Okla. Stat. tit. 12A § 4-405
Okla. Stat. tit. 12A, § 4-405
Oklahoma Code Comment
1. Death and incompetence of the drawer are among the "four legals" that traditionally have required dishonor of an item, subject to certain limitations in this Section that are generally designed to permit payment before or within a reasonable time after the bank receives notice of the customer's death or adjudication of incompetence. Sub section 4-303(a)(5) permits the bank to establish a "cut-off" time governing the effective date of such a notice; any subsequent notice will be deemed received the next banking day.
Notice is effective to preclude payment only if it is received far enough in advance of the time of payment to permit the bank a reasonable opportunity to act on the notice before the payment occurs. The time the item is received will be determined under Section 4-108, and the time of payment will be determined under Section 4-215. The process of posting is no longer a means of final payment under revised sub section 4-215(a). Once payment is final under sub section 4-215(a), it cannot be reversed on account of any of the four legals or at the request of any claimant. See Sunshine v. Bankers Trust Co., 34 N.Y.2d 404, 314 N.E.2d 860, 358 N.Y.S.2d 113 (1974). Even with notice, the bank may continue to pay for a 10-day period unless ordered to stop payment by a person claiming an interest in the account. Cirar v. Bank of Hartshorne, 567 P.2d 96 (Okla. 1977).
2. Section 4-405 does not displace the adverse claims procedure in the Oklahoma Banking Code, 6 O.S. § 905 (1970), which permits a party not authorized to draw on the account to assert an adverse claim against the account by procuring a restraining order, injunction or other judicial order, or an indemnity bond acceptable to the bank. Compare UCC § 3-602(b). A joint tenant or similar account holder is not an adverse claimant for purposes of Section 905 . Fortune v. City Nat'l Bank & Trust Co., 671 P.2d 69 (Okla. Ct. App. 1983). Title 6 O.S. § 901 (1991) permits the bank to allow withdrawal by a surviving joint tenant after the death of a co-tenant, and Section 4-405 does not change this rule.
Notwithstanding the above statutory provisions, a depository institution is prohibited by 68 O.S. § 812 (1984) from releasing certain funds in excess of $2,500 after receiving notice that the account holder has died. The bank must give at least 10 days' prior notice to the Oklahoma Tax Commission before avowing disposition of the funds, and must retain sufficient funds to pay any estate tax liability unless the Tax Commission has provided a written release. Failure to comply makes the bank liable for any tax due. However, the bank can release up to $175,000 in the aggregate to joint tenants who are lineal descendants of the deceased.
3. A bank's ability to freeze an account upon notice of the customer's bankruptcy in order to preserve the bank's right to set off funds in the account against debts owed to the bank remains unclear. See UCC § 4-401, Oklahoma Comments.
4. The question may arise whether this section conflicts with 6 O.S. § 905 (1970), if the bank recognizes the stop payment order of a person "claiming an interest in the account." Section 905 provides that an adverse claimant cannot "cause" a bank to "recognize said adverse claimant" unless the adverse claimant obtains a restraining order, after serving the owner of the account, or posts a bond. When a depositor dies or becomes incompetent, the bank may cease honoring items drawn against the account immediately. Section 4-405 merely authorizes the bank to continue to pay for 10 days unless an adverse claimant orders the bank to stop payment. If the bank chooses to honor the order to stop payment, and prudence dictates that it will, then the bank will have simply ceased taking advantage of sub section 4-405(b), which is optional to the bank in the first instance. See Lietzman v. Ruidoso State Bank, 113 N.M. 480, 827 P.2d 1294 (1992).