Board of Higher Ed. of City of New York v. Bankers Trust Co.

CourtUnited States State Supreme Court (New York)
Writing for the CourtABRAHAM J. GELLINOFF
Citation86 Misc.2d 560,383 N.Y.S.2d 508,19 U.C.C.Rep. 599
Decision Date07 May 1976
Parties, 19 UCC Rep.Serv. 599 BOARD OF HIGHER EDUCATION OF the CITY OF NEW YORK, Plaintiff, v. BANKERS TRUST COMPANY et al., Defendants.

Page 508

383 N.Y.S.2d 508
86 Misc.2d 560, 19 UCC Rep.Serv. 599
BOARD OF HIGHER EDUCATION OF the CITY OF NEW YORK, Plaintiff,
v.
BANKERS TRUST COMPANY et al., Defendants.
Supreme Court, New York County, Part 4.
May 7, 1976.

Page 510

W. Bernard Richland, Corp. Counsel, New York City (Michael Cecere and Michael Gordon, New York City, of counsel), for plaintiff.

Charles Leeds, New York City (Jack H. Weiner, New York City, of counsel), for Bankers Trust.

Bigham, Englar, Jones & Houston, New York City (Joseph A. Kilbourn and James R. Sullivan, New York City, of counsel), for Chemical Bank.

ABRAHAM J. GELLINOFF, Justice:

Plaintiff, the drawer of various checks, seeks judgment against defendant banks, claiming that defendants wrongfully paid the checks, and wrongfully debited the amounts thereof to plaintiff's accounts. Both sides move for summary judgment. Defendant Clarice Rich has not answered the complaint, and is not involved in this motion.

Ms. Rich was an employee of plaintiff. It was her duty to prepare requisitions for checks to be issued by plaintiff for scholarships and other payments to students, to prepare the checks, to have them signed by authorized personnel, and to send the checks to their recipients.

However, in some instances, instead of sending the checks, Ms. Rich retained them. Also, on a number of occasions she prepared duplicate requisitions and checks, which when signed, she likewise retained. She then forged the endorsement of the named payees on the checks she had retained, and cashed them at defendant Chemical Bank. Some of the checks were drawn on plaintiff's accounts at Chemical Bank, others on its accounts at defendant Bankers Trust. The amounts of the checks were charged to plaintiff's accounts at each bank. After discovery of the forgeries plaintiff demanded that its accounts be credited. Defendants' refusals led to this action.

Upon this motion for summary judgment, defendants assert that the endorsements, although forgeries, are nevertheless 'effective', because the forger, as an 'employee of the maker or drawer(,) has supplied * * * (the drawer) with the name of the payee intending the latter to have no such interest' (Uniform Commercial Code, § 3--405(1)(c)). Additionally, Chemical Bank argues that, as to the checks it cashed which had been drawn on Bankers Trust, Chemical was merely a collecting bank, and owed no responsibility to plaintiff as a matter of law. Finally, both defendants urge that, as to some of the checks, this action is barred by the pertinent statute of limitations.

Plaintiff does not seriously contest the applicability of Section 3--405 to the facts of this case. It does, however, claim that, as a municipal rather than a business corporation, it ought to be relieved of the onus of that section. This argument is frivolous.

Plaintiff's principal argument is that even if, by its terms, Section 3--405 does apply, defendants are estopped from invoking its protection because it was their gross negligence, amounting to commercial bad faith, which permitted the forger to cash the checks. Plaintiff is...

