A check is made payable to two people using "and" language the check is properly endorsed by both payees in front of teller when deposited. However, the deposit account is an individual account. Does the bank in question have the right to refuse the check or require additional notarized paperwork from the party who is not on the deposit account?

I see no issues with this, especially if it was endorsed properly. The bank always maintains the right to refuse a deposit, but what benefit would a notarized statement provide?

Yes, the bank must guarantee all endorsements - therefore whatever steps need to be taken to support that guarantee can be taken, including declining to negotiate the check when support is not secured.

Thanks for the response. I understand the bank must guarantee all endorsements, but they did they with ID when deposited. However, they put an indefinite hold on the funds until a notarized affidavit from the party, not on the account, is received stating it is okay to deposit the funds into the other party's individual account.

In a perfect world the endorsement should have gone something like this.........
A endorses the check (in front of the teller and with good ID) and writes "pay tho the order of B". Then B endorses the check, writes "for deposit only" and deposits it into his/her individual account.

You know, after the fact, I asked the bank if your exact suggestion would have worked. And, this particular bank said no, as they do not allow secondary endorsements. They have more rules than I have ever seen. Thanks.

well, you have several isues here then. The first is the banks internal guidleines or specifications for accepting checks. It appears they have taken a more stringent approach than is regulatorily required. As long as the item is endorsed as written, it meets the criteria per UCC.

First off, As far as I know, a bank cannot put an indefinate hold on the funds. You need to ask your bank to see a copy of their Funds Availibity Policy. (Reg. CC) It should tell you how long the funds will be held. I have never heard of the affidavit that you referenced, but that does not mean that that bank doesn't have that policy. I don't think that this is a law, but a policy of the bank, but then again, different states may have different laws. I am in Washington State.
My bank does not except 3rd party checks either, (Pay to the order of endorsements) but we will make exceptions if it is a known customer. Also, I had a question, did they mail a "notice of hold" to you? If so, what was the reason given for the hold?
BTW... if they have a notary at the bank, it may just be easiest to have your friend go in and just have them fill out the affiavit... save yourself stress, and get your money! Hope this helps.