N.Y. Uniform Commercial Code Law § 4-214: Insolvency and Preference

Section 4--214. Insolvency and Preference.

(1) Any item in or coming into the possession of a payor or collecting

bank which suspends payment and which item is not finally paid shall be

returned by the receiver, trustee or agent in charge of the closed bank

to the presenting bank or the closed bank's customer.

(2) If a payor bank finally pays an item and suspends payments without

making a settlement for the item with its customer or the presenting

bank which settlement is or becomes final, the owner of the item has a

preferred claim against the payor bank.

(3) If a payor bank gives or a collecting bank gives or receives a

provisional settlement for an item and thereafter suspends payments, the

suspension does not prevent or interfere with the settlement becoming

final if such finality occurs automatically upon the lapse of certain

time or the happening of certain events (subsection (3) of Section

4--211, subsections (1) (d), (2) and (3) of Section 4--213).

(4) If a collecting bank receives from subsequent parties settlement

for an item which settlement is or becomes final and suspends payments

without making a settlement for the item with its customer which is or

becomes final, the owner of the item has a preferred claim against such

collecting bank.