Payment systems and other financial transactions : cases, materials, and problems / Ronald J. Mann.
2011
KF957 .M36 2011 (Map It)
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Author
Mann, Ronald J., 1961-
Title
Payment systems and other financial transactions : cases, materials, and problems / Ronald J. Mann.
Published
Austin : Wolters Kluwer Law & Business ; New York, NY : Aspen Publishers, [2011]
Copyright
©2011
Call Number
KF957 .M36 2011
Edition
Fifth edition.
ISBN
9780735507173 (hbk. : alk. paper)
0735507171 (hbk. : alk. paper)
9780735509825 (pbk. ; teacher's manual)
0735509824 (pbk. ; teacher's manual)
0735507171 (hbk. : alk. paper)
9780735509825 (pbk. ; teacher's manual)
0735509824 (pbk. ; teacher's manual)
Description
xxiv, 592 pages : illustrations ; 26 cm + teacher's manual.
System Control No.
(OCoLC)694080498
Note
Includes index.
Series
Aspen casebook series.
Record Appears in
Onsite Print Resources
Shared Records
All Resources
Casebooks
Shared Records
All Resources
Casebooks
Table of Contents
Acknowledgments
xxi
Preface to the Fifth Edition
xxiii
pt. One
Payment Systems
1
Introduction to Part One
3
Typologies of Payment Systems
4
Cash and Noncash
4
Figure 1.1
Value of Cash and Noncash Retail Transactions
4
Paper and Electronic
5
Figure 1.2
Share of Value of Checks in Noncash Transactions
6
In-Person and Remote
7
Universal and Networked
8
Developing Payment Systems
9
Figure 1.3
Consumer Payments Systems over Time
9
ch. 1
Checking Accounts as the Paradigm Payment System
13
Assignment 1
The Basic Checking Relationship and the Bank's Right to Pay Checks
13
A.
The Basic Relationship
13
Figure 1.1
Payment by Check
13
B.
The Bank's Right to Pay
15
1.
When Is It Proper for the Bank to Pay?
15
a.
Overdrafts
16
McGuire v. Bank One, Louisiana, N.A.
16
b.
Stopping Payment
19
2.
Remedies for Improper Payment
21
McIntyre v. Harris
22
Problem Set 1
24
Assignment 2
The Bank's Obligation to Pay Checks
26
A.
When Are Funds Available for Payment?
26
1.
Time of Evaluation
26
2.
Availability of Funds
27
First National Bank v. Colonial Bank
33
B.
Wrongful Dishonor: What Happens If the Bank Refuses to Pay?
35
Maryott v. First National Bank
36
Problem Set 2
42
Assignment 3
Risk of Loss in the Checking System---The Basic Framework
45
A.
Nonpayment
45
Figure 3.1
Indorser Liability
47
B.
Forged Signatures
47
1.
Forged Drawers' Signatures and the Rule of Price v. Neal
48
a.
What If the Payor Bank Pays the Forged Check?
48
Figure 3.2
Presentment and Transfer Warranties
49
Decibel Credit Union v. Pueblo Bank & Trust Company
50
b.
What If the Payor Bank Dishonors the Forged Check?
53
The Special Case of Telephone Checks
54
2.
Forged Indorsements
55
a.
What If the Payor Bank Dishonors the Check Because of the Forged Indorsement?
55
b.
What If the Payor Bank Pays the Check Despite the Forged Indorsement?
56
c.
Conversion
57
C.
Alteration
58
Problem Set 3
58
Assignment 4
Risk of Loss in the Checking System --- Special Rules
61
A.
Negligence
61
Bank of Texas v. VR Electric, Inc.
61
B.
Theft by Employees
70
Cable Cast Magazine v. Premier Bank
70
Halifax Corp. v. Wachovia Bank
73
C.
Impostors
76
State Security Check Cashing, Inc. v. American General Financial Services (DE)
76
Problem Set 4
87
Assignment 5
Collection of Checks I: Forward Collection and Returned Checks
89
A.
The Payor Bank's Obligation to the Payee
89
Outdoor Technologies, Inc. v. Allfirst Financial, Inc.
89
B.
The Process of Collection
95
1.
Obtaining Payment Directly
95
Figure 5.1
Direct Presentment
96
2.
Obtaining Payment Through Intermediaries
96
a.
Payee/Customer to Depository Bank
97
b.
Depositary Bank to Payor Bank
97
i.
Multilateral Arrangements (Clearinghouses)
98
Figure 5.2
Clearinghouse Collection
100
ii.
