IVERSON v FIRST BANK OF BILLINGS

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No. 85-158 I N THE SUPREME COURT OF THE STATE OF MONTANA 1985 GENE G . IVERSON, P l a i n t i f f and R e s p o n d e n t , FIRST BANK OF BILLINGS ( f o r m e r l y t h e M i d l a n d N a t i o n a l . Bank o f B i l l i n g s , Montana), Defendant, Third P a r t y P l a i n t i f f and A p p e l l a n t , MONTANA LIVESTOCK PRODUCTION CREDIT ASSOCIATION OF HELENA, MONTANA, Third P a r t y Defendant, Counter-Claimant and Respondent, APPEAL FROM: District Court of t h e Eighth J u d i c i a l District, I n and f o r t h e County o f Cascade, The H o n o r a b l e Thomas M c K i t t r i c k , J u d g e p r e s i d i n g . COUNSEL OF RECORD: For Appellant: M o u l t o n , B e l l i n g h a m , Longo & M a t h e r ; G e r a l d B. Murphy a r g u e d , B i l l i n g s , Montana For Respondent : Alexander & Baucus; John D. A l e x a n d e r a r g u e d f o r I v e r s o n , G r e a t F a l l s , Montana Luxan & M u r f i t t ; W a l t e r S. M u r f i t t a r g u e d f o r Montana L i v e s t o c k , H e l e n a , Montana Submitted: Decided: October 22, 1985 December 3 1 , 1 9 8 5 M r . J u s t i c e J o h n Conway H a r r i s o n d e l i v e r e d t h e O p i n i o n o f t h e Court. In the [hereinafter defendants, action below, Iverson) plaintiff filed a complaint Iverson against two ( h e r e i n a f t e r N u e r n b e r g ~ r ) and Howard N u e r n b e r g e r F i r s t Bank B i l l i n g s Gene ( h e r e i n a f t e r F i r s t Bank). In count I o f h i s c o m p l a i n t , I v e r s o n a l l e g e d t h a t N u e r n b e r g e r was l i a b l e t o him for the Nuernberger face to amount of Iverson. a dishonored In count I1 check of issued his by complaint, I v e r s o n a l l e g e d t h a t F i r s t Bank w a s a l s o l i a b l e t o him f o r the f a c e amount o f t h e d i s h o n o r e d N u e r n b e r g e r c h e c k b e c a u s e First Bank had S 30-4-302, violated (the MCA, midnight d e a d l i n e r u l e ) by f a i l i n g t o r e t u r n t h e dishonored check i n a t i m e l y manner a f t e r t h e s u b j e c t c h e c k was p r e s e n t e d t o F i r s t Bank for liability collection. First and that alleging Bank responded 30-4-302 § was by not denying violated b e c a u s e t h e s u b j e c t c h e c k was n o t " p r e s e n t e d " t o F i - r s t Bank f o r c o l l e c t i o n a s a "demand i t e m , " and a l s o because t h e check was held specific Production longer than request Credit normal and by First authority Association Bank of pursuant Montana t o the Livestock ( h e r e i n a f t e r MLPCA), a joint p a y e e on t h e s u b j e c t c h e c k . Thereafter, First Bank filed a third-party complaint a g a i n s t MLPCA s e e k i n g i n d e m n i f i c a t i o n f r o m MLPCA i f i t s h o u l d be f o u n d t h a t F i r s t Bank w a s l i a b l e t o I v e r s o n . MLPCA t h e n f i l e d a c o u n t e r c l a i m a g a i n s t F i r s t Bank a l l e g i n g , a s I v e r s o n had done earlier, requirements of § that 30-4-302, First MCA, o f t h e s u b j e c t c h e c k a s damages. stipulated to entry of judgment Bank had violated the a n d s o u g h t t h e f a c e amount Nuernberger, a t t h i s point, i n f a v o r o f I v e r s o n and t h e r e m a i n i n g p a r t i e s a l l moved f o r summary j u d g m e n t . The District Court the of Eighth C a s c a d e C o u n t y , t h e H o n o r a b l e Thomas M. District, Judicial McKittrick presiding, g r a n t e d summary j u d g m e n t i n f a v o r o f I v e r s o n a n d MLPCA. The D i s t r i c t C o u r t f o u n d F i r s t Bank s t r i c t l y l i a b l e f o r t h e f a c e amount o f t h e s u b j e c t c h e c k b e c a u s e o f F i r s t B a n k ' s to comply w i t