870                               LAWS OF MARYLAND                        [CH. 538

lapse of certain time or the happening of certain events (Sub-section
(3) of Section 4—211, Sub-sections (1) (d), (2) and (3) of Section
4—213).

(4) If a collecting bank receives from subsequent parties settle-
ment for an item which settlement is or becomes final and suspends
payments without making a settlement for the item with its cus-
tomer which is or becomes final, the owner of the item has a pre-
ferred claim against such collecting bank.

Part 3
Collection of Items: Pay or Banks

4—301. Deferred Posting; Recovery of Payment by Return of
Items; Time of Dishonor.

(1)   Where an authorized settlement for a demand item (other
than a documentary draft) received by a payor bank otherwise than
for immediate payment over the counter has been made before mid-
night of the banking day of receipt the payor bank may revoke the
settlement and recover any payment if before it has made final pay-
ment (Sub-section (1) of Section 4—213) and before its midnight
deadline it

(a)  returns the item; or

(b)  sends written notice of dishonor or nonpayment if the item
is held for protest or is otherwise unavailable for return.

(2)  If a demand item is received by a payor bank for credit on
its books it may return such item or send notice of dishonor and may
revoke any credit given or recover the amount thereof withdrawn
by its customer, if it acts within the time limit and in the manner
specified in the preceding Sub-section.

(3)   Unless previous notice of dishonor has been sent an item is
dishonored at the time when for purposes of dishonor it is returned
or notice sent in accordance with this section.

(4) An item is returned:

(a)  as to an item received through a clearing house, when it is
delivered to the presenting or last collecting bank or to the clearing
house or is sent or delivered in accordance with its rules; or

(b)  in all other cases, when it is sent or delivered to the bank's
customer or transferor or pursuant to his instructions.

4—302. Payor Bank's Responsibility for Late Return of Item.

In the absence of a valid defense such as breach of a presentment
warranty (Sub-section (1) of Section 4—207), settlement effected or
the like, if an item is presented on and received by a payor bank the
the bank is accountable for the amount of

(a) a demand item other than a documentary draft whether prop-
erly payable or not if the bank, in any case where it is not also the
depositary bank, retains the item beyond midnight of the banking
day of receipt without settling for it or, regardless of whether it is
also the depositary bank, does not pay or return the item or send
notice of dishonor until after its midnight deadline; or