Bilateral Arrangements (Direct-Send and Correspondent Clearing)
102
Figure 5.3
Direct-Send Collection
103
iii.
Collection Through the Federal Reserve System
103
Figure 5.4
Federal Reserve Collection
104
NBT Bank v. First National Community Bank
107
United States Bank N.A. v HMA, L.L.C.
117
Problem Set 5
124
Assignment 6
Collection of Checks II: Bank Statements and Check 21
128
A.
Bank Statements
128
Figure 6.1
MICR Line
129
Stowell v. Cloquet Co-op Credit Union
131
B.
Depositary-Bank Truncation and the Check 21 Act
138
Wachovia Bank, N.A. v. Foster Banchshares, Inc.
139
Figure 6.2
Check Processing Under Check 21
142
Figure 6.3
Substitute Check
143
Triffin v. Third Federal Savings Bank
145
Problem Set 6
148
ch. 2
Electronic Payments
151
Assignment 7
The Credit-Card System
151
A.
The Issuer---Cardholder Relationship
151
B.
Using the Credit-Card Account
154
C.
Collection by the Payee
155
1.
The Mechanics of Collection
155
Figure 7.1
Payment by Credit Card
157
Figure 7.2
Dividing the Credit-Card Dollar
158
2.
Finality of Payment
158
Hyland v. First USA Bank
160
Citibank (South Dakota), N. A. v. Mincks
162
Problem Set 7
173
Assignment 8
Error and Fraud in Credit-Card Transactions
175
A.
Erroneous Charges
175
Belmont v. Associates National Bank (Delaware)
176
B.
Unauthorized Charges
186
DBI Architects, P.C. v. American Express Travel-Related Services Co.
187
New Century Financial Services v. Dennegar
193
Problem Set 8
197
Assignment 9
Debit Cards
200
A.
Payment with a Debit Card
200
1.
Establishing the Debit-Card Relationship
201
2.
Transferring Funds with a Debit Card
202
3.
Collection by the Payee
202
a.
PIN-Based ("Online") Debit Cards
203
b.
PIN-Less ("Offline") Debit Cards
203
B.
Error and Fraud in Debit-Card Transactions
205
1.
Erroneous Transactions
205
2.
Fraudulent Transactions
206
Hospicomm, Inc. v. Fleet Bank, N.A.
210
Heritage Bank v. Lovett
214
Problem Set 9
216
Assignment 10
Electronic Checks and Automated Clearing House Payments
219
A.
True Electronic Checks
219
B.
ACH Transfers
221
1.
The Basics of ACH Transfers
221
a.
The Basic Terminology
222
b.
The Mechanics
222
Figure 10.1
ACH Entries
223
c.
Types of ACH Entries
225
d.
Finality, Error, and Fraud in ACH Transfers
225
Security First Network Bank v. C.A.P.S., Inc.
227
2.
POS Conversion
233
Figure 10.2
POS Conversion
235
C.
Telephone-Initiated Payments
236
Problem Set 10
237
Assignment 11
The Wire-Transfer System
239
A.
Introduction
239
B.
How Does It Work?
240
1.
Initiating the Wire Transfer: From the Originator to the Originator's Bank
240
Figure 11.1
Payment by Wire Transfer
241
Trustmark Ins. Co. v. Bank One
242
Banco de la Provincia v. BayBank Boston N.A.
246
2.
Executing the Transfer: From the Originator's Bank to the Beneficiary's Bank
250
a.
Bilateral Systems (Including SWIFT)
251
b.
CHIPS
252
c.
Fedwire
252
Figure 11.2
Multilateral Netting on CHIPS
253
Figure 11.3
Sample Fedwire Message
254
3.
Completing the Funds Transfer: From the Beneficiary's Bank to the Beneficiary
256
C.
Discharge of the Originator's Underlying Obligation
258
D.
Finality of Payment
259
Aleo International, Ltd. v. Citibank, N.A.
259
Problem Set 11
260
Assignment 12
Error in Wire-Transfer Transactions
264
A.
Recovering from Parties in the System
264
1.
Errors by the Originator
265
Phil & Kathy's Inc. v. Safra Nat'l Bank
265
2.
Errors in the System
269
a.
Sending Excessive Funds
269
b.
Sending Inadequate Funds
270
c.
Bank-Statement Rule
272
3.
Circuity of Recovery
272
Grain Traders, Inc. v. CitiBank, N.A.
272
B.
Recovering from the Mistaken Recipient
277
Problem Set 12
278
Assignment 13
Advanced Topics in Wire-Transfer Transactions
281
A.
