89. Warranty Of Prior Endorsements On Checks

Treasury regulations provide that a bank presenting a check issued by the United States for payment is deemed to have guaranteed prior endorsements. 31 C.F.R. § 240.5. Suit should be brought against the presenting bank, which is liable on its warranty of the prior endorsement. National Metropolitan Bank v. United States, 323 U.S. 454 (1945). The UCC does not control in such situations. See United States v. First National Bank of Atlanta, Ga., 441 F.2d 906 (5th Cir. 1971). Rather, federal law controls the rights and duties of the United States on its commercial paper. See Clearfield Trust Co. v. United States, 318 U.S. 363 (1943).

If the Secretary of the Treasury determines that a Treasury check has been paid over a forged or unauthorized endorsement, within a one year period beginning on the date of payment, the Secretary may reclaim the amount of the check from the presenting bank or any other endorser that has breached its guarantee of endorsements. A civil action may be brought by the United States against an endorser, transferor, depository or a fiscal agent on a forged or unauthorized signature or endorsement on a check issued by the United States within a one year period, which may be extended an additional three years if written notice is given an endorser within the one year time frame. 31 U.S.C. § 3712(a). In the event of fraudulent concealment, suit may be commenced within two years after discovery of the cause of action, 31 U.S.C. § 3712(b).

[cited in JM 4-4.533]