Iverson v. First Bank of Billings

No. 85-158

I N THE SUPREME COURT OF THE STATE OF MONTANA

1985

GENE G . IVERSON,

P l a i n t i f f and R e s p o n d e n t ,

FIRST BANK OF BILLINGS ( f o r m e r l y
t h e M i d l a n d N a t i o n a l . Bank o f
B i l l i n g s , Montana),

Defendant, Third P a r t y P l a i n t i f f
and A p p e l l a n t ,

MONTANA LIVESTOCK PRODUCTION CREDIT
ASSOCIATION OF HELENA, MONTANA,

Third P a r t y Defendant, Counter-Claimant
and Respondent,

APPEAL FROM: District Court of t h e Eighth J u d i c i a l District,
I n and f o r t h e County o f Cascade,
The H o n o r a b l e Thomas M c K i t t r i c k , J u d g e p r e s i d i n g .

COUNSEL OF RECORD:

For Appellant:

M o u l t o n , B e l l i n g h a m , Longo & M a t h e r ; G e r a l d B. Murphy
a r g u e d , B i l l i n g s , Montana

For Respondent :

Alexander & Baucus; John D. A l e x a n d e r a r g u e d f o r
I v e r s o n , G r e a t F a l l s , Montana
Luxan & M u r f i t t ; W a l t e r S. M u r f i t t a r g u e d f o r Montana
L i v e s t o c k , H e l e n a , Montana

Submitted: October 22, 1985

Decided: December 3 1 , 1 9 8 5
M r . J u s t i c e J o h n Conway H a r r i s o n d e l i v e r e d t h e O p i n i o n o f t h e
Court.

In the action below, plaintiff Gene Iverson

[hereinafter Iverson) filed a complaint against two

defendants, Howard N u e r n b e r g e r ( h e r e i n a f t e r N u e r n b e r g ~ r ) and

F i r s t Bank B i l l i n g s ( h e r e i n a f t e r F i r s t Bank). In count I o f

h i s c o m p l a i n t , I v e r s o n a l l e g e d t h a t N u e r n b e r g e r was l i a b l e t o

him for the face amount of a dishonored check issued by

Nuernberger to Iverson. In count I1 of his complaint,

I v e r s o n a l l e g e d t h a t F i r s t Bank w a s a l s o l i a b l e t o him f o r

the f a c e amount o f t h e d i s h o n o r e d N u e r n b e r g e r c h e c k b e c a u s e

First Bank had violated S 30-4-302, MCA, (the midnight

d e a d l i n e r u l e ) by f a i l i n g t o r e t u r n t h e dishonored check i n a

t i m e l y manner a f t e r t h e s u b j e c t c h e c k was p r e s e n t e d t o F i r s t

Bank for collection. First Bank responded by denying

liability and alleging that § 30-4-302 was not violated

b e c a u s e t h e s u b j e c t c h e c k was n o t " p r e s e n t e d " t o F i - r s t Bank

f o r c o l l e c t i o n a s a "demand i t e m , " and a l s o because t h e check

was held longer than normal by First Bank pursuant t o the

specific request and authority of Montana Livestock

Production Credit Association ( h e r e i n a f t e r MLPCA), a joint

p a y e e on t h e s u b j e c t c h e c k .

Thereafter, First Bank filed a third-party complaint

a g a i n s t MLPCA s e e k i n g i n d e m n i f i c a t i o n f r o m MLPCA i f i t s h o u l d

be f o u n d t h a t F i r s t Bank w a s l i a b l e t o I v e r s o n . MLPCA t h e n

f i l e d a c o u n t e r c l a i m a g a i n s t F i r s t Bank a l l e g i n g , a s I v e r s o n

had done earlier, that First Bank had violated the

requirements of § 30-4-302, MCA, a n d s o u g h t t h e f a c e amount

o f t h e s u b j e c t c h e c k a s damages. Nuernberger, a t t h i s point,

stipulated to entry of judgment i n f a v o r o f I v e r s o n and t h e

r e m a i n i n g p a r t i e s a l l moved f o r summary j u d g m e n t .
 The District Court of the Eighth Judicial District,

C a s c a d e C o u n t y , t h e H o n o r a b l e Thomas M. McKittrick presiding,

g r a n t e d summary j u d g m e n t i n f a v o r o f I v e r s o n a n d MLPCA. The

D i s t r i c t C o u r t f o u n d F i r s t Bank s t r i c t l y l i a b l e f o r t h e f a c e

amount o f t h e s u b j e c t c h e c k b e c a u s e o f F i r s t B a n k ' s failure

to comply w i t h the requirements of S 30-4-302. From t h i s

j u d g m e n t F i r s t Bank a p p e a l s .

