A recent decision of the Maryland Court of Special Appeals Banks has clarified an important protection for banks and financial institutions regarding checks and other instruments that it honors.
Banks are often named in lawsuits alleging conversion or wrongful payment of checks. The Uniform Commercial Code, as adopted in Maryland, sets out the statutes of limitations that apply to claims on negotiable instruments. See Md. Code Ann., Com. Law § 3-118. The language of the statute suggests that the limitations period begins to run when the check or instrument is presented for payment.
Maryland generally follows the discovery rule, meaning that a cause of action does not accrue, and the limitations period does not begin to run, until the wronged party knew or should have discovered the underlying facts. It has been an open question in Maryland whether the discovery rule governs causes of action for the alleged wrongful honor a check or instrument.
The recent case of Fitzgerald v. Bell, decided by the Maryland Court of Special Appeals held that the discovery rule did not apply to an action to recover on a negotiable instrument under the Maryland UCC. See 2020 WL 2104613, at *14.