California Commercial Code 4216 – (a) If an item is in or comes into the possession of a payor or …
(a) If an item is in or comes into the possession of a payor or collecting bank that suspends payment and the item has not been finally paid, the item shall be returned by the receiver, trustee, or agent in charge of the closed bank to the presenting bank or the closed bank’s customer.
(b) If a payor bank finally pays an item and suspends payments without making a settlement for the item with its customer or the presenting bank which settlement is or becomes final, the owner of the item has a preferred claim against the payor bank.
Terms Used In California Commercial Code 4216
- Bank: means a person engaged in the business of banking, and includes a savings bank, savings and loan association, credit union, and trust company. See California Commercial Code 1201
- 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. See California Commercial Code 4104
- Item: means an instrument or a promise or order to pay money handled by a bank for collection or payment. See California Commercial Code 4104
- Settlement: Parties to a lawsuit resolve their difference without having a trial. Settlements often involve the payment of compensation by one party in satisfaction of the other party's claims.
- Trustee: A person or institution holding and administering property in trust.
(c) If a payor bank gives or a collecting bank gives or receives a provisional settlement for an item and thereafter suspends payments, the suspension does not prevent or interfere with the settlement’s becoming final if the finality occurs automatically upon the lapse of certain time or the happening of certain events.
(d) If a collecting bank receives from subsequent parties settlement for an item, which settlement is or becomes final and the bank suspends payments without making a settlement for the item with its customer which settlement is or becomes final, the owner of the item has a preferred claim against the collecting bank.
(Added by renumbering Section 4214 by Stats. 1992, Ch. 914, Sec. 36. Effective January 1, 1993.)