(Posted March 3, 2022) I’ll confess that I was hoping that the Supreme Court wouldn’t issue any opinions this morning. That’s because I got to argue an appeal in the Supreme Court – that means inside the actual courtroom – for the first time in two years yesterday, and if there had been no opinions to analyze, I planned to post an essay about the experience. That one will have to wait; the court hands down a single opinion today in an appeal argued in January.

Yet another confession: When I learned that Stahl v. Stitt involved the midnight-deadline requirement in the banking provisions of the Uniform Commercial Code, I was excited. One of my poorly kept secrets is that in law school – a long time ago in a galaxy far, far away – I was a UCC jock. Perhaps because of my college Economics major, I took to commercial law in a manner that probably caused my pals’ eyes to roll. This morning, I looked forward to a rare discourse on this little-known provision.

Today’s opinion, penned by Justice Chafin, addresses an ancillary issue to commercial law: standing. I sense that the Supreme Court has decided a larger number of standing rulings in recent years than it handed down in years past, reflecting a greater modern emphasis on the issue if not an actual change in jurisprudence.

Here’s the setup: A lady whom we’ll call Aunt Ivory lived in Lynchburg, having moved there a few years before from her previous home in West Virginia. She held a bank account in West Virginia with about a quarter-million dollars. She also held an account here in Virginia.

In March 2016, Aunt Ivory was in rapidly failing health, so she moved in with a lady we’ll call Niece #1, who provided hospice care to her aunt. Niece #1 was the pay-on-death beneficiary of Aunt Ivory’s Virginia bank account.

Now we get to the point where individual dates matter, so I’ll lay them out here:

  • Tuesday, March 15 – Niece #1 requests an electronic transfer of the entire balance of the West Virginia bank account to the Virginia bank. Today’s opinion tells us that the niece was assisting Aunt Ivory in this task.
  • Friday, March 18 – The West Virginia bank issues a check for the full balance in the account, payable to the Virginia bank account.
  • Monday, March 21 – The Virginia bank receives the check and provisionally credits Aunt Ivory’s account with the amount of the deposit.
  • Tuesday, March 22 – The Virginia bank electronically presents the check to the West Virginia bank for payment. The West Virginia bank, having issued the check four days earlier, decides not to honor it.
  • Friday, March 25 – The West Virginia bank allegedly mails the check back to the Federal Reserve.
  • Saturday, March 26 – Aunt Ivory dies, leaving no will; the West Virginia bank freezes the account, which still shows a balance of almost a quarter-million dollars.

Uh-oh. We have a problem. At some point before Aunt Ivory’s death, Niece #2 contacted both banks and asserted that the transaction was fraudulent. After the death, Niece #2 qualified to administer her late aunt’s estate, and obtained the money in the West Virginia account.

Now we have an intra-family squabble over a sizeable amount of liquid assets. Niece #1 sued both banks and Niece #2 in Lynchburg Circuit Court. That court dismissed all of the claims except the one against the West Virginia bank, and that’s the issue that the Supreme Court decides today.

The first time I heard about a midnight deadline was in my Commercial Transactions class in law school. It sounded eerie when the professor mentioned it – after all, it has the words midnight and dead in it – but in practice it’s mundane. When a drawee bank – the one holding the funds to be transferred – receives a check, it has a deadline to act on it. It can accept it for payment, or dishonor it. The deadline for the bank to take one of those actions is midnight on the next business day after the bank receives the check. If the deadline passes without either of those actions, then under the UCC the bank “is accountable” for it; that is, the bank is on the hook for the payment.

A quick peek up at the timeline above will tell you that the West Virginia bank missed the midnight deadline. It received the check on a Tuesday and sent it back on a Friday, despite its need to act no later than 11:59 pm on Wednesday. Under essentially identical provisions of the Virginia and West Virginia Commercial Codes, that bank now has to pay it.

But that’s not how this case came out in the circuit court. There, a judge held that Niece #1 didn’t have standing to enforce the midnight-deadline requirement. How can that be, you ask? Because when the deadline expired very late on Wednesday night, March 23, Aunt Ivory was still alive. It was her bank account; not her niece’s. By law, a POD beneficiary has no legal rights to an account while the primary depositor is still alive.

The circuit court thus sustained the bank’s demurrer, holding that Niece #1 had no right to complain about the missed deadline, despite her later acquisition of the Virginia account under the POD provision. In so holding, the court adopted the reasoning of a federal decision from the Eastern District of Virginia, the only decision the court could find that interpreted standing in this context. The justices agree today and adopt this as the standing rule in Virginia.

Does this mean that no one can enforce the deadline requirement? Does the bank get off scot-free? Today’s opinion doesn’t mention this, but I suppose it would be possible for the decedent’s personal representative to sue, asserting a claim that the aunt had in life. I’m not sure how that would play out in the law, but in the world of fact, remember that Niece #2 was the personal rep, and she wasn’t likely to file such an action. After all, she now has the money.

We can’t know the equities of this situation, whether Niece #1 acted in good faith or, as Niece #2 asserted, committed fraud. If you developed a rooting interest in our exploration of this case, it had to arise from the mundane world of commercial transactions and not from family relationships.