## Facts

- HMA, L.C., a real estate development business, deposited a large check (the “Woodson check”) into its U.S. Bank account.
- After the deposit, HMA wrote a check on the same account payable to Barnes Bank; U.S. Bank honored that check.
- The drawer of the Woodson check issued a stop-payment order, and the check was returned unpaid through the Federal Reserve system, leaving HMA’s account unable to cover amounts already paid out.
- U.S. Bank charged back the Woodson check, swept remaining funds in the account, treated the account as overdrawn, and sought recovery of the deficiency.
- U.S. Bank sued to recover the overdraft and foreclose deeds of trust that secured HMA’s obligations; the district court granted summary judgment to U.S. Bank.
- On appeal, HMA argued only that (1) the paying bank’s return was late under the UCC “midnight deadline,” barring charge-back and overdraft treatment, and (2) venue should have been transferred from Salt Lake County to Utah County.

## Issues

1. Whether the paying bank failed to return the dishonored check by the UCC “midnight deadline,” thereby preventing U.S. Bank from charging back the deposited item and treating the account as overdrawn.
2. Whether the district court erred or abused its discretion by denying HMA’s motion to change venue from Salt Lake County to Utah County.

## Decision

- The Utah Supreme Court affirmed summary judgment for U.S. Bank.
- The court held the paying bank timely returned the check within the applicable “midnight deadline” as computed under UCC banking-day rules, including intervening nonbanking days.
- The court held that timely dispatch on the return path (including return through the Federal Reserve as intermediary) satisfied the midnight-deadline requirement for return, preserving the depositary bank’s ability to charge back a dishonored item.
- The court held U.S. Bank was not barred from charging back the Woodson check, debiting HMA’s account, and pursuing remedies for the resulting overdraft and secured obligations.
- The court held the district court did not err in denying the venue transfer because Salt Lake County was a proper venue and the decision fell within the court’s discretion.

## Legal Principles

- A paying bank avoids liability for wrongful retention of a dishonored check by meeting the UCC “midnight deadline” and complying with return and notice requirements; the deadline is measured to the next banking day after receipt, excluding nonbanking days.
- For midnight-deadline purposes, the legally significant act is timely dispatch of the item on its return route, not the precise time of receipt by the depositary bank, when return is made through appropriate channels that ensure prompt return.
- When a deposited item is returned dishonored after provisional settlement, the depositary bank may charge back the item and debit the customer’s account, including creating and collecting an overdraft consistent with applicable account and secured-credit arrangements.
- Venue rulings are reviewed for abuse of discretion; denial of a requested venue transfer will be affirmed when the chosen county is authorized by statute and the decision is not legally erroneous.

## Conclusion

The court held that the paying bank’s return of the check complied with the UCC midnight-deadline timing rules, so U.S. Bank could charge back the dishonored deposit and recover the resulting overdraft and secured debt, and it further upheld the trial court’s refusal to transfer venue.


U.S. Bank Nat’l Ass’n v. HMA, L.C., 169 P.3d 433 (Utah 2007)