-303.
(c) The following definitions in other articles apply to
this article:
"Bank," section 336.4-105.
"Banking day," section 336.4-104.
"Clearinghouse," section 336.4-104.
"Collecting bank," section 336.4-105.
"Depositary bank," section 336.4-105.
"Documentary draft," section 336.4-104.
"Intermediary bank," section 336.4-105.
"Item," section 336.4-104.
"Payor bank," section 336.4-105.
"Suspends payments," section 336.4-104.
(d) In addition, article 1 contains general definitions and
principles of construction and interpretation applicable
throughout this article.
Sec. 2. Minnesota Statutes 2002, section 336.3-106, is
amended to read:
336.3-106 [UNCONDITIONAL PROMISE OR ORDER.]
(a) Except as provided in this section, for the purposes of
section 336.3-104(a), a promise or order is unconditional unless
it states (i) an express condition to payment, (ii) that the
promise or order is subject to or governed by another
writing record, or (iii) that rights or obligations with respect
to the promise or order are stated in another writing record. A
reference to another writing record does not of itself make the
promise or order conditional.
(b) A promise or order is not made conditional (i) by a
reference to another writing record for a statement of rights
with respect to collateral, prepayment, or acceleration, or (ii)
because payment is limited to resort to a particular fund or
source.
(c) If a promise or order requires, as a condition to
payment, a countersignature by a person whose specimen signature
appears on the promise or order, the condition does not make the
promise or order conditional for the purposes of section
336.3-104(a). If the person whose specimen signature appears on
an instrument fails to countersign the instrument, the failure
to countersign is a defense to the obligation of the issuer, but
the failure does not prevent a transferee of the instrument from
becoming a holder of the instrument.
(d) If a promise or order at the time it is issued or first
comes into possession of a holder contains a statement, required
by applicable statutory or administrative law, to the effect
that the rights of a holder or transferee are subject to claims
or defenses that the issuer could assert against the original
payee, the promise or order is not thereby made conditional for
the purposes of section 336.3-104(a); but if the promise or
order is an instrument, there cannot be a holder in due course
of the instrument.
Sec. 3. Minnesota Statutes 2002, section 336.3-116, is
amended to read:
336.3-116 [JOINT AND SEVERAL LIABILITY; CONTRIBUTION.]
(a) Except as otherwise provided in the instrument, two or
more persons who have the same liability on an instrument as
makers, drawers, acceptors, endorsers who endorse as joint
payees, or anomalous endorsers are jointly and severally liable
in the capacity in which they sign.
(b) Except as provided in section 336.3-419(e) or by
agreement of the affected parties, a party having joint and
several liability who pays the instrument is entitled to receive
from any party having the same joint and several liability
contribution in accordance with applicable law.
(c) Discharge of one party having joint and several
liability by a person entitled to enforce the instrument does
not affect the right under subsection (b) of a party having the
same joint and several liability to receive contribution from
the party discharged.
Sec. 4. Minnesota Statutes 2002, section 336.3-119, is
amended to read:
336.3-119 [NOTICE OF RIGHT TO DEFEND ACTION.]
In an action for breach of an obligation for which a third
person is answerable over pursuant to this article or article 4,
the defendant may give the third person written notice of the
litigation in a record, and the person notified may then give
similar notice to any other person who is answerable over. If
the notice states (i) that the person notified may come in and
defend and (ii) that failure to do so will bind the person
notified in an action later brought by the person giving the
notice as to any determination of fact common to the two
litigations, the person notified is so bound unless after
seasonable receipt of the notice the person notified does come
in and defend.
Sec. 5. Minnesota Statutes 2002, section 336.3-305, is
amended to read:
336.3-305 [DEFENSES AND CLAIMS IN RECOUPMENT.]
(a) Except as stated in subsection (b) otherwise provided
in this section, the right to enforce the obligation of a party
to pay an instrument is subject to the following:
(1) a defense of the obligor based on (i) infancy of the
obligor to the extent it is a defense to a simple contract, (ii)
duress, lack of legal capacity, or illegality of the transaction
which, under other law, nullifies the obligation of the obligor,
(iii) fraud that induced the obligor to sign the instrument with
neither knowledge nor reasonable opportunity to learn of its
character or its essential terms, or (iv) discharge of the
obligor in insolvency proceedings;
(2) a defense of the obligor stated in another section of
this article or a defense of the obligor that would be available
if the person entitled to enforce the instrument were enforcing
a right to payment under a simple contract; and
(3) a claim in recoupment of the obligor against the
original payee of the instrument if the claim arose from the
transaction that gave rise to the instrument; but the claim of
the obligor may be asserted against a transferee of the
instrument only to reduce the amount owing on the instrument at
the time the action is brought.
(b) The right of a holder in due course to enforce the
obligation of a party to pay the instrument is subject to
defenses of the obligor stated in subsection (a)(1), but is not
subject to defenses of the obligor stated in subsection (a)(2)
or claims in recoupment stated in subsection (a)(3) against a
person other than the holder.
(c) Except as stated in subsection (d), in an action to
enforce the obligation of a party to pay the instrument, the
obligor may not assert against the person entitled to enforce
the instrument a defense, claim in recoupment, or claim to the
instrument (section 336.3-306) of another person, but the other
person's claim to the instrument may be asserted by the obligor
if the other person is joined in the action and personally
asserts the claim against the person entitled to enforce the
instrument. An obligor is not obliged to pay the instrument if
the person seeking enforcement of the instrument does not have
rights of a holder in due course and the obligor proves that the
instrument is a lost or stolen instrument.
