§ 336.4-407 — Payor Bank's Right to Subrogation on Improper Payment
Plain-Language Summary
If a bank pays a check when it should not have (like paying over a stop-payment order), the bank is subrogated to (steps into) the rights of the holder, the payee, and the drawer for purposes of preventing unjust enrichment.
336.4-407 PAYOR BANK’S RIGHT TO SUBROGATION ON IMPROPER PAYMENT.
If a payor bank has paid an item over the order of the drawer or maker to stop payment, or after an account has been closed, or otherwise under circumstances giving a basis for objection by the drawer or maker, to prevent unjust enrichment and only to the extent necessary to prevent loss to the bank by reason of its payment of the item, the payor bank is subrogated to the rights:
(1) of any holder in due course on the item against the drawer or maker;
(2) of the payee or any other holder of the item against the drawer or maker either on the item or under the transaction out of which the item arose; and
(3) of the drawer or maker against the payee or any other holder of the item with respect to the transaction out of which the item arose.
History:
1965 c 811 s 336.4-407; 1992 c 565 s 108
History: History: 1965 c 811 s 336.4-407; 1992 c 565 s 108