h the requirements of S 30-4-302. failure From t h i s j u d g m e n t F i r s t Bank a p p e a l s . W e r e v e r s e t h e summary j u d g m e n t o f t h e D i s t r i c t Court e n t e r e d i n f a v o r o f I v e r s o n a n d MLPCA a g a i n s t F i r s t B a n k , a n d h e r e b y o r d e r t h e D i s t r i c t C o u r t t o e n t e r summary j u d g m e n t i n f a v o r o f F i r s t Bank a g a i n s t I v e r s o n a n d MLPCA i n a c c o r d a n c e with t h i s opinion. Plaintiff, Falls, Montana, operation MLPCA, is a rancher outside of Great Gene I v e r s o n , who obtained from MPLCA. Iverson, executed and delivered financing for cattle his i n o b t a i n i n g f i n a n c i n g from to MLPCA a loan agreement w h e r e b y MLPCA was g i v e n a f i r s t s e c u r i t y i n t e r e s t i n a l l o f Iverson's cattle. a On S e p t e m b e r 2 , 1 9 7 9 , I v e r s o n e n t e r e d i n t o c o n t r a c t w i t h PJuernberger, doing business a s t h e Montana C a t t l e Company, f o r t h e s a l e o f a number o f I v e r s o n ' s c a t t l e . The c o n t r a c t p r o v i d e d t h a t N u e r n b e r g e r p a y t o I v e r s o n t h e sum of $ 4 , 0 0 0 a s a down p a y m e n t w i t h a b a l a n c e o w i n g o f $ 4 1 , 2 0 9 . Shortly thereafter, Iverson his payees, i n t h e amount o f $ 4 1 , 2 0 9 a n d t o o k p o s s e s s i o n o f t h e cattle. Iverson endorsement, MLPCA. check, Nuernberger payable then to executed Iverson delivered and and the delivered MLPCA a s check, to joint without t o MLPCA f o r a p p l i c a t i o n upon h i s d e b t owed t o A t t h i s p o i n t , MLPCA r e l e a s e d i t s s e c u r e d p o s i t i o n in I v e r s o n ' s c a t t l e p r i o r t o t h e check b e i n g p a i d . S u b s e q u e n t l y , MLPCA d e p o s i t e d t h e c h e c k i n i t s a c c o u n t at First Security Bank in Helena, Montana, t h r o u g h t h e normal b a n k i n g c o l l e c t i o n p r o c e s s . for payment On November 26, 1979, t h e check a r r i v e d a t F i r s t Rank B i l l i n g s a n d w a s s u b s e q u e n t l y r e t u r n e d t o MLPCA o n November 2 8 , " i n s u f f i c i e n t funds" (NSF). 1979, marked The c h e c k w a s d e p o s i t e d s e c o n d t i m e t o MLPCA's a c c o u n t o n November 2 9 , for a 1979, and was a g a i n r e t u r n e d b y F i r s t Bank B i l l i n g s t o MLPCA o n D e c e m b e r 4 , The c h e c k , h a v i n g b e e n 1979, because o f i n s u f f i c i e n t funds. deposited funds, twice was and twice stamped refused "payment because refused of insufficient twice--present for c o l l e c t i o n only." On or about 6, December 1979, MLPCA, through its a s s i s t a n t t r e a s u r e r , A l i c e T y a n i c h , t e l e p h o n e d F i r s t Bank a n d was put in t o u c h w i t h James Wempner vice-president directions Wempner in charge o f regarding instructed F i r s t Bank t o h i s t o F i r s t Bank check t o hold was to mailed to the of Tyanich (Wempner I Pursuant period. the Agriculture collection Alice ( h e r e i n a f t e r Wempner) the to Nuernberger forward the for check. check t o attention granting permission s ) check beyond these Department , t h e normal instructions, First Bank with the an 24-hour Nuernberger accompanying memorandum w h i c h r e a d i n p e r t i n e n t p a r t a s f o l l o w s : SUBJECT: Company Check no. 214-Montana DATE December 6 , 1 9 7 9 Cattle I am r e t u r n i n g h e r e w i t h t h e a b o v e named check and you h e r e b y have o u r a u t h o r i t y t o h o l d it f o r l o n g e r t h a n t h e u s u a l 24-hour p e r i o d . When f u n d s a r e a v a i l a b l e on the above account p l e a s e send a c a s h i e r ' s c h e c k made p a y a b l e t o M o n t a n a L i v e s t o c k PCA. Date