Answer:
Section 3-118(g) merely states that an action (for conversion, breach of warranty or to enforce any other obligation not otherwise governed by other parts of Section 3-118) has to be brought within three years from when the "cause of action" or "claim for relief" accrues. To determine when the "trigger" occurs, one has to look elsewhere.
For an action for breach of transfer warranties, the "cause of action" or "claim for relief" [one or the other of these terms is used in each state] accrues when the claimant has reason to know of the breach (UCC Section 3-416(d)). Similar language is found in Section 3-417(f) for presentment warranties.
Let's suppose I write you a check for $100.00, to pay a debt to you. Your spouse intercepts the check in the mail, forges your signature in an endorsement, and takes the money. The check gets paid by my bank, and appears in my bank statement. I reconcile my account dutifully, and believe my debt to you is satisfied.
A month later, you call to dun me about my late payment. I do the "but I've got a canceled check" dance, and you counter with the "I never got that check" argument. At that point, you and I both have reason to know of the breach of transfer warranties made by your spouse and any party negotiating the check after her. I have three years from that point to bring an action to recover my money from my bank or the bank that cashed the check.
But I also have to look to Section Section 3-416(c) and 3-417(e) to see that the warrantor may be partly off the hook if any delay beyond 30 days in my notifying them of my claim causes them increased losses.
As for your hypothetical account of the late notice, it appears that the affidavit was signed within the three-year term. What we don't know is when the various claimants had reason to know of the claim. It's possible that the payor bank did not know of the claim until the affidavit was signed. If that's true, I believe their three-year term started when they received the affidavit. Their claim on you was made only nine months into that three years.
Now you have to determine if the delay of more than 30 days in the payor bank's notice to you contributed to your loss on this mess. Would you have been in a better position to recover the funds 30 days after the affidavit was signed than you are now? If the answer is yes, you may be able to avoid some of the liability to the payor bank. But my guess is that your ability to recover from your customer hasn't changed at all in the nine months since the affidavit was signed, so your presentment or transfer warranty to the payor bank may be enforceable by them.
First published on BankersOnline.com 06/7/04
print
share