1-1 By: Carona S.B. No. 1162
1-2 (In the Senate - Filed March 11, 1997; March 17, 1997, read
1-3 first time and referred to Committee on Economic Development;
1-4 April 4, 1997, reported adversely, with favorable Committee
1-5 Substitute by the following vote: Yeas 9, Nays 0; April 4, 1997,
1-6 sent to printer.)
1-7 COMMITTEE SUBSTITUTE FOR S.B. No. 1162 By: Patterson
1-8 A BILL TO BE ENTITLED
1-9 AN ACT
1-10 relating to the warranties on the transfer or presentment of demand
1-11 drafts.
1-12 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-13 SECTION 1. Subsection (b), Section 3.103, Business &
1-14 Commerce Code, is amended to read as follows:
1-15 (b) Other definitions applying to this chapter and the
1-16 sections in which they appear are:
1-17 "Acceptance" Section 3.409.
1-18 "Accommodated party" Section 3.419.
1-19 "Accommodation party" Section 3.419.
1-20 "Alteration" Section 3.407.
1-21 "Anomalous indorsement" Section 3.205.
1-22 "Blank indorsement" Section 3.205.
1-23 "Cashier's check" Section 3.104.
1-24 "Certificate of deposit" Section 3.104.
1-25 "Certified check" Section 3.409.
1-26 "Check" Section 3.104.
1-27 "Consideration" Section 3.303.
1-28 "Demand draft" Section 3.104.
1-29 "Draft" Section 3.104.
1-30 "Holder in due course" Section 3.302.
1-31 "Incomplete instrument" Section 3.115.
1-32 "Indorsement" Section 3.204.
1-33 "Indorser" Section 3.204.
1-34 "Instrument" Section 3.104.
1-35 "Issue" Section 3.105.
1-36 "Issuer" Section 3.105.
1-37 "Negotiable instrument" Section 3.104.
1-38 "Negotiation" Section 3.201.
1-39 "Note" Section 3.104.
1-40 "Payable at a definite time" Section 3.108.
1-41 "Payable on demand" Section 3.108.
1-42 "Payable to bearer" Section 3.109.
1-43 "Payable to order" Section 3.109.
1-44 "Payment" Section 3.602.
1-45 "Person entitled to enforce" Section 3.301.
1-46 "Presentment" Section 3.501.
1-47 "Reacquisition" Section 3.207.
1-48 "Special indorsement" Section 3.205.
1-49 "Teller's check" Section 3.104.
1-50 "Transfer of instrument" Section 3.203.
1-51 "Traveler's check" Section 3.104.
1-52 "Value" Section 3.303.
1-53 SECTION 2. Section 3.104, Business & Commerce Code, is
1-54 amended by adding Subsection (k) to read as follows:
1-55 (k) "Demand draft" means a writing that is not signed by a
1-56 customer, as defined in Section 4.104 (a)(5), and that is created
1-57 by a third party under the purported authority of the customer for
1-58 the purpose of charging the customer's account with a bank. A
1-59 demand draft does not include a check drawn by a fiduciary, as
1-60 defined in Section 3.307. A demand draft may contain any or all of
1-61 the following:
1-62 (1) the customer's printed or typewritten name or
1-63 account number;
1-64 (2) a notation that the customer authorized the draft;
2-1 and
2-2 (3) the statement "No signature required,"
2-3 "Authorization on file," "Signature on file," or words to that
2-4 effect.
2-5 SECTION 3. Section 3.416, Business & Commerce Code, is
2-6 amended by amending Subsection (a) and adding Subsection (e) to
2-7 read as follows:
2-8 (a) A person who transfers an instrument for consideration
2-9 warrants to the transferee and, if the transfer is by indorsement,
2-10 to any subsequent transferee that:
2-11 (1) the warrantor is a person entitled to enforce the
2-12 instrument;
2-13 (2) all signatures on the instrument are authentic and
2-14 authorized;
2-15 (3) the instrument has not been altered;
2-16 (4) the instrument is not subject to a defense or
2-17 claim in recoupment of any party that can be asserted against the
2-18 warrantor; [and]
2-19 (5) the warrantor has no knowledge of any insolvency
2-20 proceeding commenced with respect to the maker or acceptor or, in
2-21 the case of an unaccepted draft, the drawer; and
2-22 (6) if the instrument is a demand draft, the creation
2-23 of the instrument according to the terms on its face was authorized
2-24 by the person identified as drawer.