W e r e v e r s e t h e summary j u d g m e n t o f t h e D i s t r i c t Court

e n t e r e d i n f a v o r o f I v e r s o n a n d MLPCA a g a i n s t F i r s t B a n k , a n d

h e r e b y o r d e r t h e D i s t r i c t C o u r t t o e n t e r summary j u d g m e n t i n

f a v o r o f F i r s t Bank a g a i n s t I v e r s o n a n d MLPCA i n a c c o r d a n c e

with t h i s opinion.

Plaintiff, Gene I v e r s o n , is a rancher outside of Great

Falls, Montana, who obtained financing for his cattle

operation from MPLCA. Iverson, i n o b t a i n i n g f i n a n c i n g from

MLPCA, executed and delivered to MLPCA a loan agreement

w h e r e b y MLPCA was g i v e n a f i r s t s e c u r i t y i n t e r e s t i n a l l o f

Iverson's cattle. On S e p t e m b e r 2 , 1 9 7 9 , I v e r s o n e n t e r e d i n t o

a c o n t r a c t w i t h PJuernberger, doing business a s t h e Montana

C a t t l e Company, f o r t h e s a l e o f a number o f I v e r s o n ' s c a t t l e .

The c o n t r a c t p r o v i d e d t h a t N u e r n b e r g e r p a y t o I v e r s o n t h e sum

of $ 4 , 0 0 0 a s a down p a y m e n t w i t h a b a l a n c e o w i n g o f $ 4 1 , 2 0 9 .

Shortly thereafter, Nuernberger executed and delivered to

Iverson his check, payable to Iverson and MLPCA a s joint

payees, i n t h e amount o f $ 4 1 , 2 0 9 a n d t o o k p o s s e s s i o n o f t h e

cattle. Iverson then delivered the check, without

endorsement, t o MLPCA f o r a p p l i c a t i o n upon h i s d e b t owed t o

MLPCA. A t t h i s p o i n t , MLPCA r e l e a s e d i t s s e c u r e d p o s i t i o n in

I v e r s o n ' s c a t t l e p r i o r t o t h e check b e i n g p a i d .

S u b s e q u e n t l y , MLPCA d e p o s i t e d t h e c h e c k i n i t s a c c o u n t

at First Security Bank in Helena, Montana, for payment

t h r o u g h t h e normal b a n k i n g c o l l e c t i o n p r o c e s s . On November
26, 1979, t h e check a r r i v e d a t F i r s t Rank B i l l i n g s a n d w a s

s u b s e q u e n t l y r e t u r n e d t o MLPCA o n November 2 8 , 1979, marked

" i n s u f f i c i e n t funds" (NSF). The c h e c k w a s d e p o s i t e d for a

s e c o n d t i m e t o MLPCA's a c c o u n t o n November 2 9 , 1979, and was

a g a i n r e t u r n e d b y F i r s t Bank B i l l i n g s t o MLPCA o n D e c e m b e r 4 ,

1979, because o f i n s u f f i c i e n t funds. The c h e c k , h a v i n g b e e n

deposited twice and twice refused because of insufficient

funds, was stamped "payment refused twice--present for

c o l l e c t i o n only."

On or about December 6, 1979, MLPCA, through its

a s s i s t a n t t r e a s u r e r , A l i c e T y a n i c h , t e l e p h o n e d F i r s t Bank a n d

was put in t o u c h w i t h James Wempner ( h e r e i n a f t e r Wempner) ,
vice-president in charge o f the Agriculture Department for

directions regarding collection of the Nuernberger check.