B ALICE H. Y Treasurer. The above memo and TYANICH, A s s i s t a n t subject check were received by Wempner t h r o u g h t h e m a i l , b u t i n s t e a d o f t a k i n g t h e c h e c k t o the collection department established policy of desk i n a of First F i r s t Bank, separate f i l e t i t l e d Bank pursuant to the h e k e p t t h e check i n h i s "Nuernberger, Montana C a t t l e Company. The " record indicates that b u s i n e s s a s t h e Montana C a t t l e Company, of F i r s t Bank had been f o r approximately p e r s o n a l l y handled Nuernberger , doing had been a c u s t o m e r five years and h i s a c c o u n t b y Wempner d u r i n g t h i s p e r i o d . The r e c o r d a l s o i n d i c a t e s t h a t d u r i n g t h i s same t i m e p e r i o d , Wempner received for col lection several other NSF checks i s s u e d by N u e r n b e r g e r w h i c h h e would p l a c e i n h i s N u e r n b e r g e r desk file. Wempner would check the Nuernberger account b a l a n c e d a i l y and would p a y t h e PJSF c h e c k s h e l d i n h i s d e s k in file installments a s Nuernberger deposited funds. The r e c o r d shows Wempner's a c t i o n s a l l o w e d N u e r n b e r g e r t o s t a y i n business as creditors a the cattle buyer and inconvenience of also having saved to Nuernberger's send their NSF c h e c k s t o F i r s t Bank numerous t i m e s f o r c o l l e c t i o n . The e s t a b l i s h e d p o l i c y collection i t e m s , F i r s t Bank w i t h r e s p e c t of s u c h a s t h e s u b j e c t c h e c k , r e q u i r e d Wempner t o d e l i v e r t h e check t o t h e c o l l e c t i o n d e p a r t m e n t o f Bank where it was to be a v a i l a b l e t o pay t h e c h e c k , the c h e c k was receipt MCA, of returned the check recorded. prior to a waiver of the If funds First were not a c c o r d i n g t o F i r s t Bank p o l i c y , t o midnight avoid liability ( t h e midnight deadline r u l e ) . allow to midnight of t h e day a f t e r under 5 30-4-302, F i r s t Bank p o l i c y d i d n o t deadline rule for checks g r e a t e r t h a n $500. Wempner acknowledged t h a t h e was a w a r e o f F i r s t R a n k ' s policy, but i n d i c a t e d t h a t he d i d n o t like the limitations mandated by t h e m i d n i g h t d e a d l i n e r u l e o r t h e p o l i c y o f F i r s t Bank. MLPCA, through A l i c e Tyanich, was not aware o f the p o l i c y o f F i r s t Bank. Wempner k e p t t h e s u b j e c t c h e c k i n h i s d e s k f i l e from December 10, 1 9 7 9 , t h e d a t e on w h i c h it was r e c e i v e d , January 30, 1980, when it was returned pursuant until to the r e q u e s t o f Tom Brown, t h e n p r e s i d e n t o f MLPCA. During t h i s t i m e p e r i o d F i r s t Bank d i d n o t s e n d o u t n o t i c e o f d i s h o n o r t o e i t h e r MLPCA o r I v e r s o n , o r p a y t h e s u b j e c t c h e c k . Iverson's f i r s t c o n t a c t w i t h F i r s t Bank o c c u r r e d o n December 2 7 , s e v e n t e e n d a y s a f t e r Wempner r e c e i v e d collection. 1979, t h e s u b j e c t check The s u b j e c t c h e c k i n t h e a m o u n t o f for $41,209 h a s n e v e r b e e n pa i d . The appellant, First Bank, presents the following i s s u e s f o r review: Whether (1) rule), applies question was § to 30-4-302, the delivered (the MCA instant case, midnight when the deadline check in t o F i r s t Rank b y MLPCA o u t s i d e t h e o r d i n a r y bank c o l l e c t i o n p r o c e d u r e ? Whether (2) MLPCA made an v a r y i n g t h e e f f e c t o f S 30-4-302, (3) Whether the d a m a g e s u n d e r 5 30-4-302, (4) agreement with First Bank MCA? Court District erred in awarding MCA? W h e t h e r F i r s t Bank i s e n t i t l e d t o indemnity from