(d) In an action to enforce the obligation of an
accommodation party to pay an instrument, the accommodation
party may assert against the person entitled to enforce the
instrument any defense or claim in recoupment under subsection
(a) that the accommodated party could assert against the person
entitled to enforce the instrument, except the defenses of
discharge in insolvency proceedings, infancy, and lack of legal
capacity.
(e) In a consumer transaction, if law other than this
article requires that an instrument include a statement to the
effect that the rights of a holder or transferee are subject to
a claim or defense that the issuer could assert against the
original payee, and the instrument does not include such a
statement:
(1) the instrument has the same effect as if the instrument
included such a statement;
(2) the issuer may assert against the holder or transferee
all claims and defenses that would have been available if the
instrument included such a statement; and
(3) the extent to which claims may be asserted against the
holder or transferee is determined as if the instrument included
such a statement.
(f) This section is subject to law other than this article
that establishes a different rule for consumer transactions.
Sec. 6. Minnesota Statutes 2002, section 336.3-309, is
amended to read:
336.3-309 [ENFORCEMENT OF LOST, DESTROYED, OR STOLEN
INSTRUMENT.]
(a) A person not in possession of an instrument is entitled
to enforce the instrument if (i) the person was in possession of
the instrument and
(1) the person seeking to enforce the instrument (A) was
entitled to enforce it the instrument when loss of possession
occurred, (ii) or (B) has directly or indirectly acquired
ownership of the instrument from a person who was entitled to
enforce the instrument when loss of possession occurred;
(2) the loss of possession was not the result of a transfer
by the person or a lawful seizure,; and
(iii) (3) the person cannot reasonably obtain possession of
the instrument because the instrument was destroyed, its
whereabouts cannot be determined, or it is in the wrongful
possession of an unknown person or a person that cannot be found
or is not amenable to service of process.
(b) A person seeking enforcement of an instrument under
subsection (a) must prove the terms of the instrument and the
person's right to enforce the instrument. If that proof is
made, section 336.3-308 applies to the case as if the person
seeking enforcement had produced the instrument. The court may
not enter judgment in favor of the person seeking enforcement
unless it finds that the person required to pay the instrument
is adequately protected against loss that might occur by reason
of a claim by another person to enforce the instrument.
Adequate protection may be provided by any reasonable means.
Sec. 7. Minnesota Statutes 2002, section 336.3-312, is
amended to read:
336.3-312 [LOST, DESTROYED, OR STOLEN CASHIER'S CHECK,
TELLER'S CHECK, OR CERTIFIED CHECK.]
(a) In this section:
(1) "Check" means a cashier's check, teller's check, or
certified check.
(2) "Claimant" means a person who claims the right to
receive the amount of a cashier's check, teller's check, or
certified check that was lost, destroyed, or stolen.
(3) "Declaration of loss" means a written statement, made
in a record under penalty of perjury, to the effect that (i) the
declarer lost possession of a check, (ii) the declarer is the
drawer or payee of the check, in the case of a certified check,
or the remitter or payee of the check, in the case of a
cashier's check or teller's check, (iii) the loss of possession
was not the result of a transfer by the declarer or a lawful
seizure, and (iv) the declarer cannot reasonably obtain
possession of the check because the check was destroyed, its
whereabouts cannot be determined, or it is in the wrongful
possession of an unknown person or a person that cannot be found
or is not amenable to service of process.
(4) "Obligated bank" means the issuer of a cashier's check
or teller's check or the acceptor of a certified check.
(b) A claimant may assert a claim to the amount of a check
by a communication to the obligated bank describing the check
with reasonable certainty and requesting payment of the amount
of the check, if (i) the claimant is the drawer or payee of a
certified check or the remitter or payee of a cashier's check or
teller's check, (ii) the communication contains or is
accompanied by a declaration of loss of the claimant with
respect to the check, (iii) the communication is received at a
time and in a manner affording the bank a reasonable time to act
on it before the check is paid, and (iv) the claimant provides
reasonable identification if requested by the obligated bank.
Delivery of a declaration of loss is a warranty of the truth of
the statements made in the declaration. If a claim is asserted
in compliance with this subsection, the following rules apply:
(1) The claim becomes enforceable at the later of (i) the
time the claim is asserted, or (ii) the 90th day following the
date of the check, in the case of a cashier's check or teller's
check, or the 90th day following the date of the acceptance, in
the case of a certified check.
(2) Until the claim becomes enforceable, it has no legal
effect and the obligated bank must pay the check or, in the case
of a teller's check, may permit the drawee to pay the check.
Payment to a person entitled to enforce the check discharges all
liability of the obligated bank with respect to the check.
(3) If the claim becomes enforceable before the check is
presented for payment, the obligated bank is not obliged to pay
the check.
(4) When the claim becomes enforceable, the obligated bank
becomes obliged to pay the amount of the check to the claimant
if payment of the check has not been made to a person entitled
to enforce the check. Subject to section 336.4-302(a)(1),
payment to the claimant discharges all liability of the
obligated bank with respect to the check.
(c) If the obligated bank pays the amount of a check to a
claimant under subsection (b)(4) and the check is presented for
payment by a person having rights of a holder in due course, the
claimant is obliged to (i) refund the payment to the obligated
bank if the check is paid, or (ii) pay the amount of the check
to the person having rights of a holder in due course if the
check is dishonored.
