§3-420. Conversion of instrument

(a) An instrument is converted when

(i) a drawee to whom it is delivered for acceptance refuses to return it on demand; or

(ii) any person to whom it is delivered for payment refuses on demand either to pay or to return it; or

(iii) it is taken by transfer, other than a negotiation, from a person not entitled to enforce the instrument or a bank makes or obtains payment with respect to the instrument for a person not entitled to enforce the instrument or receive payment.

(b) An action for conversion of an instrument may not be brought by (i) the issuer or acceptor of the instrument or (ii) a payee or indorsee who did not receive delivery of the instrument either directly or through delivery to an agent or co-payee or (iii) by the drawer.

(c) In an action under Subsection (a), the measure of liability is presumed to be the amount payable on the instrument, but recovery may not exceed the amount of the plaintiff's interest in the instrument.

(d) A representative other than a depositary bank, who has in good faith dealt with an instrument or its proceeds on behalf of one who was not the person entitled to enforce the instrument is not liable in conversion to that person beyond the amount of any proceeds that it has not paid out.

(e) Nothing in this Section prevents the owner of an instrument that has been wrongfully taken from him and not negotiated from requiring the drawer or maker to issue a substitute for it.

(f) Any action for conversion or an action for replacement under Subsection (e) prescribes in one year.

Acts 1992, No. 1133, §3, eff. July 1, 1993; Acts 1993, No. 948, §10, eff. Jan. 1, 1994.