Town & Country State Bank of Newport v. First State Bank of St. Paul

SIMONETT, Justice.

This case concerns the application of provisions of the Uniform Commercial Code to three banks which found themselves involved in a customer’s check kiting scheme.

Richard G. Freitag engaged in a check kiting operation involving personal and corporate checking accounts maintained at five banks. First State Bank of St. Paul, Freitag’s main bank, was the center of the kite. Freitag transferred checks back and forth between First State and each of four other banks, but did not transfer checks among the four “periphery” banks. The kite collapsed on March 14, 1980, when First…