(d) If a claimant has the right to assert a claim under
subsection (b) and is also a person entitled to enforce a
cashier's check, teller's check, or certified check which is
lost, destroyed, or stolen, the claimant may assert rights with
respect to the check either under this section or section
336.3-309.
Sec. 8. Minnesota Statutes 2002, section 336.3-416, is
amended to read:
336.3-416 [TRANSFER WARRANTIES.]
(a) A person who transfers an instrument for consideration
warrants to the transferee and, if the transfer is by
endorsement, to any subsequent transferee that:
(1) the warrantor is a person entitled to enforce the
instrument;
(2) all signatures on the instrument are authentic and
authorized;
(3) the instrument has not been altered;
(4) the instrument is not subject to a defense or claim in
recoupment of any party which can be asserted against the
warrantor; and
(5) the warrantor has no knowledge of any insolvency
proceeding commenced with respect to the maker or acceptor or,
in the case of an unaccepted draft, the drawer; and
(6) with respect to a remotely-created item, the person on
whose account the item is drawn authorized the issuance of the
item in the amount for which the item is drawn.
(b) A person to whom the warranties under subsection (a)
are made and who took the instrument in good faith may recover
from the warrantor as damages for breach of warranty an amount
equal to the loss suffered as a result of the breach, but not
more than the amount of the instrument plus expenses and loss of
interest incurred as a result of the breach.
(c) The warranties stated in subsection (a) cannot be
disclaimed with respect to checks. Unless notice of a claim for
breach of warranty is given to the warrantor within 30 days
after the claimant has reason to know of the breach and the
identity of the warrantor, the liability of the warrantor under
subsection (b) is discharged to the extent of any loss caused by
the delay in giving notice of the claim.
(d) A cause of action for breach of warranty under this
section accrues when the claimant has reason to know of the
breach.
(e) No claim for breach of the warranty in subsection
(a)(6) is available against a person to which an item was
transferred to the extent that under applicable law (including
the applicable choice-of-law principles) the person that
transferred the item to that person did not make the warranty in
subsection (a)(6).
Sec. 9. Minnesota Statutes 2002, section 336.3-417, is
amended to read:
336.3-417 [PRESENTMENT WARRANTIES.]
(a) If an unaccepted draft is presented to the drawee for
payment or acceptance and the drawee pays or accepts the draft,
(i) the person obtaining payment or acceptance, at the time of
presentment, and (ii) a previous transferor of the draft, at the
time of transfer, warrant to the drawee making payment or
accepting the draft in good faith that:
(1) the warrantor is, or was, at the time the warrantor
transferred the draft, a person entitled to enforce the draft or
authorized to obtain payment or acceptance of the draft on
behalf of a person entitled to enforce the draft;
(2) the draft has not been altered; and
(3) the warrantor has no knowledge that the signature of
the drawer of the draft is unauthorized; and
(4) with respect to any remotely-created item, the person
on whose account the item is drawn authorized the issuance of
the item in the amount for which the item is drawn.
(b) A drawee making payment may recover from any warrantor
damages for breach of warranty equal to the amount paid by the
drawee less the amount the drawee received or is entitled to
receive from the drawer because of the payment. In addition,
the drawee is entitled to compensation for expenses and loss of
interest resulting from the breach. The right of the drawee to
recover damages under this subsection is not affected by any
failure of the drawee to exercise ordinary care in making
payment. If the drawee accepts the draft, breach of warranty is
a defense to the obligation of the acceptor. If the acceptor
makes payment with respect to the draft, the acceptor is
entitled to recover from any warrantor for breach of warranty
the amounts stated in this subsection.
(c) If a drawee asserts a claim for breach of warranty
under subsection (a) based on an unauthorized endorsement of the
draft or an alteration of the draft, the warrantor may defend by
proving that the endorsement is effective under section
336.3-404 or 336.3-405 or the drawer is precluded under section
336.3-406 or 336.4-406 from asserting against the drawee the
unauthorized endorsement or alteration.
(d) If (i) a dishonored draft is presented for payment to
the drawer or an endorser or (ii) any other instrument is
presented for payment to a party obliged to pay the instrument,
and (iii) payment is received, the following rules apply:
(1) The person obtaining payment and a prior transferor of
the instrument warrant to the person making payment in good
faith that the warrantor is, or was, at the time the warrantor
transferred the instrument, a person entitled to enforce the
instrument or authorized to obtain payment on behalf of a person
entitled to enforce the instrument.
(2) The person making payment may recover from any
warrantor for breach of warranty an amount equal to the amount
paid plus expenses and loss of interest resulting from the
breach.
(e) The warranties stated in subsections (a) and (d) cannot
be disclaimed with respect to checks. Unless notice of a claim
for breach of warranty is given to the warrantor within 30 days
after the claimant has reason to know of the breach and the
identity of the warrantor, the liability of the warrantor under
subsection (b) or (d) is discharged to the extent of any loss
caused by the delay in giving notice of the claim.
(f) A cause of action for breach of warranty under this
section accrues when the claimant has reason to know of the
breach.
(g) No claim for breach of the warranty in subsection
(a)(4) is available against a person to which an item was
transferred to the extent that under applicable law (including
the applicable choice-of-law principles) the person that
transferred the item to that person did not make the warranty in
subsection (a)(4).
