Answer:
John Burnett: First, you should consider your reasons for doing so. The fact that the payee's endorsement is missing doesn't affect your customer, the issuer of the check. The depositary bank has warranted to you and your depositor that the depositary bank's customer received credit or cash for the check. If the payee claims non receipt or that the check was not credited to the payee's account, the payee can start the ball rolling on a claim against the depositary bank's warranty (in addition to its presentment and transfer warranties). So there's usually no real purpose for returning a check for missing endorsement.
That said, you can return a check for missing endorsement within your bank's midnight deadline. After that, you will need the appropriate affidavit and you'll send the check directly in a claim without entry against the warranties. In most states, such a claim must be made within three years.
Answer:
Ken Golliher: John's analysis is spot on; the midnight deadline would apply as your bank could have detected the missing endorsement on the day the item was presented. Regardless, both you and your customer have the bank of first deposit's guarantee that the payee either received the funds or they were deposited into the payee's account.
There is something missing from the facts you have offered; i.e. why it is that you actually want to return it? Presumably, it's at the customer's request, but that does not necessarily mean you must act on that request.
Answer:
John Burnett: As Ken points out, a customer's request for an endorsement doesn't necessarily require that you return the check to obtain that endorsement. There are, however, instances in which a payee endorsement might be required. One example might be a check representing a distribution from an annuity or retirement plan which carries a legend on the reverse indicating that the payee's endorsement on or after the date of the check is required (clearly an attempt to verify the payee is alive). In such cases, there may be a contractual requirement between you and the check issuer that would call for the return of an unendorsed check.
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