75R11023 LJR-D
By Gutierrez H.B. No. 2902
Substitute the following for H.B. No. 2902:
By Marchant C.S.H.B. No. 2902
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to the warranties on the transfer or presentment of demand
1-3 drafts.
1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-5 SECTION 1. Section 3.103(b), Business & Commerce Code, is
1-6 amended to read as follows:
1-7 (b) Other definitions applying to this chapter and the
1-8 sections in which they appear are:
1-9 "Acceptance" Section 3.409.
1-10 "Accommodated party" Section 3.419.
1-11 "Accommodation party" Section 3.419.
1-12 "Alteration" Section 3.407.
1-13 "Anomalous indorsement" Section 3.205.
1-14 "Blank indorsement" Section 3.205.
1-15 "Cashier's check" Section 3.104.
1-16 "Certificate of deposit" Section 3.104.
1-17 "Certified check" Section 3.409.
1-18 "Check" Section 3.104.
1-19 "Consideration" Section 3.303.
1-20 "Demand draft" Section 3.104.
1-21 "Draft" Section 3.104.
1-22 "Holder in due course" Section 3.302.
1-23 "Incomplete instrument" Section 3.115.
1-24 "Indorsement" Section 3.204.
2-1 "Indorser" Section 3.204.
2-2 "Instrument" Section 3.104.
2-3 "Issue" Section 3.105.
2-4 "Issuer" Section 3.105.
2-5 "Negotiable instrument" Section 3.104.
2-6 "Negotiation" Section 3.201.
2-7 "Note" Section 3.104.
2-8 "Payable at a definite time" Section 3.108.
2-9 "Payable on demand" Section 3.108.
2-10 "Payable to bearer" Section 3.109.
2-11 "Payable to order" Section 3.109.
2-12 "Payment" Section 3.602.
2-13 "Person entitled to enforce" Section 3.301.
2-14 "Presentment" Section 3.501.
2-15 "Reacquisition" Section 3.207.
2-16 "Special indorsement" Section 3.205.
2-17 "Teller's check" Section 3.104.
2-18 "Transfer of instrument" Section 3.203.
2-19 "Traveler's check" Section 3.104.
2-20 "Value" Section 3.303.
2-21 SECTION 2. Section 3.104, Business & Commerce Code, is
2-22 amended by adding Subsection (k) to read as follows:
2-23 (k) "Demand draft" means a writing that is not signed by a
2-24 customer, as defined by Section 4.104(a)(5), and that is created by
2-25 a third party under the purported authority of the customer for the
2-26 purpose of charging the customer's account with a bank. A demand
2-27 draft does not include a check drawn by a fiduciary, as defined in
3-1 Section 3.307. A demand draft may contain any or all of the
3-2 following:
3-3 (1) the customer's printed or typewritten name or
3-4 account number;
3-5 (2) a notation that the customer authorized the draft;
3-6 and
3-7 (3) the statement "No signature required,"
3-8 "Authorization on file," "Signature on file," or words to that
3-9 effect.
3-10 SECTION 3. Section 3.416, Business & Commerce Code, is
3-11 amended by amending Subsection (a) and adding Subsection (e) to
3-12 read as follows:
3-13 (a) A person who transfers an instrument for consideration
3-14 warrants to the transferee and, if the transfer is by indorsement,
3-15 to any subsequent transferee that:
3-16 (1) the warrantor is a person entitled to enforce the
3-17 instrument;
3-18 (2) all signatures on the instrument are authentic and
3-19 authorized;
3-20 (3) the instrument has not been altered;
3-21 (4) the instrument is not subject to a defense or
3-22 claim in recoupment of any party that can be asserted against the
3-23 warrantor; [and]
3-24 (5) the warrantor has no knowledge of any insolvency
3-25 proceeding commenced with respect to the maker or acceptor or, in
3-26 the case of an unaccepted draft, the drawer; and
3-27 (6) if the instrument is a demand draft, the creation
4-1 of the instrument according to the terms on its face was authorized
4-2 by the person identified as drawer.
4-3 (e) If the warranty under Subsection (a)(6) is not given by
4-4 a transferor under applicable conflict of law rules, the warranty
4-5 is not given to that transferor when that transferor is a
4-6 transferee.