Sec. 10. Minnesota Statutes 2002, section 336.3-419, is
amended to read:
336.3-419 [INSTRUMENTS SIGNED FOR ACCOMMODATION.]
(a) If an instrument is issued for value given for the
benefit of a party to the instrument ("accommodated party") and
another party to the instrument ("accommodation party") signs
the instrument for the purpose of incurring liability on the
instrument without being a direct beneficiary of the value given
for the instrument, the instrument is signed by the
accommodation party "for accommodation."
(b) An accommodation party may sign the instrument as
maker, drawer, acceptor, or endorser and, subject to subsection
(d), is obliged to pay the instrument in the capacity in which
the accommodation party signs. The obligation of an
accommodation party may be enforced notwithstanding any statute
of frauds and whether or not the accommodation party receives
consideration for the accommodation.
(c) A person signing an instrument is presumed to be an
accommodation party and there is notice that the instrument is
signed for accommodation if the signature is an anomalous
endorsement or is accompanied by words indicating that the
signer is acting as surety or guarantor with respect to the
obligation of another party to the instrument. Except as
provided in section 336.3-605, the obligation of an
accommodation party to pay the instrument is not affected by the
fact that the person enforcing the obligation had notice when
the instrument was taken by that person that the accommodation
party signed the instrument for accommodation.
(d) If the signature of a party to an instrument is
accompanied by words indicating unambiguously that the party is
guaranteeing collection rather than payment of the obligation of
another party to the instrument, the signer is obliged to pay
the amount due on the instrument to a person entitled to enforce
the instrument only if (i) execution of judgment against the
other party has been returned unsatisfied, (ii) the other party
is insolvent or in an insolvency proceeding, (iii) the other
party cannot be served with process, or (iv) it is otherwise
apparent that payment cannot be obtained from the other party.
(e) If the signature of a party to an instrument is
accompanied by words indicating that the party guarantees
payment or the signer signs the instrument as an accommodation
party in some other manner that does not unambiguously indicate
an intention to guarantee collection rather than payment, the
signer is obligated to pay the amount due on the instrument to a
person entitled to enforce the instrument in the same
circumstances as the accommodated party would be obliged,
without prior resort to the accommodated party by the person
entitled to enforce the instrument.
(f) An accommodation party who pays the instrument is
entitled to reimbursement from the accommodated party and is
entitled to enforce the instrument against the accommodated
party. In proper circumstances, an accommodation party may
obtain relief that requires the accommodated party to perform
its obligations on the instrument. An accommodated party who
that pays the instrument has no right of recourse against, and
is not entitled to contribution from, an accommodation party.
Sec. 11. Minnesota Statutes 2002, section 336.3-602, is
amended to read:
336.3-602 [PAYMENT.]
(a) Subject to subsection (b) (e), an instrument is paid to
the extent payment is made (i) by or on behalf of a party
obliged to pay the instrument, and (ii) to a person entitled to
enforce the instrument.
(b) Subject to subsection (e), a note is paid to the extent
payment is made by or on behalf of a party obliged to pay the
note to a person that formerly was entitled to enforce the note
only if at the time of the payment the party obliged to pay has
not received adequate notification that the note has been
transferred and that payment is to be made to the transferee. A
notification is adequate only if it is signed by the transferor
or the transferee; reasonably identifies the transferred note;
and provides an address at which payments subsequently are to be
made. Upon request, a transferee shall seasonably furnish
reasonable proof that the note has been transferred. Unless the
transferee complies with the request, a payment to the person
that formerly was entitled to enforce the note is effective for
purposes of subsection (c) even if the party obliged to pay the
note has received a notification under this paragraph.
(c) Subject to subsection (e), to the extent of the a
payment under subsections (a) and (b), the obligation of the
party obliged to pay the instrument is discharged even though
payment is made with knowledge of a claim to the instrument
under section 336.3-306 by another person.
(d) Subject to subsection (e), a transferee, or any party
that has acquired rights in the instrument directly or
indirectly from a transferee, including any such party that has
rights as a holder in due course, is deemed to have notice of
any payment that is made under subsection (b) after the date
that the note is transferred to the transferee but before the
party obliged to pay the note receives adequate notification of
the transfer.
(b) (e) The obligation of a party to pay the instrument is
not discharged under subsection subsections (a) through (d) if:
(1) a claim to the instrument under section 336.3-306 is
enforceable against the party receiving payment and (i) payment
is made with knowledge by the payor that payment is prohibited
by injunction or similar process of a court of competent
jurisdiction, or (ii) in the case of an instrument other than a
cashier's check, teller's check, or certified check, the party
making payment accepted, from the person having a claim to the
instrument, indemnity against loss resulting from refusal to pay
the person entitled to enforce the instrument; or
(2) the person making payment knows that the instrument is
a stolen instrument and pays a person it knows is in wrongful
possession of the instrument.
(f) As used in this section, "signed," with respect to a
record that is not a writing, includes the attachment to or
logical association with the record of an electronic symbol,
sound, or process with the present intent to adopt or accept the
record.
Sec. 12. Minnesota Statutes 2002, section 336.3-604, is
amended to read:
336.3-604 [DISCHARGE BY CANCELLATION OR RENUNCIATION.]
