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BANK DID NOT DEMONSTRATE IT ACTED IN ACCORDANCE WITH GENERAL BANKING RULES OR PRACTICES WHEN IT CASHED FORGED CHECKS, BANK’S MOTION FOR SUMMARY JUDGMENT IN THIS NEGLIGENCE ACTION PROPERLY DENIED (SECOND DEPT),

The Second Department determined defendant bank’s (Capital One’s) motion for summary judgment in this forged-check negligence action was properly denied (without the need to consider the opposing papers). One of plaintiff corporation’s employees forged company checks made out to herself amounting to over $84,000. Plaintiff sued the bank for negligence pursuant to Uniform Commercial Code (UCC) article 4:

Under article 4 of the UCC, with regard to repeated forgeries by the same wrongdoer, the customer’s failure to exercise reasonable care and promptness in examining its bank statements and to timely notify the bank of the forgeries in accordance with UCC 4-406(2)(b) generally will result in the customer being precluded from asserting claims against the bank in connection with the loss associated with any such forgeries … . However, the loss of repeated forgeries may be shifted back to the bank in the circumstance where the bank failed to use ordinary care in paying the forged checks … . With regard to the issue of ordinary care, UCC 4-103(3) provides that “in the absence of special instructions, action or non-action consistent with clearing house rules and the like or with a general banking usage not disapproved by this Article, prima facie constitutes the exercise of ordinary care.” Thus, under this “safe harbor” provision, a bank can ensure that its conduct at least prima facie meets an ordinary care standard, by showing that it acted in accordance with general banking rules or practices … . However, it is the bank, as the party that benefits from the “safe harbor” provision, that bears the burden of proving general clearing house rules or general banking usage in order to establish ordinary care … . …

Capital One did not meet its burden of showing that it acted in accordance with general banking rules or general clearing house rules, and therefore, it failed to demonstrate prima facie that it exercised ordinary care in paying the forged checks … .Capital One’s submissions failed to provide any evidentiary basis that its processing of the forged checks comported with general banking usage. Redgrave Elec. Maintenance, Inc. v Capital One, N.A., 2018 NY Slip Op 0316, Second Dept 5-2-18

​BANKING LAW (BANK DID NOT DEMONSTRATE IT ACTED IN ACCORDANCE WITH GENERAL BANKING RULES OR PRACTICES WHEN IT CASHED FORGED CHECKS, BANK’S MOTION FOR SUMMARY JUDGMENT IN THIS NEGLIGENCE ACTION PROPERLY DENIED (SECOND DEPT))/UNIFORM COMMERCIAL CODE (FORGED CHECKS, BANK DID NOT DEMONSTRATE IT ACTED IN ACCORDANCE WITH GENERAL BANKING RULES OR PRACTICES WHEN IT CASHED FORGED CHECKS, BANK’S MOTION FOR SUMMARY JUDGMENT IN THIS NEGLIGENCE ACTION PROPERLY DENIED (SECOND DEPT))/EVIDENCE (BANKING LAW, UNIFORM COMMERCIAL CODE, FORGED CHECKS, BANK DID NOT DEMONSTRATE IT ACTED IN ACCORDANCE WITH GENERAL BANKING RULES OR PRACTICES WHEN IT CASHED FORGED CHECKS, BANK’S MOTION FOR SUMMARY JUDGMENT IN THIS NEGLIGENCE ACTION PROPERLY DENIED (SECOND DEPT))/NEGLIGENCE (BANKING LAW, FORGED CHECKS, BANK DID NOT DEMONSTRATE IT ACTED IN ACCORDANCE WITH GENERAL BANKING RULES OR PRACTICES WHEN IT CASHED FORGED CHECKS, BANK’S MOTION FOR SUMMARY JUDGMENT IN THIS NEGLIGENCE ACTION PROPERLY DENIED (SECOND DEPT))/CHECKS (BANKING LAW, UNIFORM COMMERCIAL CODE, FORGED CHECKS, BANK DID NOT DEMONSTRATE IT ACTED IN ACCORDANCE WITH GENERAL BANKING RULES OR PRACTICES WHEN IT CASHED FORGED CHECKS, BANK’S MOTION FOR SUMMARY JUDGMENT IN THIS NEGLIGENCE ACTION PROPERLY DENIED (SECOND DEPT))/FORGED CHECKS (BANKING LAW, UNIFORM COMMERCIAL CODE, BANK DID NOT DEMONSTRATE IT ACTED IN ACCORDANCE WITH GENERAL BANKING RULES OR PRACTICES WHEN IT CASHED FORGED CHECKS, BANK’S MOTION FOR SUMMARY JUDGMENT IN THIS NEGLIGENCE ACTION PROPERLY DENIED (SECOND DEPT))

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