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14 practice notes
  • General Acc. Ins. Co. v. Fidelity & Deposit Co., Civ. A. No. 83-3223.
    • United States
    • United States District Courts. 3th Circuit. United States District Court (Eastern District of Pennsylvania)
    • October 25, 1984
    ...Chemical Bank, 57 N.Y.2d 439, 456 N.Y.S.2d 742, 442 N.E.2d 1253 (1982); New York City Board of Higher Education v. Bankers Trust Company, 86 Misc.2d 560, 383 N.Y.S.2d 508 (1976). However, some commentators have argued that a failure to observe reasonable commercial standards should, alone, ......
  • McAdam v. Dean Witter Reynolds, Inc., No. 89-5250
    • United States
    • United States Courts of Appeals. United States Court of Appeals (3rd Circuit)
    • March 16, 1990
    ...v. First State Bank of Spring Lake Park, 316 N.W.2d 532, 536 (Minn.1982); Board of Higher Educ. of the City of N.Y. v. Bankers Trust Co., 86 Misc.2d 560, 383 N.Y.S.2d 508, 511 (N.Y.Sup.Ct.1976); 6 R. Anderson, Uniform Commercial Code Sec. 4-105:4 (3d ed. 1984). To avoid confusion, we will r......
  • Shearson Lehman Bros., Inc. v. Wasatch Bank, No. 90-C-814A.
    • United States
    • United States District Courts. 10th Circuit. United States District Court of Utah
    • March 30, 1992
    ...collecting party was careless and negligent and therefore failed to act in good faith); Board of Higher Educ. v. Bankers Trust Co., 86 Misc.2d 560, 383 N.Y.S.2d 508, 511 (Sup.Ct.1976) (collecting bank liable if it acts with gross negligence or commercial bad faith as manifested by bank's fa......
  • Brighton, Inc. v. Colonial First Nat. Bank
    • United States
    • New Jersey Superior Court – Appellate Division
    • October 15, 1980
    ...S & L Ass'n of Malverne v. Franklin Nat'l Bank, 18 U.C.C.Rep. 757 (N. Y. Sup. Ct. 1976); Board of Higher Ed. v. Bankers Trust Co., 86 Misc.2d 560, 383 N.Y.S.2d 508, 19 U.C.C.Rep. 599 (Sup.Ct.1976); Pine Bluff Nat'l Bank v. Kesterson, 257 Ark. 813, 520 S.W.2d 253, 16 U.C.C.Rep. 805 (Sup.Ct.1......
  • Request a trial to view additional results
14 cases
  • General Acc. Ins. Co. v. Fidelity & Deposit Co., Civ. A. No. 83-3223.
    • United States
    • United States District Courts. 3th Circuit. United States District Court (Eastern District of Pennsylvania)
    • October 25, 1984
    ...Chemical Bank, 57 N.Y.2d 439, 456 N.Y.S.2d 742, 442 N.E.2d 1253 (1982); New York City Board of Higher Education v. Bankers Trust Company, 86 Misc.2d 560, 383 N.Y.S.2d 508 (1976). However, some commentators have argued that a failure to observe reasonable commercial standards should, alone, ......
  • McAdam v. Dean Witter Reynolds, Inc., No. 89-5250
    • United States
    • United States Courts of Appeals. United States Court of Appeals (3rd Circuit)
    • March 16, 1990
    ...v. First State Bank of Spring Lake Park, 316 N.W.2d 532, 536 (Minn.1982); Board of Higher Educ. of the City of N.Y. v. Bankers Trust Co., 86 Misc.2d 560, 383 N.Y.S.2d 508, 511 (N.Y.Sup.Ct.1976); 6 R. Anderson, Uniform Commercial Code Sec. 4-105:4 (3d ed. 1984). To avoid confusion, we will r......
  • Shearson Lehman Bros., Inc. v. Wasatch Bank, No. 90-C-814A.
    • United States
    • United States District Courts. 10th Circuit. United States District Court of Utah
    • March 30, 1992
    ...collecting party was careless and negligent and therefore failed to act in good faith); Board of Higher Educ. v. Bankers Trust Co., 86 Misc.2d 560, 383 N.Y.S.2d 508, 511 (Sup.Ct.1976) (collecting bank liable if it acts with gross negligence or commercial bad faith as manifested by bank's fa......
  • Brighton, Inc. v. Colonial First Nat. Bank
    • United States
    • New Jersey Superior Court – Appellate Division
    • October 15, 1980
    ...S & L Ass'n of Malverne v. Franklin Nat'l Bank, 18 U.C.C.Rep. 757 (N. Y. Sup. Ct. 1976); Board of Higher Ed. v. Bankers Trust Co., 86 Misc.2d 560, 383 N.Y.S.2d 508, 19 U.C.C.Rep. 599 (Sup.Ct.1976); Pine Bluff Nat'l Bank v. Kesterson, 257 Ark. 813, 520 S.W.2d 253, 16 U.C.C.Rep. 805 (Sup.Ct.1......
  • Request a trial to view additional results

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