(a) A person entitled to enforce an instrument, with or
without consideration, may discharge the obligation of a party
to pay the instrument (i) by an intentional voluntary act, such
as surrender of the instrument to the party, destruction,
mutilation, or cancellation of the instrument, cancellation or
striking out of the party's signature, or the addition of words
to the instrument indicating discharge, or (ii) by agreeing not
to sue or otherwise renouncing rights against the party by a
signed writing record.
(b) Cancellation or striking out of an endorsement pursuant
to subsection (a) does not affect the status and rights of a
party derived from the endorsement.
(c) In this section, "signed," with respect to a record
that is not a writing, includes the attachment to or logical
association with the record of an electronic symbol, sound, or
process with the present intent to adopt or accept the record.
Sec. 13. Minnesota Statutes 2002, section 336.3-605, is
amended to read:
336.3-605 [DISCHARGE OF ENDORSERS AND ACCOMMODATION PARTIES
SECONDARY OBLIGORS.]
(a) In this section, the term "endorser" includes a drawer
having the obligation described in section 336.3-414(d).
(b) Discharge, under section 336.3-604, of the obligation
of a party to pay an instrument does not discharge the
obligation of an endorser or accommodation party having a right
of recourse against the discharged party.
(c) If a person entitled to enforce an instrument agrees,
with or without consideration, to an extension of the due date
of the obligation of a party to pay the instrument, the
extension discharges an endorser or accommodation party having a
right of recourse against the party whose obligation is extended
to the extent the endorser or accommodation party proves that
the extension caused loss to the endorser or accommodation party
with respect to the right of recourse.
(d) If a person entitled to enforce an instrument agrees,
with or without consideration, to a material modification of the
obligation of a party other than an extension of the due date,
the modification discharges the obligation of an endorser or
accommodation party having a right of recourse against the
person whose obligation is modified to the extent the
modification causes loss to the endorser or accommodation party
with respect to the right of recourse. The loss suffered by the
endorser or accommodation party as a result of the modification
is equal to the amount of the right of recourse unless the
person enforcing the instrument proves that no loss was caused
by the modification or that the loss caused by the modification
was an amount less than the amount of the right of recourse.
(e) If the obligation of a party to pay an instrument is
secured by an interest in collateral and a person entitled to
enforce the instrument impairs the value of the interest in
collateral, the obligation of an endorser or accommodation party
having a right of recourse against the obligor is discharged to
the extent of the impairment. The value of an interest in
collateral is impaired to the extent (i) the value of the
interest is reduced to an amount less than the amount of the
right of recourse of the party asserting discharge, or (ii) the
reduction in value of the interest causes an increase in the
amount by which the amount of the right of recourse exceeds the
value of the interest. The burden of proving impairment is on
the party asserting discharge.
(f) If the obligation of a party is secured by an interest
in collateral not provided by an accommodation party and a
person entitled to enforce the instrument impairs the value of
the interest in collateral, the obligation of any party who is
jointly and severally liable with respect to the secured
obligation is discharged to the extent the impairment causes the
party asserting discharge to pay more than that party would have
been obliged to pay, taking into account rights of contribution,
if impairment had not occurred. If the party asserting
discharge is an accommodation party not entitled to discharge
under subsection (e), the party is deemed to have a right to
contribution based on joint and several liability rather than a
right to reimbursement. The burden of proving impairment is on
the party asserting discharge.
(g) Under subsection (e) or (f), impairing value of an
interest in collateral includes (i) failure to obtain or
maintain perfection or recordation of the interest in
collateral, (ii) release of collateral without substitution of
collateral of equal value, (iii) failure to perform a duty to
preserve the value of collateral owed, under article 9 or other
law, to a debtor or surety or other person secondarily liable,
or (iv) failure to comply with applicable law in disposing of
collateral.
(h) An accommodation party is not discharged under
subsection (c), (d), or (e) unless the person entitled to
enforce the instrument knows of the accommodation or has notice
under section 336.3-419(c) that the instrument was signed for
accommodation.
(i) A party is not discharged under this section if (i) the
party asserting discharge consents to the event or conduct that
is the basis of the discharge, or (ii) the instrument or a
separate agreement of the party provides for waiver of discharge
under this section either specifically or by general language
indicating that parties waive defenses based on suretyship or
impairment of collateral.
(a) If a person entitled to enforce an instrument releases
the obligation of a principal obligor in whole or in part, and
another party to the instrument is a secondary obligor with
respect to the obligation of that principal obligor, the
following rules apply:
(1) Any obligations of the principal obligor to the
secondary obligor with respect to any previous payment by the
secondary obligor are not affected. Unless the terms of the
release preserve the secondary obligor's recourse, the principal
obligor is discharged, to the extent of the release, from any
other duties to the secondary obligor under this article.
(2) Unless the terms of the release provide that the person
entitled to enforce the instrument retains the right to enforce
the instrument against the secondary obligor, the secondary
obligor is discharged to the same extent as the principal
obligor from any unperformed portion of its obligation on the
instrument. If the instrument is a check and the obligation of
the secondary obligor is based on an indorsement of the check,
the secondary obligor is discharged without regard to the
language or circumstances of the discharge or other release.
(3) If the secondary obligor is not discharged under
paragraph (2), the secondary obligor is discharged to the extent
of the value of the consideration for the release, and to the
extent that the release would otherwise cause the secondary
obligor a loss.
