Printable Format84-4-205. Depository bank holder of unendorsed item. If a customer delivers an item to a depository bank for collection:
(a) The depository bank becomes a holder of the item at the time it receives the item for collection if the customer at the time of delivery was a holder of the item, whether or not the customer endorses the item, and, if the bank satisfies the other requirements of K.S.A. 84-3-302, it is a holder in due course; and
(b) the depository bank warrants to collecting banks, the payor bank or other payor, and the drawer that the amount of the item was paid to the customer or deposited to the customer's account.
History: L. 1965, ch. 564, § 214; L. 1991, ch. 296, § 86; February 1, 1992.
KANSAS COMMENT, 1996
This section is identical to the 1995 Official Text except that lower case letters have been substituted for arabic numbers in the text. This is a new section and a substantial expansion of the former 84-4-205. A depositary bank can now become a holder without indorsing the item and it warrants that the funds went to the depositing customer. Historical case and statutory references can be obtained from the 1965 and 1983 bound volume 7 of the Kansas Statutes Annotated.
This section provides that a depositary bank taking an item for collection from a holder is automatically a holder without the former formality or requiring it to supply the payee's missing indorsement, often a trap under the former section. The depositary bank can also acquire the status as a holder in due course. See United Overseas Bank v. Veneers, Inc., 375 F. Supp. 596 (D. Md. 1974) where the lack of an indorsement prevented the depositary bank from having holder in due course status. The warranty that the funds were paid or applied to the customer imposes a duty on the collecting bank as agent of its depositing customer.