MLPCA? We find the dispositive of First is Bank f i r s t i s s u e p r e s e n t e d b y F i r s t Rank t o be the instant arguing case. that " p r e s e n t e d " a s a "demand i t e m " the Under subject its first check issue, was not f o r payment, a s d e f i n e d by t h e Montana U n i f o r m C o m m e r c i a l Code (MUCC), b u t w a s i n s t e a d l e f t by MLPCA w i t h F i r s t Bank w i t h i n s t r u c t i o n s t o p a y t h e c h e c k when a n d if f u n d s became a v a i l a b l e i n N u e r n b e r g e r ' s a c c o u n t . F i r s t Rank a r g u e s b e c a u s e t h e s u b j e c t c h e c k w a s n o t p r o p e r l y " p r e s e n t e d " a s a "demand i t e m , " 5 30-4-302, deadline rule) , M A ( t h e midnight C d o e s n o t a p p l y t o t h e i n s t a n t c a s e and t h u s F i r s t Bank i s n o t l i a b l e f o r t h e f a c e a m o u n t o f t h e s u b j e c t check. W e a g r e e w i t h F i r s t Bank's r e s u l t , b u t on a s l i g h t l y d i f f e r e n t theory. The m a j o r "The under consideration i s 5 30-4-302, ( a ) o f t h e s t a t u t e i s commonly r e f e r r e d t o Subsection MCA. as statute Midnight Deadline Rule." The statute reads as follows: Payor b a n k ' s responsibility for late return of i t e m . In t h e absence o f a valid defense such as breach of a p r e s e n t m e n t w a r r a n t y , ( s u b s e c t i o n (1) o f 30-4-207), settlement effected o r the l i k e , i f a n i t e m i s p r e s e n t e d on and r e c e i v e d by a p a y o r bank t h e bank i s a c c o u n t a b l e f o r t h e amount o f : (a) a demand i t e m other than a documentary draft whether properly payable o r n o t i f t h e bank, i n any c a s e where it i s n o t a l s o t h e d e p o s i t a r y b a n k , r e t a i n s t h e i t e m beyond m i d n i g h t o f t h e banking day o f r e c e i p t without s e t t l i n g f o r it o r , r e g a r d l e s s o f w h e t h e r it i s a l s o t h e d e p o s i t a r y bank, d o ~ s o t pay o r n return the item or send notice of dishonor until after its midnight deadline; o r ( b ) any other properly payable item unless within the time allowed for a c c e p t a n c e o r payment o f t h a t i t e m t h e bank e i t h e r a c c e p t s o r p a y s t h e i t e m o r r e t u r n s it and accompanying d o c u m e n t s . (Emphasis a d d e d . ) The p a r t i e s c o n t e n d , i n l i g h t o f t h i s s t a t u t e , t h e r e a r e two major c o n d i t i o n s r e l e v a n t t o t h e i n s t a n t c a s e t h a t must b e s a t i s f i e d b e f o r e F i r s t Bank becomes l i a b l e u n d e r t h e m i d n i g h t deadline rule: t h e r e must b e a "demand i t e m " ( s u b j e c t check) " p r e s e n t e d " ( t o F i r s t Bank) w i t h i n t h e meaning o f S 30-4-302, MCA. I n arguing t h e s e conditions t h e p a r t i e s devote a l l of t h e i r attention t o subsection (a) essentially defense, a provides demand that item, ( a ) o f S 30-4-302. in the retained absence beyond Subsection of the a valid "midnight d e a d l i n e " by t h e p a y o r bank w i t h o u t e i t h e r p a y i n g , r e t u r n i n g , o r g i v i n g n o t i c e o f d i s h o n o r r e n d e r s t h e p a y o r bank l i a b l e t o t h e p a y e e f o r t h e f a c e amount o f t h e i t e m . Co., Mont. Sun R i v e r C a t t l e I n c . v. M i n e r s N a t i o n a l Bank o f Montana N . A . 