(b) If a person entitled to enforce an instrument grants a
principal obligor an extension of the time at which one or more
payments are due on the instrument and another party to the
instrument is a secondary obligor with respect to the obligation
of that principal obligor, the following rules apply:
(1) Any obligations of the principal obligor to the
secondary obligor with respect to any previous payment by the
secondary obligor are not affected. Unless the terms of the
extension preserve the secondary obligor's recourse, the
extension correspondingly extends the time for performance of
any other duties owed to the secondary obligor by the principal
obligor under this article.
(2) The secondary obligor is discharged to the extent that
the extension would otherwise cause the secondary obligor a loss.
(3) To the extent that the secondary obligor is not
discharged under paragraph (2), the secondary obligor may
perform its obligations to a person entitled to enforce the
instrument as if the time for payment had not been extended or,
unless the terms of the extension provide that the person
entitled to enforce the instrument retains the right to enforce
the instrument against the secondary obligor as if the time for
payment had not been extended, treat the time for performance of
its obligations as having been extended correspondingly.
(c) If a person entitled to enforce an instrument agrees,
with or without consideration, to a modification of the
obligation of a principal obligor other than a complete or
partial release or an extension of the due date and another
party to the instrument is a secondary obligor with respect to
the obligation of that principal obligor, the following rules
apply:
(1) Any obligations of the principal obligor to the
secondary obligor with respect to any previous payment by the
secondary obligor are not affected. The modification
correspondingly modifies any other duties owed to the secondary
obligor by the principal obligor under this article.
(2) The secondary obligor is discharged from any
unperformed portion of its obligation to the extent that the
modification would otherwise cause the secondary obligor a loss.
(3) To the extent that the secondary obligor is not
discharged under paragraph (2), the secondary obligor may
satisfy its obligation on the instrument as if the modification
had not occurred, or treat its obligation on the instrument as
having been modified correspondingly.
(d) If the obligation of a principal obligor is secured by
an interest in collateral, another party to the instrument is a
secondary obligor with respect to that obligation, and a person
entitled to enforce the instrument impairs the value of the
interest in collateral, the obligation of the secondary obligor
is discharged to the extent of the impairment. The value of an
interest in collateral is impaired to the extent the value of
the interest is reduced to an amount less than the amount of the
recourse of the secondary obligor, or the reduction in value of
the interest causes an increase in the amount by which the
amount of the recourse exceeds the value of the interest. For
purposes of this subsection, impairing the value of an interest
in collateral includes failure to obtain or maintain perfection
or recordation of the interest in collateral, release of
collateral without substitution of collateral of equal value or
equivalent reduction of the underlying obligation, failure to
perform a duty to preserve the value of collateral owed, under
Article 9 or other law, to a debtor or other person secondarily
liable, and failure to comply with applicable law in disposing
of or otherwise enforcing the interest in collateral.
(e) A secondary obligor is not discharged under subsection
(a)(3), (b), (c), or (d) unless the person entitled to enforce
the instrument knows that the person is a secondary obligor or
has notice under section 336.3-419(c) that the instrument was
signed for accommodation.
(f) A secondary obligor is not discharged under this
section if the secondary obligor consents to the event or
conduct that is the basis of the discharge, or the instrument or
a separate agreement of the party provides for waiver of
discharge under this section specifically or by general language
indicating that parties waive defenses based on suretyship or
impairment of collateral. Unless the circumstances indicate
otherwise, consent by the principal obligor to an act that would
lead to a discharge under this section constitutes consent to
that act by the secondary obligor if the secondary obligor
controls the principal obligor or deals with the person entitled
to enforce the instrument on behalf of the principal obligor.
(g) A release or extension preserves a secondary obligor's
recourse if the terms of the release or extension provide that
the person entitled to enforce the instrument retains the right
to enforce the instrument against the secondary obligor and the
recourse of the secondary obligor continues as if the release or
extension had not been granted.
(h) Except as otherwise provided in subsection (i), a
secondary obligor asserting discharge under this section has the
burden of persuasion both with respect to the occurrence of the
acts alleged to harm the secondary obligor and loss or prejudice
caused by those acts.
(i) If the secondary obligor demonstrates prejudice caused
by an impairment of its recourse, and the circumstances of the
case indicate that the amount of loss is not reasonably
susceptible of calculation or requires proof of facts that are
not ascertainable, it is presumed that the act impairing
recourse caused a loss or impairment equal to the liability of
the secondary obligor on the instrument. In that event, the
burden of persuasion as to any lesser amount of the loss is on
the person entitled to enforce the instrument.
ARTICLE 2
AMENDMENTS TO UNIFORM COMMERCIAL CODE ARTICLE 4
Section 1. Minnesota Statutes 2002, section 336.4-104, is
amended to read:
336.4-104 [DEFINITIONS AND INDEX OF DEFINITIONS.]
