Section 3--419. Conversion of Instrument; Innocent Representative.

(1) An instrument is converted when

(a) a drawee to whom it is delivered for acceptance refuses to

return it on demand; or

(b) any person to whom it is delivered for payment refuses on

demand either to pay or to return it; or

(c) it is paid on a forged indorsement.

(2) In an action against a drawee under subsection (1) the measure of
the drawee's liability is the face amount of the instrument. In any
other action under subsection (1) the measure of liability is presumed
to be the face amount of the instrument.

(3) Subject to the provisions of this Act concerning restrictive
indorsements a representative, including a depositary or collecting
bank, who has in good faith and in accordance with the reasonable
commercial standards applicable to the business of such representative
dealt with an instrument or its proceeds on behalf of one who was not
the true owner is not liable in conversion or otherwise to the true
owner beyond the amount of any proceeds remaining in his hands.

(4) An intermediary bank or payor bank which is not a depositary bank
is not liable in conversion solely by reason of the fact that proceeds
of an item indorsed restrictively (Sections 3--205 and 3--206) are not
paid or applied consistently with the restrictive indorsement of an
indorser other than its immediate transferor.