2-25 (e) If the warranty under Subsection (a)(6) is not given by
2-26 a transferor under applicable conflict of law rules, the warranty
2-27 is not given to that transferor when that transferor is a
2-28 transferee.
2-29 SECTION 4. Section 3.417, Business & Commerce Code, is
2-30 amended by amending Subsection (a) and adding Subsection (g) to
2-31 read as follows:
2-32 (a) If an unaccepted draft is presented to the drawee for
2-33 payment or acceptance and the drawee pays or accepts the draft, (i)
2-34 the person obtaining payment or acceptance, at the time of
2-35 presentment, and (ii) a previous transferor of the draft, at the
2-36 time of transfer, warrant to the drawee making payment or accepting
2-37 the draft in good faith that:
2-38 (1) the warrantor is, or was, at the time the
2-39 warrantor transferred the draft, a person entitled to enforce the
2-40 draft or authorized to obtain payment or acceptance of the draft on
2-41 behalf of a person entitled to enforce the draft;
2-42 (2) the draft has not been altered; [and]
2-43 (3) the warrantor has no knowledge that the signature
2-44 of the drawer of the draft is unauthorized; and
2-45 (4) if the instrument is a demand draft, the creation
2-46 of the draft according to the terms on its face was authorized by
2-47 the person identified as drawer.
2-48 (g) If the warranty under Subsection (a)(4) is not given by
2-49 a transferor under applicable conflict of law rules, the warranty
2-50 is not given to that transferor when that transferor is a
2-51 transferee.
2-52 SECTION 5. Section 4.207, Business & Commerce Code, is
2-53 amended by amending Subsection (a) and adding Subsection (f) to
2-54 read as follows:
2-55 (a) A customer or collecting bank that transfers an item and
2-56 receives a settlement or other consideration warrants to the
2-57 transferee and to any subsequent collecting bank that:
2-58 (1) the warrantor is a person entitled to enforce the
2-59 item;
2-60 (2) all signatures on the item are authentic and
2-61 authorized;
2-62 (3) the item has not been altered;
2-63 (4) the item is not subject to a defense or claim in
2-64 recoupment (Section 3.305(a)) of any party that can be asserted
2-65 against the warrantor; [and]
2-66 (5) the warrantor has no knowledge of any insolvency
2-67 proceeding commenced with respect to the maker or acceptor or, in
2-68 the case of an unaccepted draft, the drawer; and
2-69 (6) if the item is a demand draft, the creation of the
3-1 item according to the terms on its face was authorized by the
3-2 person identified as drawer.
3-3 (f) If the warranty under Subsection (a)(6) is not given by
3-4 a transferor or collecting bank under applicable conflict of law
3-5 rules, the warranty is not given to that transferor when that
3-6 transferor is a transferee or to any prior collecting bank of that
3-7 transferee.
3-8 SECTION 6. Section 4.208, Business & Commerce Code, is
3-9 amended by amending Subsection (a) and adding Subsection (g) to
3-10 read as follows:
3-11 (a) If an unaccepted draft is presented to the drawee for
3-12 payment or acceptance and the drawee pays or accepts the draft, (i)
3-13 the person obtaining payment or acceptance, at the time of
3-14 presentment, and (ii) a previous transferor of the draft, at the
3-15 time of transfer, warrant to the drawee that pays or accepts the
3-16 draft in good faith that:
3-17 (1) the warrantor is, or was, at the time the
3-18 warrantor transferred the draft, a person entitled to enforce the
3-19 draft or authorized to obtain payment or acceptance of the draft on
3-20 behalf of a person entitled to enforce the draft;
3-21 (2) the draft has not been altered; [and]
3-22 (3) the warrantor has no knowledge that the signature
3-23 of the purported drawer of the draft is unauthorized; and
3-24 (4) if the instrument is a demand draft, the creation
3-25 of the draft according to the terms on its face was authorized by
3-26 the person identified as drawer.
3-27 (g) If the warranty under Subsection (a)(4) is not given by
3-28 a transferor under applicable conflict of law rules, the warranty
3-29 is not given to that transferor when that transferor is a
3-30 transferee.
3-31 SECTION 7. This Act takes effect September 1, 1997.
3-32 SECTION 8. The importance of this legislation and the
3-33 crowded condition of the calendars in both houses create an
3-34 emergency and an imperative public necessity that the
3-35 constitutional rule requiring bills to be read on three several
3-36 days in each house be suspended, and this rule is hereby suspended.
3-37 * * * * *