Wempner instructed Alice Tyanich to forward the check t o

F i r s t Bank t o h i s (Wempner I s ) attention granting permission

t o F i r s t Bank t o hold the check beyond t h e normal 24-hour

period. Pursuant to these instructions, the Nuernberger

check was mailed to First Bank with an accompanying

memorandum w h i c h r e a d i n p e r t i n e n t p a r t a s f o l l o w s :

SUBJECT: Check no. 214-Montana Cattle
Company DATE December 6 , 1 9 7 9

I am r e t u r n i n g h e r e w i t h t h e a b o v e named
check and you h e r e b y have o u r a u t h o r i t y
t o h o l d it f o r l o n g e r t h a n t h e u s u a l
24-hour p e r i o d . When f u n d s a r e a v a i l a b l e
on the above account p l e a s e send a
c a s h i e r ' s c h e c k made p a y a b l e t o M o n t a n a
L i v e s t o c k PCA.

Date B ALICE H.
Y TYANICH, A s s i s t a n t
Treasurer.

The above memo and subject check were received by

Wempner t h r o u g h t h e m a i l , b u t i n s t e a d o f t a k i n g t h e c h e c k t o

the collection department of First Bank pursuant to the

established policy of F i r s t Bank, h e k e p t t h e check i n h i s

desk i n a separate f i l e t i t l e d "Nuernberger, Montana C a t t l e
Company. " The record indicates that Nuernberger , doing

b u s i n e s s a s t h e Montana C a t t l e Company, had been a c u s t o m e r

of F i r s t Bank f o r approximately five years and h i s a c c o u n t

had been p e r s o n a l l y handled b y Wempner d u r i n g t h i s p e r i o d .

The r e c o r d a l s o i n d i c a t e s t h a t d u r i n g t h i s same t i m e p e r i o d ,

Wempner received for col lection several other NSF checks

i s s u e d by N u e r n b e r g e r w h i c h h e would p l a c e i n h i s N u e r n b e r g e r

desk file. Wempner would check the Nuernberger account

b a l a n c e d a i l y and would p a y t h e PJSF c h e c k s h e l d i n h i s d e s k

file in installments a s Nuernberger deposited funds. The

r e c o r d shows Wempner's a c t i o n s a l l o w e d N u e r n b e r g e r t o s t a y i n

business as a cattle buyer and also saved Nuernberger's

creditors the inconvenience of having to send their NSF

c h e c k s t o F i r s t Bank numerous t i m e s f o r c o l l e c t i o n .

The e s t a b l i s h e d p o l i c y of F i r s t Bank w i t h r e s p e c t to

collection i t e m s , s u c h a s t h e s u b j e c t c h e c k , r e q u i r e d Wempner

t o d e l i v e r t h e check t o t h e c o l l e c t i o n d e p a r t m e n t o f First

Bank where it was to be recorded. If funds were not

a v a i l a b l e t o pay t h e c h e c k , a c c o r d i n g t o F i r s t Bank p o l i c y ,

the c h e c k was returned prior t o midnight of t h e day a f t e r

receipt of the check to avoid liability under 5 30-4-302,
MCA, ( t h e midnight deadline r u l e ) . F i r s t Bank p o l i c y d i d n o t

allow a waiver of the midnight deadline rule for checks

g r e a t e r t h a n $500.

Wempner acknowledged t h a t h e was a w a r e o f F i r s t R a n k ' s

policy, but i n d i c a t e d t h a t he d i d n o t like the limitations

mandated by t h e m i d n i g h t d e a d l i n e r u l e o r t h e p o l i c y o f F i r s t

Bank. MLPCA, through A l i c e Tyanich, was not aware o f the

p o l i c y o f F i r s t Bank.

Wempner k e p t t h e s u b j e c t c h e c k i n h i s d e s k f i l e from

December 10, 1 9 7 9 , t h e d a t e on w h i c h it was r e c e i v e d , until

January 30, 1980, when it was returned pursuant to the
r e q u e s t o f Tom Brown, t h e n p r e s i d e n t o f MLPCA. During t h i s

t i m e p e r i o d F i r s t Bank d i d n o t s e n d o u t n o t i c e o f d i s h o n o r t o

e i t h e r MLPCA o r I v e r s o n , o r p a y t h e s u b j e c t c h e c k . Iverson's

f i r s t c o n t a c t w i t h F i r s t Bank o c c u r r e d o n December 2 7 , 1979,

s e v e n t e e n d a y s a f t e r Wempner r e c e i v e d t h e s u b j e c t check for

collection. The s u b j e c t c h e c k i n t h e a m o u n t o f $41,209 h a s

n e v e r b e e n pa i d .