(a) In this article, unless the context otherwise requires:
(1) "Account" means any deposit or credit account with a
bank, including a demand, time, savings, passbook, share draft,
or like account, other than an account evidenced by a
certificate of deposit;
(2) "Afternoon" means the period of a day between noon and
midnight;
(3) "Banking day" means that part of any day, excluding
Saturday, Sunday, and holidays, on which a bank is open to the
public for carrying on substantially all of its banking
functions;
(4) "Clearinghouse" means an association of banks or other
payors regularly clearing items;
(5) "Customer" means a person having an account with a bank
or for whom a bank has agreed to collect items, including a bank
that maintains an account at another bank;
(6) "Documentary draft" means a draft to be presented for
acceptance or payment if specified documents, certificated
securities (section 336.8-102) or instructions for
uncertificated securities (section 336.8-102), or other
certificates, statements, or the like are to be received by the
drawee or other payor before acceptance or payment of the draft;
(7) "Draft" means a draft as defined in section 336.3-104
or an item, other than an instrument, that is an order;
(8) "Drawee" means a person ordered in a draft to make
payment;
(9) "Item" means an instrument or a promise or order to pay
money handled by a bank for collection or payment. The term
does not include a payment order governed by article 4A or a
credit or debit card slip;
(10) "Midnight deadline" with respect to a bank is midnight
on its 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;
(11) "Settle" means to pay in cash, by clearinghouse
settlement, in a charge or credit or by remittance, or otherwise
as agreed. A settlement may be either provisional or final;
(12) "Suspends payments" with respect to a bank means that
it has been closed by order of the supervisory authorities, that
a public officer has been appointed to take it over, or that it
ceases or refuses to make payments in the ordinary course of
business.
(b) Other definitions applying to this article and the
sections in which they appear are:
"Agreement for electronic presentment," section 336.4-110
"Bank," section 336.4-105
"Collecting bank," section 336.4-105
"Depositary bank," section 336.4-105
"Intermediary bank," section 336.4-105
"Payor bank," section 336.4-105
"Presenting bank," section 336.4-105
"Presentment notice," section 336.4-110
(c) The following definitions in other articles apply to
this article:
"Acceptance," section 336.3-409
"Alteration," section 336.3-407
"Cashier's check," section 336.3-104
"Certificate of deposit," section 336.3-104
"Certified check," section 336.3-409
"Check," section 336.3-104
"Good faith," section 336.3-103
"Holder in due course," section 336.3-302
"Instrument," section 336.3-104
"Notice of dishonor," section 336.3-503
"Order," section 336.3-103
"Ordinary care," section 336.3-103
"Person entitled to enforce," section 336.3-301
"Presentment," section 336.3-501
"Promise," section 336.3-103
"Prove," section 336.3-103
"Record," section 336.3-103
"Remotely-created item," section 336.3-103
"Teller's check," section 336.3-104
"Unauthorized signature," section 336.3-403
(d) In addition, article 1 contains general definitions and
principles of construction and interpretation applicable
throughout this article.
Sec. 2. Minnesota Statutes 2002, section 336.4-207, is
amended to read:
336.4-207 [TRANSFER WARRANTIES.]
(a) A customer or collecting bank that transfers an item
and receives a settlement or other consideration warrants to the
transferee and to any subsequent collecting bank that:
(1) the warrantor is a person entitled to enforce the item;
(2) all signatures on the item are authentic and
authorized;
(3) the item has not been altered;
(4) the item is not subject to a defense or claim in
recoupment (section 336.3-305(a)) of any party that can be
asserted against the warrantor; and
(5) the warrantor has no knowledge of any insolvency
proceeding commenced with respect to the maker or acceptor or,
in the case of an unaccepted draft, the drawer; and
(6) with respect to any remotely-created item, the person
on whose account the item is drawn authorized the issuance of
the item in the amount for which the item is drawn.
(b) If an item is dishonored, a customer or collecting bank
transferring the item and receiving settlement or other
consideration is obliged to pay the amount due on the item (i)
according to the terms of the item at the time it was
transferred, or (ii) if the transfer was of an incomplete item,
according to its terms when completed as stated in sections
336.3-115 and 336.3-407. The obligation of a transferor is owed
to the transferee and to any subsequent collecting bank that
takes the item in good faith. A transferor cannot disclaim its
obligation under this subsection by an endorsement stating that
it is made "without recourse" or otherwise disclaiming liability.
(c) A person to whom the warranties under subsection (a)
are made and who took the item in good faith may recover from
the warrantor as damages for breach of warranty an amount equal
to the loss suffered as a result of the breach, but not more
than the amount of the item plus expenses and loss of interest
incurred as a result of the breach.
(d) The warranties stated in subsection (a) cannot be
disclaimed with respect to checks. Unless notice of a claim for
breach of warranty is given to the warrantor within 30 days
after the claimant has reason to know of the breach and the
identity of the warrantor, the warrantor is discharged to the
extent of any loss caused by the delay in giving notice of the
claim.
(e) A cause of action for breach of warranty under this
section accrues when the claimant has reason to know of the
breach.
(f) No claim for breach in the warranty in subsection
(a)(6) is available against a person to which an item was
transferred to the extent that under applicable law (including
the applicable choice-of-law principles) the person that
transferred the item to that person did not make the warranty in
subsection (a)(6).
Sec. 3. Minnesota Statutes 2002, section 336.4-208, is
amended to read:
336.4-208 [PRESENTMENT WARRANTIES.]
(a) If an unaccepted draft is presented to the drawee for
payment or acceptance and the drawee pays or accepts the draft,
(i) the person obtaining payment or acceptance, at the time of
presentment, and (ii) a previous transferor of the draft, at the
time of transfer, warrant to the drawee that pays or accepts the
draft in good faith that:
(1) the warrantor is, or was, at the time the warrantor
transferred the draft, a person entitled to enforce the draft or
authorized to obtain payment or acceptance of the draft on
behalf of a person entitled to enforce the draft;
(2) the draft has not been altered; and
(3) the warrantor has no knowledge that the signature of
the purported drawer of the draft is unauthorized; and
(4) with respect to any remotely-created item, the person
on whose account the item is drawn authorized the issuance of
the item in the amount for which the item is drawn.