237, 5 2 1 P.2d 679. ( 1 9 7 4 ) , 164 The " m i d n i g h t d e a d l i n e " r e f e r r e d t o in describing the duty S; 30-4-104 ( h ) , MCA, following the This § as banking Court 30-4-302, the payor midnight of the that is bank d a y on w h i c h t h e recognizes next defined banking day i t e m was r e c e i v e d . subsection (a) of i s " p r e s e n t e d " t o a p a y o r bank and t h e bank h o l d s t h e i t e m beyond t h e m i d n i g h t d e a d l i n e . Court holds by i s a v a l i d t h e o r y f o r h o l d i n g a bank l i a b l e MCA, "demand i t e m " when a of that subsection (a) of S 30-4-302 But t h i s i s n o t even a p p l i c a b l e t o t h e i n s t a n t c a s e because t h e s u b j e c t check i s not -a "demand i t e m . " held l i a b l e under § T h e r e f o r e , i f F i r s t Bank i s g o i n g t o b e t h i s Court must look i n s t e a d t o 30-4-302, (b) o f t h e s t a t u t e . subsection First, a s mentioned c h e c k i s n o t a "demand i t e m . " and d u e , First we hold above, that the subject The s u b j e c t c h e c k t h o u g h d a t e d i s n o t a demand i t e m b e c a u s e it w a s t r a n s m i t t e d t o Bank with the understanding that it should be held u n t i l t h e r e w e r e s u f f i c i e n t funds i n Nuernberger's account t o To b e t t e r u n d e r s t a n d t h i s c o n c l u s i o n it i s pay t h e check. i m p o r t a n t t o review under what c o n d i t i o n s t h e s u b j e c t check was delivered discussed subject in to the check to First facts First Bank of by this Bank MLPCA. opinion, with the previously As MLPCA m a i l e d following the written instructions: I am r e t u r n i n g h e r e w i t h t h e a b o v e named check and you h e r e b y have o u r a u t h o r i t y t o h o l d it f o r l o n g e r t h a n t h e u s u a l 24-hour p e r i o d . When f u n d s a r e a v a i l a b l e on t h e above account please send a c a s h i e r ' s c h e c k made p a y a b l e t o Montana L i v e s t o c k PCA. According to t h i s memorandum, MLPCA a u t h o r i z e d First Rank t o h o l d t h e c h e c k b e y o n d t h e u s u a l 2 4 - h o u r p e r i o d a n d t o p a y t h e c h e c k o n l y , "when funds a r e available. " This Court h o l d s t h e r e i s no c o n c e i v a b l e way t o c o n s t r u e t h i s memorandum o t h e r t h a n t o s t a t e t h a t t h e i n t e n t o f MLPCA was t o t r a n s m i t t h e c h e c k , n o t a s a n i m m e d i a t e demand f o r payment, b u t r a t h e r a s a r e q u e s t f o r payment whenever f u n d s m i g h t b e a v a i l a b l e t o pay the check. c o n t e m p l a t e d by This § is simply not 30-4-302 ( a ) , MCA. item" "demand Therefore, as S30-4-302 ( a ) i s n o t even a p p l i c a b l e t o t h e i n s t a n t c a s e . Next, b e f o r e we a n a l y z e t h e S 30-4-302 ( b ) , MCA, discussed. The the concept parties, f a c t s of of "presentment" especially g r e a t l e n g t h how t h e t e r m p r e s e n t m e n t under S 30-4-302. parties, this Despite Court holds the First Bank, must be argue at should be i n t e r p r e t e d extensive the t e r m t h i s c a s e under arguments of the " p r e s ~ n t m e n t " should be l i b e r a l l y i n t e r p r e t e d a s t h e MUCC s u g g e s t s . S e c t i o n 30-3-504(1), MCA, d e f i n e s presentment under t h e MUCC a s f o l l o w s : How p r e s e n t m e n t made. (1) P r e s e n t m e n t i s a demand f o r a c c e p t a n c e o r payment made upon t h e m a k e r , a c c e p t o r , d r a w e e o r o t h e r p a y o r b y o r on b e h a l f o f t h e h o l d e r . In addition, Official Comment 1 of the UCC states the following i n e x p l a i n i n g t h e purpose o f t h i s s t a t u t e : This section is r u l e s a s t o how t o make i t c l e a r p a r t y t o pay i s where o r how. intended t o simplify t h e p r e s e n t m e n t i s made and t h a t a n y demand upon t h e a p r e s e n t m e n t no m a t t e r The a b o v e s t a t u t e a n d comment make it c l e a r t h a t t h e c o n c e p t o f "presentment" i s t o be l i b e r a l l y i n t e r p r e t e d u n d e r t h e MUCC. This Court