New York’s Second Department Affirms Denial of Summary Judgment to Bank Customer Who Alleged Fraudulent Transfer

The Second Department of New York’s Appellate Division recently affirmed a lower court’s denial of a bank customer’s motion for summary judgment and held that the customer may have contributed to the allegedly fraudulent transfer.  See Proactive Dealer Servs., Inc. v. TD Bank, 18 N.Y.S.3d 62 (2d Dept. 2015).  In the case, $50,000 was transferred from the plaintiff’s account to another account, despite the plaintiff not signing the withdrawal slip.  Instead, the withdrawal slip had a handwritten notation that someone had “spoke with” the plaintiff’s president, who had approved the transfer.  The plaintiff moved for summary judgment, noting that the Uniform Commercial Code (“UCC”) imposes strict liability for banks that charge a customer’s account for “any item not properly payable, such as a check bearing a forgery[.]”  UCC 4-401.  The defendant bank opposed the motion by alleging that the bank had acted in good faith and the customer’s negligence had contributed to the forgery, which is an exception to liability under the UCC.  UCC 3-406.  The bank claimed that its employee had spoken to the plaintiff’s president on the telephone, and the president had approved the transaction.  The Supreme Court denied the plaintiff’s motion.  The Appellate Division affirmed, finding that the bank had raised a triable issue of fact regarding the plaintiff’s contributory negligence.

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