The appellant, First Bank, presents the following

i s s u e s f o r review:

(1) Whether § 30-4-302, MCA (the midnight deadline

rule), applies to the instant case, when the check in

question was delivered t o F i r s t Rank b y MLPCA o u t s i d e t h e

o r d i n a r y bank c o l l e c t i o n p r o c e d u r e ?

(2) Whether MLPCA made an agreement with First Bank

v a r y i n g t h e e f f e c t o f S 30-4-302, MCA?

(3) Whether the District Court erred in awarding

d a m a g e s u n d e r 5 30-4-302, MCA?

(4) W h e t h e r F i r s t Bank i s e n t i t l e d t o indemnity from

MLPCA?

We find the f i r s t i s s u e p r e s e n t e d b y F i r s t Rank t o be

dispositive of the instant case. Under its first issue,

First Bank is arguing that the subject check was not

" p r e s e n t e d " a s a "demand i t e m " f o r payment, a s d e f i n e d by t h e

Montana U n i f o r m C o m m e r c i a l Code (MUCC), b u t w a s i n s t e a d l e f t

by MLPCA w i t h F i r s t Bank w i t h i n s t r u c t i o n s t o p a y t h e c h e c k

when a n d if f u n d s became a v a i l a b l e i n N u e r n b e r g e r ' s a c c o u n t .

F i r s t Rank a r g u e s b e c a u s e t h e s u b j e c t c h e c k w a s n o t p r o p e r l y

" p r e s e n t e d " a s a "demand i t e m , " 5 30-4-302, M A ( t h e midnight
C

deadline rule) , d o e s n o t a p p l y t o t h e i n s t a n t c a s e and t h u s

F i r s t Bank i s n o t l i a b l e f o r t h e f a c e a m o u n t o f t h e s u b j e c t

check. W e a g r e e w i t h F i r s t Bank's r e s u l t , b u t on a s l i g h t l y

d i f f e r e n t theory.
 The m a j o r statute under consideration i s 5 30-4-302,

MCA. Subsection ( a ) o f t h e s t a t u t e i s commonly r e f e r r e d t o

as "The Midnight Deadline Rule." The statute reads as

follows:

Payor b a n k ' s responsibility for late
return of i t e m . In t h e absence o f a
valid defense such as breach of a
p r e s e n t m e n t w a r r a n t y , ( s u b s e c t i o n (1) o f
30-4-207), settlement effected o r the
l i k e , i f a n i t e m i s p r e s e n t e d on and
r e c e i v e d by a p a y o r bank t h e bank i s
a c c o u n t a b l e f o r t h e amount o f :

(a) a demand i t e m other than a
documentary draft whether properly
payable o r n o t i f t h e bank, i n any c a s e
where it i s n o t a l s o t h e d e p o s i t a r y b a n k ,
r e t a i n s t h e i t e m beyond m i d n i g h t o f t h e
banking day o f r e c e i p t without s e t t l i n g
f o r it o r , r e g a r d l e s s o f w h e t h e r it i s
a l s o t h e d e p o s i t a r y bank, d o ~ s o t pay o r
n
return the item or send notice of
dishonor until after its midnight
deadline; o r

( b ) any other properly payable item
unless within the time allowed for
a c c e p t a n c e o r payment o f t h a t i t e m t h e
bank e i t h e r a c c e p t s o r p a y s t h e i t e m o r
r e t u r n s it and accompanying d o c u m e n t s .
(Emphasis a d d e d . )

The p a r t i e s c o n t e n d , i n l i g h t o f t h i s s t a t u t e , t h e r e a r e two

major c o n d i t i o n s r e l e v a n t t o t h e i n s t a n t c a s e t h a t must b e

s a t i s f i e d b e f o r e F i r s t Bank becomes l i a b l e u n d e r t h e m i d n i g h t

deadline rule: t h e r e must b e a "demand i t e m " ( s u b j e c t check)

" p r e s e n t e d " ( t o F i r s t Bank) w i t h i n t h e meaning o f S 30-4-302,

