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Many years ago, a customer purchased a cashier’s check naming his sister as the remitter and the Social Security Administration (SSA) as the payee. The remitter does not have an account with us. We are still gathering facts, but we believe that the remitter never delivered the check to the SSA. It has remained in her desk drawer since 2003. Now she has sent us a demand letter from her attorney insisting that she is entitled to receive a refund on the cashier’s check. We found a note indicating that we reissued the check in 2004, but we have not found a declaration of loss or any other records regarding the possible reissuance. Is the remitter entitled to a refund on the original check?

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We recommend consulting with an attorney, but in our view, the remitter likely is entitled to a refund for the amount of the cashier’s check.

The Uniform Commercial Code (UCC) does not directly address whether a remitter is entitled to a refund when she decides not to deliver the check to the payee. However, the Illinois Supreme Court has held that until a purchaser delivers a cashier’s check to the payee, the check remains the purchaser’s property, and the purchaser retains the right to cancel.

In this case, the check was never delivered to the payee, so the remitter has a strong argument that she is entitled to cancel the check and obtain a refund. Your bank has pointed to some evidence that you reissued the check, which could indicate that the original check is no longer valid. However, without a declaration of loss (or testimony from bank employees involved in the reissuance), it will be difficult to establish that the original check is not valid.

Note that the UCC also addresses the concept of a check (including a cashier’s check) becoming “overdue” 90 days after its issuance date. While this could affect a transferee’s right to become a holder in due course of the cashier’s check, we do not believe that a cashier’s check being 90 or more days “overdue” would be considered a valid basis for refusing to refund the check.

For resources related to our guidance, please see:

  • Gillespie v. Riley Management Corp., 59 Ill.2d 211, 217 (1974) (“. . . the purchaser of a cashier’s check remains the ‘owner’ thereof until such time as he delivers or negotiates it to the payee. Until such delivery, the purchaser retains the right to cancel.”)
  • Gillespie v. Riley Management Corp., 59 Ill.2d 211, 218 (1974) (“One acquires a cashier's check for the purpose of assuring the payee that there are the necessary funds contemplated by a transaction, and that the check, like the money it represents, cannot be countermanded or revoked after the payee has received it. However, often a contemplated transaction does not materialize. The purchaser may then be left with a cashier's check purchased by him, but payable to someone with whom he no longer is commercially involved. It would impose an unwarranted commercial burden to require the purchaser to obtain the endorsement of such a payee to have the cashier's check honored or cancelled. Until the purchaser places such a check in the stream of commerce, he must, of practical, commercial necessity, be able to cancel the check upon its surrender to the bank.”)
  • Uniform Commercial Code, 810 ILCS 5/3-312(a)(3) (“’Declaration of loss’ means a written statement, made under penalty of perjury, to the effect that (i) the declarer lost possession of a check, (ii) the declarer is the drawer or payee of the check, in the case of a certified check, or the remitter or payee of the check, in the case of a cashier's check or teller’s check, (iii) the loss of possession was not the result of a transfer by the declarer of a lawful seizure, and (iv) the declarer cannot reasonably obtain possession of the check because the check was destroyed, its whereabouts cannot be determined, or it is in the wrongful possession of an unknown person or a person that cannot be found or is not amenable to service of process.”)
  • Uniform Commercial Code, 810 ILCS 5/3-304(a)(2) (“An instrument payable on demand becomes overdue at the earliest of the following times: . . . if the instrument is a check, 90 days after its date; . . .”)