) An instrument is converted when
(a) A drawee to whom it is delivered for acceptance refuses to return it on demand; or
(b) Any person to whom it is delivered for payment refuses on demand either to pay or to return it; or

(c) It is paid on a forged indorsement.
(2) In any action under subdivision (1), the measure of liability is presumed to be the face amount of the instrument.
(3) Subject to the provisions of this code concerning restrictive endorsements a representative, including a depositary or collecting bank, who has in good faith and in accordance with the reasonable commercial standards applicable to the business of such representative dealt with an instrument or its proceeds on behalf of one who was not the true owner is not liable in conversion or otherwise to the true owner beyond the amount of any proceeds remaining in his hands.
(4) An intermediary bank or payor bank which is not a depositary bank is not liable in conversion solely by reason of the fact that proceeds of an item indorsed restrictively (Sections 3205 and 3206) are not paid or applied consistently with the restrictive indorsement of an indorser other than its immediate transferor.
COURT DECISIONS: The Bank of Guam did not use Areasonable commercial standards@ when it accepted a check drawn to a corporation for deposit in a
personal account and, therefore, pursuant to this section, it is liable to the maker of the check when it was discovered that the check was forged. Health Maintenance Life Insurance, Inc. v. Bank of Guam, D.C.Guam App.Div. Civ. No. 82-0216A (8/25/83), 1983 WL 30215.

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CHAPTER 5
PRESENTMENT, NOTICE OF DISHONOR AND PROTEST