Fraud
281
B.
System Failure
284
C.
The Nature of the Wire Transfer
285
Shipping Corp. of India, Ltd. v. Jaldhi Overseas PTE Ltd.
285
Regions Bank v. The Provident Bank, Inc.
290
Problem Set 13
296
ch. 3
Developing Payment Systems
299
Mark A. Lemley & David McGowan, Legal Implications of Network Economic Effects
299
Ronald J. Mann, Making Sense of Payments Policy in the Information Age
304
Assignment 14
Internet Payments
309
A.
Credit Cards on the Internet
309
1.
Processing the Transactions
309
2.
Problems
310
a.
Fraud
310
b.
Privacy
313
c.
Micropayments
314
B.
Debit Cards on the Internet
315
C.
ACH Transfers (WEB Entries)
316
D.
Foreign and Cross-Border Payments
317
Figure 14.1
ACH "Checks"
318
E.
A Note on Mobile Payments
319
Problem Set 14
320
Assignment 15
P2P EBPP
322
A.
The Basics
322
Ronald J. Mann, Regulating Internet Payment Intermediaries
322
B.
State Regulation
332
C.
Foreign and Cross-Border Transfers
332
Problem Set 15
333
Assignment 16
Prepaid Cards and Electronic Money
336
A.
Portability: Prepaid Cards
337
1.
The Basics
337
2.
Legal Issues
339
a.
EFTA
339
b.
Other Issues
340
B.
Remote Transactions: Internet-Capable Electronic Money
341
1.
Obtaining E-Money
342
2.
Spending E-Money
342
3.
Clearing and Settling E-Money Transactions
343
Figure 16.1
Using Electronic Money
344
4.
Problems with E-Money Systems
345
a.
Privacy
345
b.
Duplicate Spending
346
c.
Forged E-Coins
346
5.
Legal Issues with E-Money
347
Problem Set 16
348
pt. Two
Credit Enhancement and Letters of Credit
351
Introduction to Part Two
353
ch. 4
Credit Enhancement
355
Assignment 17
Credit Enhancement by Guaranty
355
A.
The Role of Guaranties
355
B.
Rights of the Creditor Against the Guarantor
358
In re PTI Holding Corp. (Homestead Holdings, Inc. v. Broome & Wellington)
359
Problem Set 17
368
Promissory Note
370
Thomas S. Hemmendinger, Hillman on Commercial Loan Documentation
374
Assignment 18
Protections for Guarantors
379
A.
Rights of the Guarantor Against the Principal
379
1.
Performance
379
2.
Reimbursement
379
Figure 18.1
Rights of the Guarantor
380
3.
Subrogation
380
Chemical Bank v. Meltzer
381
B.
Rights of the Guarantor Against the Creditor
386
1.
Suretyship Defenses
386
2.
Waiver of Suretyship Defenses
388
Data Sales Co. v. Diamond Z Manufacturing
389
C.
Bankruptcy of the Guarantor
394
Trimec, Inc. v. Zale Corporation
394
Problem Set 18
396
ch. 5
Letters of Credit
399
Assignment 19
Letters of Credit---The Basics
399
A.
The Underlying Transaction
400
Figure 19.1
Irrevocable Commercial Letter of Credit
401
B.
Advising and Confirming Banks
403
C.
The Terms of the Credit
403
Figure 19.2
Issuing the Letter of Credit
404
D.
Drawing on the Credit
406
Samuel Rappaport Family Partnership v. Meridian Bank
407
Carter Petroleum Products, Inc. v. Brotherhood Bank & Trust Co.
411
LaBarge Pipe & Steel Co. v. First Bank
415
E.
Reimbursement
426
Figure 19.3
Payment with a Letter of Credit
426
Banco Nacional De Mexico v. Societe Generale
427
Problem Set 19
430
Assignment 20
Letters of Credit---Advanced Topics
433
A.
Error and Fraud in Letter-of-Credit Transactions
433
1.
Wrongful Honor
433
2.
Wrongful Dishonor
435
3.
Fraud
437
a.
Forged Drafts
437
b.
Fraudulent Submissions by the Beneficiary
438
B.
Assigning Letters of Credit
439
C.
Choice-of-Law Rules
441
Problem Set 20
442
Assignment 21
Third-Party Credit Enhancement---Standby Letters of Credit
444
A.
The Standby Letter-of-Credit Transaction
444
Figure 21.1
Standby Letters of Credit
446
Nobel Insurance Co. v. First Natl. Bank
447
Figure 21.2
Form Standby Letter of Credit
449
Wood v. State Bank
451
B.
