Page 33 - John Hundley 2014

Banking Law Roundup

Sharp Thinking

No. 123 Perspectives on Developments in the Law from The Sharp Law Firm, P.C. December 2014

“Void After 90 Days” Legend On Check Does Not

Constitute Valid “Stop Payment” Order, Court Rules

By John T. Hundley, Jhundley@lotsharp.com, 618-242-0246

A “void after 90 days” notation on a check does not constitute a stop-payment order under
Uniform Commercial Code (UCC) § 4-403(a) (810 ILCS 5/4-403(a)) and “is not a reasonable means
by which to direct a bank to stop payment on a check”, the Appellate Court in Chicago has ruled.

The court ruled that absent issuance of a stop-payment order in compliance with the bank-
depositor agreement, the bank had a right to pay a $50,000 check despite presence of the “void after
90 days” legend on the face of the check. Aliaga Med. Ctr., S.C. v. Harris Bank, N.A., 2014 IL App
(1st) 133645.

Owing to the multiple issues offered by the depositor in attempting to reverse the trial court’s
dismissal of its complaint, Aliaga is an important case with several important teachings.

1. The Bank-Depositor Agreement Controls.

In Aliaga, the bank-depositor agreement specified the ways and times that
a customer could stop payment on a check, but the customer argued these
provisions were not controlling in light of § 4-403(a), under which it contended
the “void after 90 days” legend was sufficient. The court rejected this
argument for multiple reasons:

● UCC § 4-103(a) permitted § 4-403(a) to be “varied by agreement,”
and the bank-depositor agreement did so.

● Official Comments to the UCC indicated it did not intend its
provisions to “freeze present methods of operation by mandatory statutory rules.”

2. The Legend Was Not In Compliance With Law In Any Event.

The court ruled that the “void after 90 days” legend did not comply with § 4-403(a)
in any event. That provision requires that a stop-payment notice be issued in “a
manner that affords the bank a reasonable opportunity to act on it.” In light of the fact
that checks today are processed by automated systems that read only the MICR-
encoded line, a legend elsewhere on the check directing non-payment “is not a
reasonable means by which to direct a bank to stop payment on a check,” the court
said.

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