HRS 0490-0004-0210 ANNOTATIONS

Prior Uniform Statutory Provision: None; but see American Bankers Association Bank Collection Code, Section 2.

1. Subsection (1) states a rational rule for the interest of a bank in an item. The customer of the depositary bank is normally the owner of the item and the several collecting banks are his agents (Section 4-201). A collecting agent may properly make advances on the security of paper held by him for collection, and when he does acquires at common law a possessory lien for his advances. Subsection (1) applies an analogous principle to a bank in the collection chain which extends credit on items in the course of collection. The bank has a security interest to the extent stated in this section. To the extent of its security interest it is a holder for value (Sections 3-303, 4-209) and a holder in due course if it satisfies the other requirements for that status (Section 3-302). Subsection (1) does not derogate from the banker's general common-law lien or right of set-off against indebtedness owing in deposit accounts. See Section 1-103. Rather subsection (1) specifically implements and extends the principle as a part of the bank collection process.

2. Subsection (2) spreads the security interest of the bank over all items in a single deposit or received under a single agreement and a single giving of credit. It also adopts the "first-in, first-out" rule.

3. Collection statistics establish that in excess of ninety-nine per cent of items handled for collection are in fact collected. The first sentence of subsection (3) reflects the fact that in such normal case the bank's security interest is self-liquidating. The remainder of the subsection correlates the security interest with the provisions of Article 9, particularly for use in the cases of non-collection where the security interest may be important.

Sections 3-302, 3-303, 4-201, 4-209, 9-203(1)(b) and 9-302.

Definitional Cross References:

"Account". Section 4-104.

"Agreement". Section 1-201.

"Bank". Section 1-201.

"Item". Section 4-104.

"Security interest". Section 1-201.

"Settlement". Section 4-104.