## Facts

- Essex Construction Corporation deposited a $120,710.70 check into its account at Industrial Bank of Washington, drawn by East Side Manor Cooperative Association on an account at Signet Bank.
- Industrial provisionally credited Essex’s account, but provided written notice that all but $100 would not be available for withdrawal until April 6, 1995, based on a large-deposit hold.
- On April 6, 1995, Signet notified Industrial that the drawer had stopped payment on the check.
- Industrial placed a permanent hold on the deposited amount and revoked the provisional credit.
- On April 7, 1995, Industrial mailed Essex written notice that the check had been returned and enclosed the returned item.
- On April 7, 1995, Essex wrote two checks against what it believed were available funds; Essex received Industrial’s mailed notice on April 11, 1995.
- Essex sued Industrial for the check amount, alleging violations of the Expedited Funds Availability Act (and Regulation CC) and District of Columbia UCC provisions governing notice of dishonor.

## Issues

1. Whether a depository bank violates the EFAA and Regulation CC by not making funds available on a stated availability date when the deposited check is later dishonored by stop-payment.
2. Whether the bank failed to provide timely and adequate notice of dishonor under the District of Columbia UCC by mailing written notice and returning the item the day after learning of the stop-payment.
3. If notice were untimely, whether the depositor could recover the face amount of the dishonored check rather than only losses actually caused by late notice.

## Decision

- The court granted summary judgment for Industrial and denied Essex’s motions.
- The court held Industrial did not violate the EFAA or Regulation CC because the availability schedule and large-deposit exception did not require the bank to convert a provisional credit into final payment when the item was dishonored.
- The court held Industrial did not violate the District of Columbia UCC because mailing written notice and returning the check the day after learning of the stop-payment was commercially reasonable and not unduly delayed.
- The court further stated that even if notice had been late, recovery would be limited to damages actually caused by the delay, not automatically the check’s face amount.

## Legal Principles

- Funds availability deadlines under the EFAA and Regulation CC govern when provisional credit may be withdrawn, but do not require a bank to honor a deposit as finally paid if the underlying item is dishonored.
- A bank may extend availability for large deposits if it gives the customer the required notice, and may revoke provisional credit upon dishonor.
- Under the UCC, a bank revoking a provisional settlement must notify the customer of the facts or return the item; notice of dishonor may be given by any commercially reasonable means, including written notice by mail.
- For allegedly late notice of dishonor, the depositor’s remedy is limited to actual damages caused by the delay; the bank is not treated as a guarantor of the check’s amount based solely on notice timing.

## Conclusion

The court held that the bank lawfully applied a large-deposit hold, could revoke provisional credit after a stop-payment dishonor, and provided timely, commercially reasonable notice by mailing written notice and returning the check, with any notice-related recovery limited to proven, causally linked damages.


Essex Constr. Corp. v. Indus. Bank of Wash., Inc., 913 F. Supp. 416 (D. Md. 1995)