Las Vegas Ice & Cold Storage Co. v. Far West Bank

Summary

Las Vegas Ice & Cold Storage Co. v. Far West Bank, 893 F.2d 1182 (10th Cir. 1990): A payor bank that completes final payment on a check under UCC § 4-213(1) is accountable for the amount, even if it later returns the check unpaid for insufficient funds; a payee may bring a direct action against the payor bank, and the bank cannot assert presentment warranty defenses (UCC §§ 3-417, 4-207) because those warranties run only to the payee's transferee. The court also held that a district court may deny a motion to amend a complaint to add a punitive damages claim based solely on untimeliness, and that a payee's knowledge that the check drawer was a Chapter 11 debtor-in-possession does not establish bad faith as a matter of law.

Holdings

1. The district court did not abuse its discretion in denying leave to amend because the motion was untimely, filed a year and a half after the complaint and nine months after partial summary judgment, and the facts underlying the claim were known to the plaintiff at the time of the original complaint.
2. Far West Bank is accountable under UCC § 4-213(1) because it finally paid the item and then returned it unpaid. 'Accountable' means liable for the amount.
3. A payee may bring a direct action against a payor bank under UCC § 4-213(1) because the UCC does not restrict to whom the payor bank is accountable, and direct actions are permitted in numerous cases.
4. A payor bank may not assert breach of presentment warranties because those warranties run only to the transferee bank, not to the payor bank. The payor bank also cannot qualify as a holder in due course because it does not hold the instrument.
5. The district court's finding that Las Vegas Ice acted in good faith was not clearly erroneous. The fact that the drawer was a debtor-in-possession under Chapter 11 does not, as a matter of law, establish bad faith because a debtor-in-possession is authorized to continue operations and incur unsecured debt in the ordinary course.

Questions Presented

1. Whether the district court abused its discretion in denying the plaintiff's motion to amend its complaint to add a punitive damages claim.
2. Whether Far West Bank was accountable under UCC § 4-213(1) for the amount of the check despite returning it unpaid.
3. Whether a payee may bring a direct action against a payor bank under UCC § 4-213(1).
4. Whether a payor bank may assert breach of warranty defenses in a direct action by a payee.
5. Whether the district court erred in finding that Las Vegas Ice acted in good faith when presenting the check.

Disposition

affirmed