Nebraska Uniform Commercial Code 3-420

UCC 3-420

3-420.

Conversion of instrument.

(a) The law applicable to conversion of personal property applies to instruments. An instrument is also converted if it is taken by transfer, other than a negotiation, from a person not entitled to enforce the instrument or a bank makes or obtains payment with respect to the instrument for a person not entitled to enforce the instrument or receive payment. An action for conversion of an instrument may not be brought by (i) the issuer or acceptor of the instrument or (ii) a payee or indorsee who did not receive delivery of the instrument either directly or through delivery to an agent or a copayee.

(b) In an action under subsection (a), the measure of liability is presumed to be the amount payable on the instrument, but recovery may not exceed the amount of the plaintiff's interest in the instrument.

(c) A representative, other than a depositary bank, who has in good faith dealt with an instrument or its proceeds on behalf of one who was not the person entitled to enforce the instrument is not liable in conversion to that person beyond the amount of any proceeds that it has not paid out.

Annotations

  • When this section applies, a litigant cannot rely on common-law causes of action. Zornes v. Zornes, 292 Neb. 271, 872 N.W.2d 571 (2015).

  • Common-law claims in which the plaintiff alleges that a bank made or obtained payment on an instrument to a person not entitled to enforce the instrument or receive payment on it are displaced by the Uniform Commercial Code. Mandolfo v. Mandolfo, 281 Neb. 443, 796 N.W.2d 603 (2011).

  • Former section 3-419 does not displace the common-law action for conversion of a negotiable instrument, but merely supplies examples of ways in which a negotiable instrument may be converted. Hecker v. Ravenna Bank, 237 Neb. 810, 468 N.W.2d 88 (1991).

  • A depositary bank seeking immunity under subsection (3) of former section 3-419, must plead and prove the affirmative defenses that it acted in good faith and in accordance with reasonable commercial standards. Hydroflo Corp. v. First Nat. Bank of Omaha, 217 Neb. 20, 349 N.W.2d 615 (1984).

  • The language of subsection (3) of former section 3-419, "a representative, including a depositary or collecting bank," does include depositary and collecting banks when engaged in the normal business of paying or collecting ordinary checks. Hydroflo Corp. v. First Nat. Bank of Omaha, 217 Neb. 20, 349 N.W.2d 615 (1984).

  • Under former section 3-419, the payee of a check bearing a forged endorsement may recover from the drawee bank which pays the check on the forged endorsement. Maddox v. First Westroads Bank, 199 Neb. 81, 256 N.W.2d 647 (1977).