MCA. I n arguing t h e s e conditions t h e p a r t i e s devote a l l of

t h e i r attention t o subsection ( a ) o f S 30-4-302. Subsection

(a) essentially provides that in the absence of a valid

defense, a demand item, retained beyond the "midnight

d e a d l i n e " by t h e p a y o r bank w i t h o u t e i t h e r p a y i n g , r e t u r n i n g ,

o r g i v i n g n o t i c e o f d i s h o n o r r e n d e r s t h e p a y o r bank l i a b l e t o

t h e p a y e e f o r t h e f a c e amount o f t h e i t e m . Sun R i v e r C a t t l e

Co., I n c . v. M i n e r s N a t i o n a l Bank o f Montana N . A . ( 1 9 7 4 ) , 164

Mont. 237, 5 2 1 P.2d 679. The " m i d n i g h t d e a d l i n e " r e f e r r e d t o
in describing the duty of the payor bank is defined by

S; 30-4-104 ( h ) , MCA, as midnight of the next banking day

following the banking d a y on w h i c h t h e i t e m was r e c e i v e d .

This Court recognizes that subsection (a) of

§ 30-4-302, MCA, i s a v a l i d t h e o r y f o r h o l d i n g a bank l i a b l e

when a "demand i t e m " i s " p r e s e n t e d " t o a p a y o r bank and t h e
bank h o l d s t h e i t e m beyond t h e m i d n i g h t d e a d l i n e . But t h i s

Court holds that subsection (a) of S 30-4-302 i s n o t even

a p p l i c a b l e t o t h e i n s t a n t c a s e because t h e s u b j e c t check i s

-a
not "demand i t e m . " T h e r e f o r e , i f F i r s t Bank i s g o i n g t o b e

held l i a b l e under § 30-4-302, t h i s Court must look i n s t e a d t o

subsection (b) o f t h e s t a t u t e .

First, a s mentioned above, we hold that the subject

c h e c k i s n o t a "demand i t e m . " The s u b j e c t c h e c k t h o u g h d a t e d

and d u e , i s n o t a demand i t e m b e c a u s e it w a s t r a n s m i t t e d t o

First Bank with the understanding that it should be held

u n t i l t h e r e w e r e s u f f i c i e n t funds i n Nuernberger's account t o

pay t h e check. To b e t t e r u n d e r s t a n d t h i s c o n c l u s i o n it i s

i m p o r t a n t t o review under what c o n d i t i o n s t h e s u b j e c t check

was delivered to First Bank by MLPCA. As previously

discussed in the facts of this opinion, MLPCA m a i l e d the

subject check to First Bank with the following written

instructions:

I am r e t u r n i n g h e r e w i t h t h e a b o v e named
check and you h e r e b y have o u r a u t h o r i t y
t o h o l d it f o r l o n g e r t h a n t h e u s u a l
24-hour p e r i o d . When f u n d s a r e a v a i l a b l e
on t h e above account please send a
c a s h i e r ' s c h e c k made p a y a b l e t o Montana
L i v e s t o c k PCA.

According to t h i s memorandum, MLPCA a u t h o r i z e d First

Rank t o h o l d t h e c h e c k b e y o n d t h e u s u a l 2 4 - h o u r p e r i o d a n d t o

p a y t h e c h e c k o n l y , "when funds a r e available. " This Court

h o l d s t h e r e i s no c o n c e i v a b l e way t o c o n s t r u e t h i s memorandum

o t h e r t h a n t o s t a t e t h a t t h e i n t e n t o f MLPCA was t o t r a n s m i t
t h e c h e c k , n o t a s a n i m m e d i a t e demand f o r payment, b u t r a t h e r

a s a r e q u e s t f o r payment whenever f u n d s m i g h t b e a v a i l a b l e t o

pay the check. This simply is not "demand item" as

c o n t e m p l a t e d by § 30-4-302 ( a ) , MCA. Therefore, S30-4-302 ( a )

i s n o t even a p p l i c a b l e t o t h e i n s t a n t c a s e .

Next, b e f o r e we a n a l y z e t h e f a c t s of t h i s c a s e under

S 30-4-302 ( b ) , MCA, the concept of "presentment" must be

discussed. The parties, especially First Bank, argue at

g r e a t l e n g t h how t h e t e r m p r e s e n t m e n t should be i n t e r p r e t e d

under S 30-4-302. Despite the extensive arguments of the

parties, this Court holds the t e r m " p r e s ~ n t m e n t " should be

l i b e r a l l y i n t e r p r e t e d a s t h e MUCC s u g g e s t s .

