Legal Question in Banking Law in Maryland

Re: Statute of limitations on bank errors?

I personally had this issue. My prior bank, and its supposedly well informed branch managers and corporate officers, did not know the law or rather only knew that law that was of benefit to them. I now have a new bank which follows the law (so far anyway).

Below is a section of negotiable instruments law. Negotiable instrument law is complex, and there are countering doctrines and sections. For example, a bank does not want to risk a charge of "wrongful dishonor" so it

may honor checks that are "properly payable". I contend that paying a check that is overdue is not making "proper payment". Moreover, if the person to whom the check was written wants to claim that

a check was issued under improper pretense (i.e., that there was no intention to pay when the check was made), then I contend that it is their fault for not "properly presenting" the check for payment, which includes presenting the check during the period that it is lawfully due.

Caution is in order with regard to closing accounts where a check is known to be outstanding. Also be advised that your despositor's agreement (a.k.a. depositary contract, or banking and fee agreement, etc.) may alter the applicability of certain sections of law and you should take a look at this agreement.

COMMERCIAL LAW; TITLE 3. NEGOTIABLE INSTRUMENTS; SUBTITLE 3. ENFORCEMENT OF INSTRUMENTS

Md. COMMERCIAL LAW Code Ann. � 3-304 (2002); � 3-304. Overdue instrument

(a) An instrument payable on demand becomes overdue at the earliest of the following times:

(1) On the day after the day demand for payment is duly made;

(2) If the instrument is a check, 90 days after its date; or

(3) If the instrument is not a check, when the instrument has been outstanding for a period of time after its

date which is unreasonably long under the circumstances of the particular case in light of the nature of the

instrument and usage of the trade.

(b) With respect to an instrument payable at a definite time the following rules apply:

(1) If the principal is payable in installments and a due date has not been accelerated, the instrument

becomes overdue upon default under the instrument for nonpayment of an installment, and the instrument

remains overdue until the default is cured.

(2) If the principal is not payable in installments and the due date has not been accelerated, the instrument

becomes overdue on the day after the due date.

(3) If a due date with respect to principal has been accelerated, the instrument becomes overdue on the

day after the accelerated due date.

(c) Unless the due date of principal has been accelerated, an instrument does not become overdue if there is

default in payment of interest but no default in payment of principal.

I hope this is helpful. I am a general practice attorney in Maryland and welcome referrals.

G. Joseph Holthaus III, Esq.

(410) 799-9002