KANSAS OFFICE of
  REVISOR of STATUTES

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84-4-405. Death or incompetence of customer. (a) A payor or collecting bank's authority to accept, pay, or collect an item or to account for proceeds of its collection, if otherwise effective, is not rendered ineffective by incompetence of a customer of either bank existing at the time the item is issued or its collection is undertaken if the bank does not know of an adjudication of incompetence. Neither death nor incompetence of a customer revokes the authority to accept, pay, collect, or account until the bank knows of the fact of death or of an adjudication of incompetence and has reasonable opportunity to act on it.

(b) Even with knowledge, a bank may for 10 days after the date of death pay or certify checks drawn on or before that date unless ordered to stop payment by a person claiming an interest in the account.

History: L. 1965, ch. 564, § 231; L. 1991, ch. 296, § 104; February 1, 1992.

KANSAS COMMENT, 1996

This section is identical to the 1995 Official Text. The section is the former 84-4-301 with stylistic amendments not meant to change the substantive law.

Subsection (a) provides an important definition of items which are "properly payable" for 84-4-401. Under this subsection, the drawee bank's authority to pay an item is not rendered ineffective until the bank has actual knowledge of "the fact of death or of an adjudication of incompetence and has reasonable opportunity to act on it." In order to protect both the personal representative and the creditors of the deceased drawer, subsection (b) provides that the bank may continue to pay checks for ten days after death, even with knowledge, "unless ordered to stop payment by a person claiming an interest in the account." Such an order could presumably include a telephone call. The drafters have attempted to strike a balance between the right of creditors to avoid filing claims in probate and the right of estate beneficiaries and creditors to protect the assets of the estate by ordering the bank to freeze the account upon death. Subsection (b) is an exception to the general rule of 84-4-403 that only the bank's customer or those authorized to sign can stop payment or close an account.

Most of the cases construing this section have held that the drawee bank can take advantage of the ten-day rule as creditor of the deceased drawer. In re Schenck's Estate, 63 Misc. 2d 721, 313 N.Y.S.2d 277 (1970); Cirar v. Bank of Hartshorne, 567 P.2d 96 (Okla. 1977); contra: Joseph v. United of America Bank, 266 N.E.2d 438 (Ill. App. 1970). This case law suggests that a bank could exercise setoff against the deceased customer's account if it acted within ten days after death and before receiving a stop order, by way of analogy to post-death payment of checks under this section.


 



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