agrees. Therefore, in l i g h t of the above d i s c u s s i o n , t h e o n l y q u e s t i o n r e m a i n i n g i n t h e i n s t a n t case § is whether 30-4-302, First, a presentment occurred as required by MCA. with regard t o MLPCA, t h e r e i s no q u e s t i o n it p r e s e n t e d t h e s u b j e c t c h e c k t o F i r s t Bank w i t h i n t h e meaning of 30-3-504 ( 1 ) . The f a c t s a r e u n c o n t r o v e r t e d t h a t MLPCA, t h r o u g h A l i c e T y a n i c h , m a i l e d t h e s u b j e c t c h e c k t o F i r s t Bank f o r c o l l e c t i o n p u r s u a n t t o t h e i n s t r u c t i o n s o f James Wempner. Wempner a l s o a d m i t s r e c e i v i n g t h e c h e c k f r o m MLPCA t h o u g h t h e mail for collection purposes. These facts constitute a presentment. However, presentment delivered with of the the Nuernberger, to regard subject subject Iverson, to check check, there Bank. First after he was no Iverson it received from t o MLPCA f o r a p p l i c a t i o n u p o n h i s d e b t owed t o MLPCA. The record does not indicate Iverson made attempt, a f t e r h e d e l i v e r e d t h e s u b j e c t c h e c k t o MLPCA, demand t h a t F i r s t Bank a c c e p t o r p a y t h e s u b j e c t c h e c k . this point, the record indicates Iverson considered s u b j e c t c h e c k t o b e t h e r e s p o n s i b i l i t y o f MLPCA. because Iverson never presented any to At the Therefore, t h e s u b j e c t check t o F i r s t Bank w i t h i n t h e m e a n i n g o f 5 30-3-504 (1), h i s c l a i m a g a i n s t F i r s t Rank u n d e r S 30-4-302 Finally, "demand must f a i l . a f t e r d e t e r m i n i n g t h e s u b j e c t check was n o t a item" and MLPCA properly "presented" the subject c h e c k t o F i r s t Bank f o r p a y m e n t , we c a n a n a l y z e MLPCA's c l a i m a g a i n s t F i r s t Bank u n d e r S 3 0 - 4 - 3 0 2 ( b ) , § 30-4-302(b) MCA. A s noted above, provides a s follows: [ i ] f an i t e m i s p r e s e n t e d on o r r e c e i v e d b y a p a y o r bank t h e bank i s a c c o u n t a b l e f o r t h e amount o f : (b) any other properly payable item unless within the time allowed for a c c e p t a n c e o r payment o f t h a t i t e m t h e bank e i t h e r a c c e p t s o r p a y s t h e i t e m o r r e t u r n s it a n d a c c o m p a n y i n g d o c u m e n t s . In light of this statute, u n d e r 5 30-4-302 the time returned must a l s o f a i l . allowed the MLPCAfs c l a i m a g a i n s t F i r s t Bank for subject In the instant case, within acceptance check to or MPLCA payment, a t First MLPCA's Bank request b e c a u s e t h e r e was n e v e r e n o u g h money i n N u e r n b e r g e r ' s a c c o u n t t o c l e a r t h e check. The memorandum s e n t b y MLPCA t o F i r s t Bank, along with the subject check, specifically allowed F i r s t Bank t o h o l d t h e c h e c k u n t i l s u f f i c i e n t " f u n d s available [in] the [were] [ N u e r n b e r g e r ] a c c o u n t " t o pay t h e c h e c k . F i r s t Bank n e v e r v i o l a t e d t h i s a g r e e m e n t a n d , w i t h i n t h e t i m e allowed for it r e t u r n e d t h e s u b j e c t a c c e p t a n c e o r payment, T h e r e f o r e , F i r s t Bank i s n e i t h e r l i a b l e n o r c h e c k t o MLPCA. a c c o u n t a b l e u n d e r § 30-4-302(b) Although w e find the t o MLPCA. first issue presented by First Bank t o be d i s p o s i t i v e o f t h e i n s t a n t c a s e , w e a l s o f e e l i t i s i m p o r t a n t t o c l a r i f y t h e second i s s u e p r e s e n t e d b y F i r s t Bank. Under conclusion issue that the #2, the facts which lead s u b j e c t c h e c k was n o t a us to "demand the item," a l s o lead u s t o t h e conclusion t h a t t h e p a r t i e s agreed under § 