Fundacion Museo de Arte Contemporaneo de Caracas v. CBI-TDB Union Bancaire Privee, CARACAS--SOFIA

• Decision Date: 18 November 1998
• Docket Number: D,CARACAS--SOFIA,No. 729,CBI-TDB,729
• Parties: 37 UCC Rep.Serv.2d 123 FUNDACION MUSEO DE ARTE CONTEMPORANEO DEIMBER, Plaintiff-Counter-Defendant-Appellant, v.UNION BANCAIRE PRIVEE, Defendant-Cross-Defendant-Cross-Claimant-Appellee, Republic National Bank of New York, Defendant-Counter-Claimant-Cross-Claimant-Cross-Defendant. ocket 98-7516.
• Court: U.S. Court of Appeals — Second Circuit

Page 146

160 F.3d 146

37 UCC Rep.Serv.2d 123

FUNDACION MUSEO DE ARTE CONTEMPORANEO DE CARACAS--SOFIA

IMBER, Plaintiff-Counter-Defendant-Appellant, v. CBI-TDB UNION BANCAIRE PRIVEE,

Defendant-Cross-Defendant-Cross-Claimant-Appellee,

Republic National Bank of New York,

Defendant-Counter-Claimant-Cross-Claimant-Cross-Defendant.

No. 729, Docket 98-7516.

United States Court of Appeals, Second Circuit.

Argued Oct. 19, 1998.

Decided Nov. 18, 1998.

Michael S. Vogel, New York City (Allegaert Berger & Vogel LLP; Michael Straus, Bainbridge & Straus, LLP, Birmingham, AL; Janine M. Gargiulo, Arent Fox Kintner Plotkin & Kahn, New York City, on the brief), for Plaintiff-Counter-Defendant-Appellant.

John S. Kinzey, New York City (James E. Schwartz, LeBoeuf, Lamb, Greene & MacRae, L.L.P., on the brief) for Defendant-Cross-Defendant-Cross-Claimant-Appellee.

Before: NEWMAN and JACOBS, Circuit Judges, and TSOUCALAS, Judge. ^*

PER CURIAM:

In May of 1993, an account holder at Defendant CBI-TDB Union Bancaire Privee ("UBP") deposited into his UBP account a check which was drawn on the account of Fundacion Museo de Arte Contemporaneo de Caracas ("the Museum") and which bore the forged signature of the Museum's director. Alleging causes of action sounding in conversion and in money had and received, the Museum now seeks to recover the amount of the forged check from UBP.

After a bench trial in the United States District Court for the Southern District of New York (Leisure, J.), the district court ruled in favor of UBP on the ground that UBP is a holder in due course. ¹ With respect to the Museum's money-had-and-received claim, the district court reached an alternative holding based on equity. The Museum appeals.

We conclude that, in reaching its holding that UBP is a holder in due course, the district court applied a standard that was excessively favorable to UBP. Nevertheless, we affirm the entry of judgment in UBP's favor (i) on the basis of the district court's alternative holding with respect to the money-had-and-received claim, and (ii) on the ground that, as a matter of law, the Museum cannot prevail on its conversion claim.

BACKGROUND

On May 10, 1993, Gustavo de los Reyes sent a check--preprinted with the number 177 ("Check 177")--to UBP. Check 177, in the amount of $825,000, was payable to UBP, was drawn on the account of Fundacion Museo de Arte Contemporaneo de Caracas ("the Museum") at Republic National Bank of New York ("Republic"), and bore the apparent signature of Sofa Imber, the Museum's director. In a fax also sent on May 10, 1993, Reyes asked UBP to deposit Check 177 into Reyes's account at UBP and to transfer the bulk of the proceeds to two accounts at different banks.

After receiving the check, UBP collected the $825,000 from Republic and disbursed the funds in compliance with Reyes's directions. Later, the parties discovered that Imber's signature had been forged, and the Museum sued UBP and Republic. With respect to UBP, the Museum pleaded two claims under New York law: (i) conversion; and (ii) money had and received.

DISCUSSION

Under New York law, a party is entitled to holder-in-due-course status if it takes an instrument for value, in good faith, and "without notice that it is overdue or has been dishonored or of any defense against it or claim to it on the part of any person." N.Y. U.C.C. § 3-302(1). The district court concluded that UBP took Check 177 in good faith because UBP "did not have actual knowledge that Check 177 was a forgery." Fundacion Museo de Arte Contemporaneo de Caracas--Sofia Imber v. CBI-TDB Union Bancaire Privee, 996 F.Supp. 277, 292 (S.D.N.Y.1998). The Museum argues, and we agree, that the standard adopted by the district court is excessively favorable to UBP.

Holder-in-due-course status depends on whether " 'the purchaser [had] knowledge of the claim or defense or knowledge of such facts that his action in taking the instrument amounts to bad faith.' " See Chemical Bank of Rochester v. Haskell, 51 N.Y.2d 85, 92, 432 N.Y.S.2d 478, 481, 411 N.E.2d 1339 (1980) (quoting N.Y. U.C.C. § 3-304(7)) (emphasis removed). The resolution of that question in this case is not obvious, and is of commercial significance. One option is to certify the question to the New York Court of Appeals. However, that would be inappropriate...