The Final Payment Doctrine
Presentment warranties in the Colorado version of the Uniform Commercial Code appear in 4-4-208, C.R.S. 1999, as follows:
(a) If an unaccepted draft is presented to the drawee for payment or acceptance and the drawee pays or accepts the draft, (i) the person obtaining payment or acceptance, at the time of presentment . . . warrants to the drawee that pays or accepts the draft in good faith that:
(1) the warrantor is, or was, at the time the warrantor transferred the draft, a person entitled to enforce the draft . . .;
(2) the draft has not been altered; and
(3) the warrantor has no knowledge that the signature of the purported drawer of the draft is unauthorized.
As noted in the Official Comment to a similar section, 4-3-417, C.R.S. 1999, the warranty in subsection (a)(1) is only a warranty that there are no unauthorized or missing endorsements on the checks.
The final payment doctrine is of great importance in banking commerce because it creates certainty relative to which institution must bear the loss and thus avoids time consuming and expensive litigation. See Travelers Indemnity Company v. Stedman, at 747 n.9.
The term "transfer" is defined in 4-3-203(a), C.R.S. 1999, as delivery by a party other than the maker of an instrument for the purpose of giving that party the right to enforce the check.
And, 4-4-207, C.R.S. 1999, contains Colorado's version of the transfer warranties of the Uniform Commercial Code.
That section provides:
(a) a customer or collecting bank that transfers an item and receives a settlement or other consideration warrants to the transferee. . . that:
(1) the warrantor is a person entitled to enforce the item;
(2) All signatures on the item are authentic and authorized;
(3) the item has not been altered;
(4) the item is not subject to a defense or claim in recoupment . . .;
(5) the warrantor has no knowledge of any insolvency proceeding commenced with respect to the . . . drawer.
Even if we assume that a transfer is involved here, it is well established that a transfer warranty as to the genuineness of the drawer's signature does not apply for the benefit of the drawee bank. See Bank of Glen Burnie v. Loyola Federal Savings Bank, supra, 336 Md. at 344, 648 A.2d at 459 n.6;
see also 5 W. Hawkland, J.F. Leary & R. Alderman, Uniform Commercial Code Series 4-207:1 n.6 (1999).