Wrongfully Dishonored Checks. Robert Parrett was the principal shareholder, president, and chief ...

Wrongfully dishonored checks
No. The appellate court held that Parrett, who had personally guaranteed corporate obligations to the bank, was a bank customer and, as such, had standing to sue the bank for the wrongful dishonor of the check. Under UCC 4-402, A payor bank is liable to its customer for damages proximately caused by the wrongful dishonor of an item. The purpose of UCC 4-402 is to hold banks accountable for wrongful dishonors of their customers' checks. To interpret the word customer to exclude partners and corporate shareholders at all times and in all circumstances was to misread the statute and its intent. Here, the parties' business re-lationship, which included Parrett's personal guaranty for P & P Machinery's obligations to the bank, was such that it was foreseeable that dishonoring the corporation's check would reflect directly on Parrett. . . . Since the consequences of the wrongful dishonor fell upon Parrett, it would elevate form over substance to say that he was not the bank's customer' within the meaning of UCC 4-402. (This case was decided before the revisions to Articles 3 and 4, but the result would likely be the same under those revisions.)

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