30-4-103, should MCA, not that apply to the the midnight instant deadline case. of S 30-4-302 Section 30-4-103 provides t h a t : (1) The e f f e c t o f t h e p r o v i s i o n s o f t h i s c h a p t e r may b e v a r i e d by a q r e e m e n t e x c e p t t h a t no aureement can d i s c l a i m a b a n k ' s r e s p o n s i b i l i t y f o r i t s own l a c k o f good f a i t h o r f a i l u r e t o exercise ordinary c a r e o r c a n l i m i t t h e m e a s u r e o f damages f o r such l a c k o r f a i l u r e ; b u t t h e p a r t i e s may by a g r e e m e n t d e t e r m i n e t h e s t a n d a r d s by which s u c h r e s p o n s i b i l i t y i s t o b e measured if such standards are not manifestly unreasonable. (Emphasis added. ) Montana h a s r e c o g n i z e d t h a t t h e p a r t i e s may a g r e e t o v a r y t h e t i m e requirements of Inc. v. $ M i n e r s Bank o f Montana 521 P.2d 679, this Court it i n t h i s c a s e , prove such an agreement. have reached the R e f r i g e r a t i o n v. same ( 1 9 7 4 ) , 164 Mont. N.A. recognized agreement t o v a r y t h e e f f e c t o f before I n Sun R i v e r C a t t l e Co., 30-4-302. § that 30-4-302, t h e r e was t h e r e may 237, be an b u t on t h e f a c t s i n s u f f i c i e n t evidence t o The c o u r t s o f o t h e r j u r i s d i c t i o n s conclusion. M e t r o Bank o f D a l l a s See, Western (1979), A i r and 599 F.2d. 83. We hold § there is such an agreement, as provided by 30-4-103, MCA, that varied the responsibility of First Bank and relieved it under the facts of this case from compliance with S 30-4-302 (the midnight deadline rule). The memorandum sent by MLPCA to First Bank, along with the subject check, specifically provided that "you hereby have our authority to hold it [the subject check] for longer than the usual 24-hour period. " Clearly MLPCA1s memorandum varied the responsibility of First Bank by waiving the midnight deadline rule in the instant case. After determining First Bank either Iverson or MLPCA under § is not accountable to 30-4-302, MCA, the additional issues raised by First Bank need not be discussed. The summary judgment of the District Court entered in favor of Iverson and MLPCA against First Bank is reversed, and the District Court is hereby ordered to enter summary judgment in favor of First Bank against Iverson and MLPCA in accordance with this opinion. i" Justice n Mr. Justice Frank B. Morrison, Jr. dissents as follows: The majority concludes that the "midnight deadline rule" is not available following reasons: item"; for recourse against the Bank for the (1) The subject check was not a "demand (2) the subject check was not presented by Iverson; I disagree with (3) the midnight deadline rule was waived. all three conclusions of the majority. The majority opinion concludes that the check was not a demand item because it was accompanied by aut-horization to hold for longer than the usual 24 hour period and to pay when funds were available. The accompanying memorandum may be viewed as an attempt by MLPCA to waive the "midnight deadline rule" but I do not see that as changing the character of what is clearly a demand item. The majority neglects to quote the Montana statute defining demand item. Section 30-3-108, MCA, states: Instruments payable on demand include those payable at sight or on presentation and those in which no time for payment is stated. The check here was clearly a demand item within the purview of the statute. Apparently the majority feels that since the check was to be held until funds became available that the check was not payable on demand. I would expect that most people anticipate that a bank will only pay a check if funds are available. The holding of this Court runs contrary to the holding in Sun River Cattle Co. v. Miners