4-7 SECTION 4. Section 3.417, Business & Commerce Code, is
4-8 amended by amending Subsection (a) and adding Subsection (g) to
4-9 read as follows:
4-10 (a) If an unaccepted draft is presented to the drawee for
4-11 payment or acceptance and the drawee pays or accepts the draft, (i)
4-12 the person obtaining payment or acceptance, at the time of
4-13 presentment, and (ii) a previous transferor of the draft, at the
4-14 time of transfer, warrant to the drawee making payment or accepting
4-15 the draft in good faith that:
4-16 (1) the warrantor is, or was, at the time the
4-17 warrantor transferred the draft, a person entitled to enforce the
4-18 draft or authorized to obtain payment or acceptance of the draft on
4-19 behalf of a person entitled to enforce the draft;
4-20 (2) the draft has not been altered; [and]
4-21 (3) the warrantor has no knowledge that the signature
4-22 of the drawer of the draft is unauthorized; and
4-23 (4) if the instrument is a demand draft, the creation
4-24 of the draft according to the terms on its face was authorized by
4-25 the person identified as drawer.
4-26 (g) If the warranty under Subsection (a)(4) is not given by
4-27 a transferor under applicable conflict of law rules, the warranty
5-1 is not given to that transferor when that transferor is a
5-2 transferee.
5-3 SECTION 5. Section 4.207, Business & Commerce Code, is
5-4 amended by amending Subsection (a) and adding Subsection (f) to
5-5 read as follows:
5-6 (a) A customer or collecting bank that transfers an item and
5-7 receives a settlement or other consideration warrants to the
5-8 transferee and to any subsequent collecting bank that:
5-9 (1) the warrantor is a person entitled to enforce the
5-10 item;
5-11 (2) all signatures on the item are authentic and
5-12 authorized;
5-13 (3) the item has not been altered;
5-14 (4) the item is not subject to a defense or claim in
5-15 recoupment (Section 3.305(a)) of any party that can be asserted
5-16 against the warrantor; [and]
5-17 (5) the warrantor has no knowledge of any insolvency
5-18 proceeding commenced with respect to the maker or acceptor or, in
5-19 the case of an unaccepted draft, the drawer; and
5-20 (6) if the item is a demand draft, the creation of the
5-21 item according to the terms on its face was authorized by the
5-22 person identified as drawer.
5-23 (f) If the warranty under Subsection (a)(6) is not given by
5-24 a transferor or collecting bank under applicable conflict of law
5-25 rules, the warranty is not given to that transferor when that
5-26 transferor is a transferee or to any prior collecting bank of that
5-27 transferee.
6-1 SECTION 6. Section 4.208, Business & Commerce Code, is
6-2 amended by amending Subsection (a) and adding Subsection (g) to
6-3 read as follows:
6-4 (a) If an unaccepted draft is presented to the drawee for
6-5 payment or acceptance and the drawee pays or accepts the draft, (i)
6-6 the person obtaining payment or acceptance, at the time of
6-7 presentment, and (ii) a previous transferor of the draft, at the
6-8 time of transfer, warrant to the drawee that pays or accepts the
6-9 draft in good faith that:
6-10 (1) the warrantor is, or was, at the time the
6-11 warrantor transferred the draft, a person entitled to enforce the
6-12 draft or authorized to obtain payment or acceptance of the draft on
6-13 behalf of a person entitled to enforce the draft;
6-14 (2) the draft has not been altered; [and]
6-15 (3) the warrantor has no knowledge that the signature
6-16 of the purported drawer of the draft is unauthorized; and
6-17 (4) if the instrument is a demand draft, the creation
6-18 of the draft according to the terms on its face was authorized by
6-19 the person identified as drawer.
6-20 (g) If the warranty under Subsection (a)(4) is not given by
6-21 a transferor under applicable conflict of law rules, the warranty
6-22 is not given to that transferor when that transferor is a
6-23 transferee.
6-24 SECTION 7. This Act takes effect September 1, 1997.
6-25 SECTION 8. The importance of this legislation and the
6-26 crowded condition of the calendars in both houses create an
6-27 emergency and an imperative public necessity that the
7-1 constitutional rule requiring bills to be read on three several
7-2 days in each house be suspended, and this rule is hereby suspended.