(b) A drawee making payment may recover from a warrantor
damages for breach of warranty equal to the amount paid by the
drawee less the amount the drawee received or is entitled to
receive from the drawer because of the payment. In addition,
the drawee is entitled to compensation for expenses and loss of
interest resulting from the breach. The right of the drawee to
recover damages under this subsection is not affected by any
failure of the drawee to exercise ordinary care in making
payment. If the drawee accepts the draft (i) breach of warranty
is a defense to the obligation of the acceptor, and (ii) if the
acceptor makes payment with respect to the draft, the acceptor
is entitled to recover from a warrantor for breach of warranty
the amounts stated in this subsection.
(c) If a drawee asserts a claim for breach of warranty
under subsection (a) based on an unauthorized endorsement of the
draft or an alteration of the draft, the warrantor may defend by
proving that the endorsement is effective under section
336.3-404 or 336.3-405 or the drawer is precluded under section
336.3-406 or 336.4-406 from asserting against the drawee the
unauthorized endorsement or alteration.
(d) If (i) a dishonored draft is presented for payment to
the drawer or an endorser or (ii) any other item is presented
for payment to a party obliged to pay the item, and the item is
paid, the person obtaining payment and a prior transferor of the
item warrant to the person making payment in good faith that the
warrantor is, or was, at the time the warrantor transferred the
item, a person entitled to enforce the item or authorized to
obtain payment on behalf of a person entitled to enforce the
item. The person making payment may recover from any warrantor
for breach of warranty an amount equal to the amount paid plus
expenses and loss of interest resulting from the breach.
(e) The warranties stated in subsections (a) and (d) cannot
be disclaimed with respect to checks. Unless notice of a claim
for breach of warranty is given to the warrantor within 30 days
after the claimant has reason to know of the breach and the
identity of the warrantor, the warrantor is discharged to the
extent of any loss caused by the delay in giving notice of the
claim.
(f) A cause of action for breach of warranty under this
section accrues when the claimant has reason to know of the
breach.
(g) No claim for breach of the warranty in subsection
(a)(4) is available against a person to which an item was
transferred to the extent that under applicable law (including
the applicable choice-of-law principle) the person that
transferred the item to that person did not make the warranty in
subsection (a)(4).
Sec. 4. Minnesota Statutes 2002, section 336.4-212, is
amended to read:
336.4-212 [PRESENTMENT BY NOTICE OF ITEM NOT PAYABLE BY,
THROUGH, OR AT BANK; LIABILITY OF DRAWER OR ENDORSER.]
(a) Unless otherwise instructed, a collecting bank may
present an item not payable by, through, or at a bank by sending
to the party to accept or pay a written record providing notice
that the bank holds the item for acceptance or payment. The
notice must be sent in time to be received on or before the day
when presentment is due and the bank must meet any requirement
of the party to accept or pay under section 336.3-501 by the
close of the bank's next banking day after it knows of the
requirement.
(b) If presentment is made by notice and payment,
acceptance, or request for compliance with a requirement under
section 336.3-501 is not received by the close of business on
the day after maturity or, in the case of demand items, by the
close of business on the third banking day after notice was
sent, the presenting bank may treat the item as dishonored and
charge any drawer or endorser by sending it notice of the facts.
Sec. 5. Minnesota Statutes 2002, section 336.4-301, is
amended to read:
336.4-301 [DEFERRED POSTING; RECOVERY OF PAYMENT BY RETURN
OF ITEMS; TIME OF DISHONOR; RETURN OF ITEMS BY PAYOR BANK.]
(a) If a payor bank settles for a demand item other than a
documentary draft presented otherwise than for immediate payment
over the counter before midnight of the banking day of receipt,
the payor bank may revoke the settlement and recover the
settlement if, before it has made final payment and before its
midnight deadline, it:
(1) returns the item; or
(2) returns an image of the item, if the party to which the
return is made has entered into an agreement to accept an image
as a return of the item and the image is returned in accordance
with that agreement; or
(3) sends written a record providing notice of dishonor or
nonpayment if the item is unavailable for return.
(b) If a demand item is received by a payor bank for credit
on its books, it may return the item or send notice of dishonor
and may revoke any credit given or recover the amount thereof
withdrawn by its customer, if it acts within the time limit and
in the manner specified in subsection (a).
(c) Unless previous notice of dishonor has been sent, an
item is dishonored at the time when for purposes of dishonor it
is returned or notice sent in accordance with this section.
(d) An item is returned:
(1) as to an item presented through a clearinghouse, when
it is delivered to the presenting or last collecting bank or to
the clearinghouse or is sent or delivered in accordance with
clearinghouse rules; or
(2) in all other cases, when it is sent or delivered to the
bank's customer or transferor or pursuant to instructions.
Sec. 6. Minnesota Statutes 2002, section 336.4-403, is
amended to read:
336.4-403 [CUSTOMER'S RIGHT TO STOP PAYMENT; BURDEN OF
PROOF OF LOSS.]
(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
336.4-303. 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 a record within that period. A
stop-payment order may be renewed for additional six-month
periods by a writing record 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
336.4-402.
Presented to the governor May 19, 2003
Signed by the governor May 22, 2003, 9:40 p.m.
Official Publication of the State of Minnesota
Revisor of Statutes