Bank of Montana N.A. (1974), 164 Mont. 237, 521 P.2d 679. In that case the Montana Supreme Court held that checks similar to the check here at issue were demand items. The Sun River Cattle Company case is not distinguished by the majority but is simply ignored. The majority opinion presentment in this case. finds that Iverson made no The subject check was made payable to both PCA and Iverson. There was no endorsement on the check but a stamped notation on the back stated: the account of the within named payee. Guaranteed." Bank. "Credit to Absence of Endorsemnt The check was delivered for collection to First On its face there is no way of determining whether the check came from PCA or from Iverson or from both of them. In view of the broad wording of S 30-3-504, MCA, which states that presentment is a demand for payment made by or on behalf of the holder, I fail to see how the majority distinguishes between presentment made by the PCA and presentment made by Iverson. Under the holding of the majority I suppose a.11 payees must make a joint presentment before they can have the protection of 30-4-302. Finally, I disagree with the majority's holding that there was a waiver of the midnight deadline rule. all, waiver is not sufficient. First of Section 30-4-103 states: (1) The effect of the provisions of this chapter may be varied by agreement except that no agreement can disclaim a bank's responsibility for its own lack of good faith or failure to exercise ordinary (Emphasis added.) care ... There must be an agreement. The bank officer who attempted to enter into an agreement for extension of the midnight deadline rule lacked authority from the Bank to enter into such an agreement. In fact, the undisputed evidence shows the Bank's express policy forbid the bank officer to enter into such an agreement, The Bank cannot seek to rely upon the terms of an agreement made by its agent in violation of the express instructions of the principal bank. The following facts are taken from the trial court's findings : 10. Mr. Wempner received the subject check through the mail but instead of taking the check to the collection department of First Bank-Billings pursuant to the established policy of First Bank-Billings for collection as a non-cash item, he kept the check in his desk in a separate file titled 'Nuernbergor, Montana Cattle Company'. (Jacobson Depo., p. 6-9; Wempner Depo., p. 21, p. 67-68, setting forth normal bank policy; Jacobson Depo., p. 23; Wempner Depo., p. 30, p. 67, 1. 2-3, establishing that Mr. Wempner kept the subject check in his desk which violated bank procedure. 13. Mr. Wempner acknowledged that he was very much aware of the bank's policy, acknowledged he did not like the limitations mandated by the midnight deadline or the policy of the bank. (Wempner Depo., p. 67-69, p. 62-63, p. 66, p. 15-116. 14. Mr. Wempner had no authority to change said bank policy or to request or accept a waiver of said policy. The MLPCA, through Alice Tyanich, was not aware of the policy of First Bank-Billings. (Jacobson Depo., p. 8; Wempner Depo., p. 62; Affidavit of Alice Tyanich, Appendix "C".) It is clear that Wempner's attempt to effectuate an agreement for a waiver of the midnight deadline rule was clearly outside the scope of his authority; no agreement was created; the Bank cannot rely upon § 30-4-103. Furthermore, if such an agreement had been made, it would only extend the midnight deadline rule if the Bank acted in good faith. The trial court found that the Bank was acting to benefit its depositor at the expense of the payees on the check. This of course is evidence of lack of good faith but unfortunately is ignored by the majority opinion. For the reasons mentioned herein I would affirm the District Court.

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