## Facts

- A livestock auction company sold 61 head of cattle to a meat-packing company and received a $14,706.90 check dated September 24, 1962.
- The seller deposited the check the same day with its depositary bank in Davenport, Iowa.
- The check reached the drawee/payor bank in Rockford, Illinois on Thursday, September 27, 1962.
- The drawer’s account lacked sufficient funds; the payor bank held the check based on assurances that funds would be deposited.
- On Tuesday morning, October 2, 1962, the payor bank stamped the check “not sufficient funds,” returned it through banking channels, and sent notice of dishonor.
- The depositary bank received the returned check on October 4, 1962; the check was never paid.
- The drawer later entered bankruptcy; the seller sued the payor bank for the check amount based on the bank’s late return.
- The trial court, on stipulated facts, entered judgment against the payor bank under U.C.C. § 4-302; the payor bank appealed.

## Issues

1. Whether the payor bank became “accountable” for the amount of the check under U.C.C. § 4-302 by retaining the item beyond the midnight deadline without timely paying, returning, or giving notice of dishonor.
2. Whether § 4-302 imposes strict liability for the face amount of the item or only liability for damages tied to lack of ordinary care.
3. Whether § 4-302 is unconstitutional under due process or equal protection principles, and whether any defect in related U.C.C. provisions affects § 4-302.
4. Whether waiver or estoppel barred the seller from enforcing § 4-302 against the payor bank.

## Decision

- The Supreme Court of Illinois affirmed the judgment for the seller.
- The court held the payor bank was “accountable” under § 4-302 because it kept the check beyond the midnight deadline without timely paying, returning, or giving notice of dishonor.
- The court construed “accountable” to mean liability for the full amount of the check, not merely consequential damages.
- The court rejected constitutional challenges to § 4-302 and held that any potential invalidity in other U.C.C. provisions was severable and did not affect § 4-302.
- The court rejected waiver and estoppel defenses because the seller did not induce the payor bank’s delay; the bank chose to hold the item based on the drawer’s assurances.

## Legal Principles

- Under U.C.C. § 4-302, a payor bank that retains a demand item beyond its “midnight deadline,” or fails within that time to pay, return, or send notice of dishonor, is accountable for the amount of the item.
- “Accountable” in § 4-302 creates strict liability for the face amount once the deadline is missed, rather than a negligence-based damages measure.
- Legislatures may impose strict liability on payor banks for late return to support speed and certainty in check collection; such a classification is rational and does not violate due process or equal protection.
- Severability principles allow § 4-302 to remain effective even if a related U.C.C. provision is challenged or invalid.
- Waiver or estoppel requires conduct that forfeits rights or misleads the opposing party; a payor bank’s independent decision to delay action does not establish these defenses against § 4-302 liability.

## Conclusion

The court held that a payor bank that keeps a check past the U.C.C. § 4-302 midnight deadline without timely dishonor is strictly liable for the check’s full amount, and it upheld the statute against constitutional and equitable defenses where the bank’s delay was its own choice.


Rock Island Auction Sales, Inc. v. Empire Packing Co., 32 Ill. 2d 269, 204 N.E.2d 721 (Ill. 1965)