O.C.G.A. § 11-4-402 (2019)
Bank’s liability to customer for wrongful dishonor; time of determining insufficiency of account
(a) Except as otherwise provided in this article, a payor bank wrongfully dishonors an item if it dishonors an item that is properly payable, but a bank may dishonor an item that would create an overdraft unless it has agreed to pay the overdraft. (b) A payor bank is liable to its customer for damages proximately caused by the wrongful dishonor of an item. Liability is limited to actual damages proved and may include damages for an arrest or prosecution of the customer or other consequential damages. Whether any consequential damages are proximately caused by the wrongful dishonor is a question of fact to be determined in each case. (c) A payor bank’s determination of the customer’s account balance on which a decision to dishonor for insufficiency of available funds is based may be made at any time between the time the item is received by the payor bank and the time that the payor bank returns the item or gives notice in lieu of return, and no more than one determination need be made. If, at the election of the payor bank, a subsequent balance determination is made for the purpose of reevaluating the bank’s decision to dishonor the item, the account balance at that time is determinative of whether a dishonor for insufficiency of available funds is wrongful.
History
Code 1933, § 109A-4-402, enacted by Ga. L. 1962, p. 156, § 1; Ga. L. 1996, p. 1306, § 13.
Annotations
Law reviews. For annual survey on law of torts, see 43 Mercer L. Rev. 395 (1991).
JUDICIAL DECISIONS Editor’s notes. - In light of the similarity of the statutory provisions, decisions under former Code 1933, § 13-2044 are included in the annotations for thisCode section. Depositor’s duty to minimize damages. - A bank is liable for damages proximately caused by its wrongful handling of an item, but depositor has obligation to exercise reasonable care to rectify situation and minimize the damage done. If depositor fails in own obligations once depositor has notice, depositor is precluded from recovery against the bank. Donmoyer v. Columbus Bank & Trust Co., 151 Ga. App. 38, 258 S.E.2d 725, 1979 Ga. App. LEXIS 2420 (1979). President of corporate depositor held not “customer” of bank. - Corporation president, who was one of four shareholders who guaranteed the corporation’s debt to a bank, which viewed the corporation as its depositor, was not a “customer” of the bank and could not maintain an action against the bank for wrongful dishonor. Thrash v. Georgia State Bank, 189 Ga. App. 21, 375 S.E.2d 112, 1988 Ga. App. LEXIS 1294 (1988). Effect of general deposit. - Deposit of money in bank on general deposit creates relationship of creditor and debtor between bank and depositor and debtor bank can discharge its liability only by paying money to depositor, or as directed by depositor, and cannot discharge its liability by accepting and paying forged checks drawn in name of depositor against the bank. White v. Georgia R.R. Bank & Trust Co., 71 Ga. App. 78, 30 S.E.2d 118, 1944 Ga. App. LEXIS 284 (1944) (decided under former Code 1933, § 13-2044). Drawer’s knowledge of insufficient funds. - In an action by the drawer of a check against a bank for damages arising
from drawer’s arrest and prosecution for issuing a bad check based on the bank’s negligent failure to stop payment and wrongful dishonor of the check, evidence that the drawer knew the check would not be honored was sufficient probable cause for the arrest and prosecution and, thus, the bank could not be held accountable for such damages. Karrer v. Georgia State Bank, 215 Ga. App. 654, 452 S.E.2d 120, 1994 Ga. App. LEXIS 1341 (1994), cert. denied, No. S95C0606, 1995 Ga. LEXIS 541 (Ga. Apr. 6, 1995). Drawee bank bears loss for payment of forged check. - A bank is bound to know signatures of its customers, and it cannot legally charge an amount paid on forged check to account of depositor whose name was forged, but must be considered as having made payment from its own funds. White v. Georgia R.R. Bank & Trust Co., 71 Ga. App. 78, 30 S.E.2d 118, 1944 Ga. App. LEXIS 284 (1944) (decided under former Code 1933, § 13-2044). Burden of proof. - On motion for summary judgment, where a bank customer introduced proof by affidavit that the payee of a wrongfully dishonored check would not have accepted any untimely tender of the amount owed after the check was dishonored, the bank had the burden of establishing as a matter of law that the damages the customer suffered were not the result of the bank’s wrongful dishonor of the check. Malak v. First Nat’l Bank, 195 Ga. App. 105, 393 S.E.2d 267, 1990 Ga. App. LEXIS 426 (1990). Punitive damages. - Wrongful dishonor may be considered a tort, for which punitive damages may be imposed. Fidelity Nat’l Bank v. Kneller, 194 Ga. App. 55, 390 S.E.2d 55, 1989 Ga. App. LEXIS 1693 (1989).
RESEARCH REFERENCES Am. Jur. 2d. 11 Am. Jur. 2d, Banks and Financial Institutions, §§ 940, 949 et seq.
Am. Jur. Proof of Facts. Wrongful Dishonor of Check, 23 POF2d 407.
C.J.S. 9 C.J.S., Banks and Banking, §§ 341, 380. U.L.A. Uniform Commercial Code (U.L.A.) § 4402. ALR. Duty of bank to prior parties to the paper to apply deposit to credit of endorser on paper owned by bank, 37 A.L.R. 578. Bank’s right to recover back money paid on stopped check, 39 A.L.R. 1239. Rights and duties where check is presented to bank which exceeds balance on deposit, 62 A.L.R. 187.
Excessiveness or inadequacy of damages for wrongful failure of bank to pay check, 65 A.L.R. 1311. Liability for negligently causing arrest or prosecution of another, 99 A.L.R.3d 1113. What constitutes wrongful dishonor of check rendering payor bank liable to drawer under UCC § 4-402, 88 A.L.R.4th 568. Who may recover for wrongful dishonor of check under UCC § 4-402, 88 A.L.R.4th 613. Damages recoverable for wrongful dishonor of check under UCC § 4-402, 88 A.L.R.4th 644.