S e c t i o n 30-3-504(1), MCA, d e f i n e s presentment under t h e

MUCC a s f o l l o w s :

How p r e s e n t m e n t made. (1) P r e s e n t m e n t i s
a demand f o r a c c e p t a n c e o r payment made
upon t h e m a k e r , a c c e p t o r , d r a w e e o r o t h e r
p a y o r b y o r on b e h a l f o f t h e h o l d e r .

In addition, Official Comment 1 of the UCC states the

following i n e x p l a i n i n g t h e purpose o f t h i s s t a t u t e :

This section is intended t o simplify t h e
r u l e s a s t o how p r e s e n t m e n t i s made and
t o make i t c l e a r t h a t a n y demand upon t h e
p a r t y t o pay i s a p r e s e n t m e n t no m a t t e r
where o r how.

The a b o v e s t a t u t e a n d comment make it c l e a r t h a t t h e

c o n c e p t o f "presentment" i s t o be l i b e r a l l y i n t e r p r e t e d u n d e r

t h e MUCC. This Court agrees. Therefore, in l i g h t of the

above d i s c u s s i o n , t h e o n l y q u e s t i o n r e m a i n i n g i n t h e i n s t a n t

case is whether a presentment occurred as required by

§ 30-4-302, MCA.

First, with regard t o MLPCA, t h e r e i s no q u e s t i o n it

p r e s e n t e d t h e s u b j e c t c h e c k t o F i r s t Bank w i t h i n t h e meaning

of 30-3-504 ( 1 ) . The f a c t s a r e u n c o n t r o v e r t e d t h a t MLPCA,

t h r o u g h A l i c e T y a n i c h , m a i l e d t h e s u b j e c t c h e c k t o F i r s t Bank

f o r c o l l e c t i o n p u r s u a n t t o t h e i n s t r u c t i o n s o f James Wempner.
Wempner a l s o a d m i t s r e c e i v i n g t h e c h e c k f r o m MLPCA t h o u g h t h e

mail for collection purposes. These facts constitute a

presentment.

However, with regard to Iverson, there was no

presentment of the subject check to First Bank. Iverson

delivered the subject check, after he received it from

Nuernberger, t o MLPCA f o r a p p l i c a t i o n u p o n h i s d e b t owed t o

MLPCA. The record does not indicate Iverson made any

attempt, a f t e r h e d e l i v e r e d t h e s u b j e c t c h e c k t o MLPCA, to

demand t h a t F i r s t Bank a c c e p t o r p a y t h e s u b j e c t c h e c k . At

this point, the record indicates Iverson considered the

s u b j e c t c h e c k t o b e t h e r e s p o n s i b i l i t y o f MLPCA. Therefore,

because Iverson never presented t h e s u b j e c t check t o F i r s t

Bank w i t h i n t h e m e a n i n g o f 5 30-3-504 (1), h i s c l a i m a g a i n s t

F i r s t Rank u n d e r S 30-4-302 must f a i l .

Finally, a f t e r d e t e r m i n i n g t h e s u b j e c t check was n o t a

"demand item" and MLPCA properly "presented" the subject

c h e c k t o F i r s t Bank f o r p a y m e n t , we c a n a n a l y z e MLPCA's c l a i m

a g a i n s t F i r s t Bank u n d e r S 3 0 - 4 - 3 0 2 ( b ) , MCA. A s noted above,

§ 30-4-302(b) provides a s follows:

[ i ] f an i t e m i s p r e s e n t e d on o r r e c e i v e d
b y a p a y o r bank t h e bank i s a c c o u n t a b l e
f o r t h e amount o f :

(b) any other properly payable item
unless within the time allowed for
a c c e p t a n c e o r payment o f t h a t i t e m t h e
bank e i t h e r a c c e p t s o r p a y s t h e i t e m o r
r e t u r n s it a n d a c c o m p a n y i n g d o c u m e n t s .