Problems in Standby Letter-of-Credit Transactions
453
1.
Bankruptcy of the Applicant
453
In re Ocana
454
2.
The Issuer's Right of Subrogation
456
CCF, Inc. v. First National Bank (In re Slamans)
456
Problem Set 21
458
pt. Three
Liquidity Systems
463
ch. 6
Negotiability
465
Assignment 22
Negotiable Instruments
465
A.
Negotiability and Liquidity
465
B.
A Typical Transaction
467
Figure 22.1
Sample Negotiable Draft
467
C.
The Negotiability Requirements
468
Figure 22.2
The Players in a Negotiable Draft Transaction
469
1.
The Promise or Order Requirement
469
Figure 22.3
The Negotiability Requirements
470
2.
The Unconditional Requirement
471
DBA Enterprises, Inc. v. Findlay
471
3.
The Money Requirement
474
4.
The Fixed-Amount Requirement
475
Nagel v. Cronebaugh
475
5.
The Payable-to-Bearer-or-Order Requirement
477
Sirius LC v. Erickson
479
6.
The Demand or Definite-Time Requirement
480
7.
The No-Extraneous-Undertakings Requirement
481
Problem Set 22
482
Assignment 23
Transfer and Enforcement of Negotiable Instruments
484
A.
Transferring a Negotiable Instrument
484
1.
Negotiation and Status as a Holder
484
2.
Special and Blank Indorsements
485
3.
Restrictive and Anomalous Indorsements
487
B.
Enforcement and Collection of Instruments
487
1.
The Right to Enforce an Instrument
487
In re Kang Jim Hwang
488
2.
Presentment and Dishonor
493
3.
Defenses to Enforcement
494
Turman v. Ward's Home Improvement, Inc.
494
C.
Liability on an Instrument
495
Figure 23.1
Liability on an Instrument
497
D.
The Effect of the Instrument on the Underlying Obligation
497
McMahon Food Corp. v. Burger Dairy Co.
499
Problem Set 23
502
Assignment 24
Holders in Due Course
505
A.
Holder-in-Due-Course Status
505
1.
The Requirements for Holder-in-Due-Course Status
505
2.
Rights of Holders in Due Course
507
State Street Bank & Trust Co. v. Strawser
509
3.
Payment and Discharge
511
4.
Transferees Without Holder-in-Due-Course Status
513
B.
The Fading Role of Negotiability
514
1.
The Declining Use of Negotiable Instruments
514
2.
The Decreasing Relevance of Negotiability to Negotiable Instruments
516
Problem Set 24
518
Assignment 25
Documents of Title
521
A.
The Mechanics of Documents of Title
521
1.
Delivering Goods to a Carrier
521
2.
Recovering Goods from a Carrier
523
a.
Nonnegotiable Documents
523
Figure 25.1
Negotiable Bill of Lading
524
b.
Negotiable Documents
525
B.
Transactions with Documentary Drafts
526
1.
The Role of Documentary Draft Transactions
526
Figure 25.2
Documentary Collection: Parties/Document Flow
527
2.
Steps in the Transaction
528
a.
Preliminaries---Sale Contract, Shipment, and Issuance of the Draft
528
b.
Processing by the Remitting Bank
528
Figure 25.3
Sight Draft for Documentary Collection
529
c.
Processing by the Presenting Bank
529
Figure 25.4
Form Collection Document
530
C.
Credit Transactions and Banker's Acceptances
531
Figure 25.5
Banker's Acceptance Transaction
532
Korea Export Insurance Corp. v. Audiobahn, Inc.
533
Problem Set 25
535
ch. 7
Securities
539
Assignment 26
Securities
539
A.
Securitization and Liquidity
539
B.
The Rise of Securitization
540
C.
Investment Securities and Article 8
541
Davis v. Stern, Agee & Leach, Inc.
542
1.
The Subject Matter: What Is a Security?
547
2.
The Obligation of the Issuer
549
3.
The Two Holding Systems
551
a.
The Direct Holding System
551
i.
Making the Transfer Effective Against the Issuer
551
ii.
The Effect of a Transfer on Third Parties
552
Meadow Homes Development Corp. v. Bowens
553
b.
The Indirect Holding System
557
i.
The Basic Framework
557
ii.
Rights Against the Intermediary
559
iii.
Rights Against Third Parties
560
Problem Set 26
563
Table of Cases
567
Table of Statutes and Regulations
571
Table of Uniform Commercial Code
577
Index
585