If a customer delivers an item to a depositary bank for collection:
(1) The depositary 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 indorses the item, and, if the bank satisfies the other requirements of section 4-3-302, it is a holder in due course; and
(2) The depositary 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.
Source: L. 94: Entire article amended with relocations, p. 887, § 2, effective January 1, 1995.
ANNOTATION
Annotator's note. The following annotations include cases decided under former provisions similar to this section.
Liability of indorser where estoppel created. While the principle that an indorser is liable on his warranty is correctly stated, the rule has no application when an estoppel has been created which would preclude plaintiff from obtaining a refund of the amount paid to defendant. First Nat'l Bank v. Ulibarri, 38 Colo. App. 428, 557 P.2d 1221 (1976).
Subsection (1) under former law held inapplicable where the depository bank did not in fact place a statement on the item to be collected, which statement would have been effective as its customer's indorsement. La Junta State Bank v. Travis, 727 P.2d 48 (Colo. 1986).
It was impossible for bank to provide indorsement on check because payee was not the bank's customer. The indorsement by the bank was unauthorized as a matter of law. Kelly v. Central Bank and Trust Co., 794 P.2d 1037 (Colo. App. 1989).
Subsection (1) under former law does not permit depository bank to evade duties imposed by § 4-3-206(3) under former law. Subsection (1) does not permit a depository bank to evade its duty to act consistently with restrictive endorsements as provided by § 4-3-206 (3). La Junta State Bank v. Travis, 727 P.2d 48 (Colo. 1986).
The duty to examine a restrictive indorsement and follow its directions may require a bank to refuse to deposit an item in a particular account if such conduct would be inconsistent with the restrictive indorsement, or to investigate rather than accept an item as a matter of course. La Junta State Bank v. Travis, 727 P.2d 48 (Colo. 1986).
Subsection (2) under former law not in conflict with requirements of § 4-3-206 (2) under former law. The clear import of both subsection (2) and § 4-3-206 (2) is that while intermediary banks and nondepository payor banks may ignore all restrictive indorsements except those of the bank's immediate transferor, depository banks may not so ignore restrictive indorsements. La Junta State Bank v. Travis, 727 P.2d 48 (Colo. 1986).