In light of this statute, MLPCAfs c l a i m a g a i n s t F i r s t Bank

u n d e r 5 30-4-302 must a l s o f a i l . In the instant case, within

the time allowed for acceptance or payment, First Bank

returned the subject check to MPLCA a t MLPCA's request

b e c a u s e t h e r e was n e v e r e n o u g h money i n N u e r n b e r g e r ' s a c c o u n t

t o c l e a r t h e check. The memorandum s e n t b y MLPCA t o F i r s t
Bank, along with the subject check, specifically allowed

F i r s t Bank t o h o l d t h e c h e c k u n t i l s u f f i c i e n t " f u n d s [were]

available [in] the [ N u e r n b e r g e r ] a c c o u n t " t o pay t h e c h e c k .

F i r s t Bank n e v e r v i o l a t e d t h i s a g r e e m e n t a n d , w i t h i n t h e t i m e

allowed for a c c e p t a n c e o r payment, it r e t u r n e d t h e s u b j e c t

c h e c k t o MLPCA. T h e r e f o r e , F i r s t Bank i s n e i t h e r l i a b l e n o r

a c c o u n t a b l e u n d e r § 30-4-302(b) t o MLPCA.

Although w e find the first issue presented by First

Bank t o be d i s p o s i t i v e o f t h e i n s t a n t c a s e , w e a l s o f e e l i t

i s i m p o r t a n t t o c l a r i f y t h e second i s s u e p r e s e n t e d b y F i r s t

Bank. Under issue #2, the facts which lead us to the

conclusion that the s u b j e c t c h e c k was n o t a "demand item,"

a l s o lead u s t o t h e conclusion t h a t t h e p a r t i e s agreed under

§ 30-4-103, MCA, that the midnight deadline of S 30-4-302
should not apply to the instant case. Section 30-4-103

provides t h a t :

(1) The e f f e c t o f t h e p r o v i s i o n s o f t h i s
c h a p t e r may b e v a r i e d by a q r e e m e n t e x c e p t
t h a t no aureement can d i s c l a i m a b a n k ' s
r e s p o n s i b i l i t y f o r i t s own l a c k o f good
f a i t h o r f a i l u r e t o exercise ordinary
c a r e o r c a n l i m i t t h e m e a s u r e o f damages
f o r such l a c k o r f a i l u r e ; b u t t h e p a r t i e s
may by a g r e e m e n t d e t e r m i n e t h e s t a n d a r d s
by which s u c h r e s p o n s i b i l i t y i s t o b e
measured if such standards are not
manifestly unreasonable. (Emphasis
added. )

Montana h a s r e c o g n i z e d t h a t t h e p a r t i e s may a g r e e t o v a r y t h e

t i m e requirements of $ 30-4-302. I n Sun R i v e r C a t t l e Co.,

Inc. v. M i n e r s Bank o f Montana N.A. ( 1 9 7 4 ) , 164 Mont. 237,

521 P.2d 679, this Court recognized that t h e r e may be an

agreement t o v a r y t h e e f f e c t o f § 30-4-302, b u t on t h e f a c t s

before it i n t h i s c a s e , t h e r e was i n s u f f i c i e n t evidence t o

prove such an agreement. The c o u r t s o f o t h e r j u r i s d i c t i o n s

have reached the same conclusion. See, Western A i r and

R e f r i g e r a t i o n v. M e t r o Bank o f D a l l a s (1979), 599 F.2d. 83.
 We hold there is such an agreement, as provided by
§ 30-4-103, MCA, that varied the responsibility of First Bank
and relieved it under the facts of this case from compliance
with S 30-4-302 (the midnight deadline rule). The memorandum
sent by MLPCA to First Bank, along with the subject check,
specifically provided that "you hereby have our authority to
hold it [the subject check] for longer than the usual 24-hour
period. " Clearly MLPCA1s memorandum varied the
responsibility of First Bank by waiving the midnight deadline
rule in the instant case.
After determining First Bank is not accountable to
either Iverson or MLPCA under § 30-4-302, MCA, the additional
issues raised by First Bank need not be discussed.
The summary judgment of the District Court entered in
favor of Iverson and MLPCA against First Bank is reversed,
and the District Court is hereby ordered to enter summary
judgment in favor of First Bank against Iverson and MLPCA in
accordance with this opinion.
n

