J. MILLARD TAWES, Governor 873
alteration on an item and must notify the bank promptly after dis-
covery thereof.
(2) If the bank establishes that the customer failed with respect
to an item to comply with the duties imposed on the customer by
Sub-section (1) the customer is precluded from asserting against
the bank
(a) his unauthorized signature or any alteration on the item if
the bank also establishes that it suffered a loss by reason of such
failure; and
(b) an unauthorized signature or alteration by the same wrong-
doer on any other item paid in good faith by the bank after the first
item and statement was available to the customer for a reasonable
period not exceeding fourteen calendar days and before the bank
receives notification from the customer of any such unauthorized sig-
nature or alteration.
(3) The preclusion under Sub-section (2) does not apply if the
customer establishes lack of ordinary care on the part of the bank
in paying the item.
(A) Without regard to care or lack of care of either the customer
or the bank a customer who does not within one year from the time
the statement and items are made available to the customer (Sub-
section (1) discover and report his unauthorized signature or any
alteration on the face or back of the item or does not within three
years from that time discover and report any unauthorized indorse-
ment is precluded from asserting against the bank such unauthorized
signature or indorsement or such alteration.
(5) If under this section a payor bank has a valid defense against
a claim of a customer upon or resulting from payment of an item
and waives or fails upon request to assert the defense the bank may
not assert against any collecting bank or other prior party presenting
or transferring the item a claim based upon the unauthorized signa-
ture or alteration giving rise to the customer's claim.
4—407. Payor Bank's Right to Subrogation on Improper Payment.
If a payor bank has paid an item over the stop payment order of
the drawer or maker or otherwise under circumstances giving a basis
for objection by the drawer or maker, to prevent unjust enrichment
and only to the extent necessary to prevent loss to the bank by reason
of its payment of the item, the payor bank shall be subrogated to
the rights
(a) of any holder in due course on the item against the drawer
or maker; and
(b) of the payee or any other holder of the item against the drawer
or maker either on the item or under the transaction out of which
the item arose; and
(c) of the drawer or maker against the payee or any other holder
of the item with respect to the transaction out of which the item
arose.
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