i"
Justice
 Mr. Justice Frank B. Morrison, Jr. dissents as follows:
The majority concludes that the "midnight deadline rule"
is not available for recourse against the Bank for the
following reasons: (1) The subject check was not a "demand
item"; (2) the subject check was not presented by Iverson;
(3) the midnight deadline rule was waived. I disagree with
all three conclusions of the majority.
The majority opinion concludes that the check was not a
demand item because it was accompanied by aut-horization to
hold for longer than the usual 24 hour period and to pay when
funds were available. The accompanying memorandum may be
viewed as an attempt by MLPCA to waive the "midnight deadline
rule" but I do not see that as changing the character of what
is clearly a demand item. The majority neglects to quote the
Montana statute defining demand item. Section 30-3-108, MCA,
states:
Instruments payable on demand include those payable
at sight or on presentation and those in which no
time for payment is stated.
The check here was clearly a demand item within the
purview of the statute. Apparently the majority feels that
since the check was to be held until funds became available
that the check was not payable on demand. I would expect
that most people anticipate that a bank will only pay a check
if funds are available. The holding of this Court runs
contrary to the holding in Sun River Cattle Co. v. Miners
Bank of Montana N.A. (1974), 164 Mont. 237, 521 P.2d 679. In
that case the Montana Supreme Court held that checks similar
to the check here at issue were demand items. The Sun River
Cattle Company case is not distinguished by the majority but
is simply ignored.
The majority opinion finds that Iverson made no
presentment in this case. The subject check was made payable
to both PCA and Iverson. There was no endorsement on the
check but a stamped notation on the back stated: "Credit to
the account of the within named payee. Absence of Endorsemnt
Guaranteed." The check was delivered for collection to First
Bank. On its face there is no way of determining whether the
check came from PCA or from Iverson or from both of them. In
view of the broad wording of S 30-3-504, MCA, which states
that presentment is a demand for payment made by or on behalf
of the holder, I fail to see how the majority distinguishes
between presentment made by the PCA and presentment made by
Iverson. Under the holding of the majority I suppose a.11
payees must make a joint presentment before they can have the
protection of 30-4-302.
Finally, I disagree with the majority's holding that
there was a waiver of the midnight deadline rule. First of
all, waiver is not sufficient. Section 30-4-103 states:
(1) The effect of the provisions of this chapter
may be varied by agreement except that no agreement
can disclaim a bank's responsibility for its own
lack of good faith or failure to exercise ordinary
care ... (Emphasis added.)
There must be an agreement. The bank officer who
attempted to enter into an agreement for extension of the
midnight deadline rule lacked authority from the Bank to
enter into such an agreement. In fact, the undisputed
evidence shows the Bank's express policy forbid the bank
officer to enter into such an agreement, The Bank cannot
seek to rely upon the terms of an agreement made by its agent
in violation of the express instructions of the principal
bank.
The following facts are taken from the trial court's
findings :
10. Mr. Wempner received the subject check through
the mail but instead of taking the check to the
collection department of First Bank-Billings
 pursuant to the established policy of First
Bank-Billings for collection as a non-cash item, he
kept the check in his desk in a separate file
titled 'Nuernbergor, Montana Cattle Company'.
(Jacobson Depo., p. 6-9; Wempner Depo., p. 21, p.
67-68, setting forth normal bank policy; Jacobson
Depo., p. 23; Wempner Depo., p. 30, p. 67, 1. 2-3,
establishing that Mr. Wempner kept the subject
check in his desk which violated bank procedure.
13. Mr. Wempner acknowledged that he was very much
aware of the bank's policy, acknowledged he did not
like the limitations mandated by the midnight
deadline or the policy of the bank. (Wempner
Depo., p. 67-69, p. 62-63, p. 66, p. 15-116.
14. Mr. Wempner had no authority to change said
bank policy or to request or accept a waiver of
said policy. The MLPCA, through Alice Tyanich, was
not aware of the policy of First Bank-Billings.
(Jacobson Depo., p. 8; Wempner Depo., p. 62;
Affidavit of Alice Tyanich, Appendix "C".)
It is clear that Wempner's attempt to effectuate an
agreement for a waiver of the midnight deadline rule was
clearly outside the scope of his authority; no agreement was
created; the Bank cannot rely upon § 30-4-103.
Furthermore, if such an agreement had been made, it
would only extend the midnight deadline rule if the Bank
acted in good faith. The trial court found that the Bank was
acting to benefit its depositor at the expense of the payees
on the check. This of course is evidence of lack of good
faith but unfortunately is ignored by the majority opinion.
For the reasons mentioned herein I would affirm the
District Court.