Proactive Dealer Services, Inc. v. TD Bank

131 A.D.3d 1216, 18 N.Y.S.3d 62

• Court: Appellate Division of the Supreme Court of the State of New York
• Decided: September 30, 2015
• Docket: 2015-00517
• Status: Published

Opinions

In an action, inter alia, to recover damages for breach of contract and fraud, the plaintiff appeals from an order of the Supreme Court, Queens County (Livote, J.), entered November 12, 2014, which denied its motion for summary judgment on the complaint.

Ordered that the order is affirmed, with costs.

On November 17, 2009, the sum of $50,000 was transferred from the plaintiffs business checking account at the defendant TD Bank to the account of Keystone Equity Group (hereinafter Keystone Equity) at TD Bank. The funds were transferred after a withdrawal slip was presented to one of TD Bank’s employees. According to the plaintiff, the transfer, which was effectuated absent a signature on the withdrawal slip, was unauthorized and fraudulent.

Thereafter, the plaintiff commenced this action against TD Bank and TD Bank Financial Group (hereinafter together the defendants) alleging, among other things, a violation of the UCC by the negotiation of an instrument that was not properly payable. The plaintiff moved for summary judgment on the complaint, arguing that the defendants were strictly liable for violating articles 3 and 4 of the UCC based upon the unauthorized transfer. In the order appealed from, the Supreme Court denied the plaintiff’s motion for summary judgment on the complaint.

Generally, an unauthorized signature—defined as a signature made without authority, including a forgery (see UCC 1-201 [b] [41])—is ineffective to pass title or authorize a drawee bank to pay (see Prudential-Bache Sec. v Citibank, 73 NY2d 263, 269 [1989]). The UCC imposes strict liability on a bank that charges against a customer’s account any item not properly payable, such as a check bearing a forgery of the customer’s signature (see UCC 4-401 [2] [a]; 4-104 [1] [g], |j]; Monreal v Fleet Bank, 95 NY2d 204, 207 [2000]; Woods v MONY Legacy Life Ins. Co., 84 NY2d 280, 283 [1994]; Putnam Rolling Ladder Co. v Manufacturers Hanover Trust Co., 74 NY2d 340, 345 [1989]; R.A. Contr. Co. v JP Morgan Chase Bank, N.A., 109 AD3d 600, 601 [2013]). A bank, however, avoids such liability if it demonstrates that the customer’s negligence substantially contributed to the forgery and that the bank acted in good faith and in accordance with reasonable commercial standards (see UCC 3-406; R.A. Contr. Co. v JP Morgan Chase Bank, N.A., 109 AD3d at 601; Carmine Rest. v Citibank, 300 AD2d 149 [2002]).

In support of its motion, the plaintiff submitted an affidavit from George Pappas, who averred that he was the president of the plaintiff and the sole signatory on the plaintiff’s bank account with TD Bank. Pappas asserted that he did not authorize the subject withdrawal. In addition, Pappas contended that a review of the withdrawal slip showed an incorrect name for the plaintiff and the absence of a signature, and that someone had written the words “spoke to George” thereupon. The plaintiff submitted a copy of the withdrawal slip which indicated that a bank representative had written thereupon “spoke to George OK to XFOL,” but did not include a telephone number for the plaintiff or specifically identify the person whom the defendants had purportedly contacted. Based on the evidence, the plaintiff contended that the defendants failed to exercise good faith in permitting the transfer.

The plaintiff established its prima facie entitlement to judgment as a matter of law on its cause of action alleging strict liability for violation of articles 3 and 4 of the UCC based upon the unauthorized transfer. The evidence submitted by the plaintiff demonstrated that the defendants effectuated the transfer from the plaintiff’s bank account by way of the unsigned withdrawal slip, an item that was not properly payable.

In opposition, however, the defendants raised a triable issue of fact by submitting evidence that Pappas had affirmatively authorized the subject transfer on the plaintiff’s behalf. In this regard, the defendants submitted an affidavit from Sevag H. Chalian, who averred that he was an assistant branch manager for TD Bank in November 2009. Chalian stated that on November 17, 2009, Thomas Gucciardo from Keystone Equity informed Chalian that a check in the sum of $50,000 from the plaintiff made payable to Keystone Equity and deposited into its account at TD Bank on November 13, 2009, had been dishonored. Gucciardo explained to Chalian that he had received the dishonored check from Pappas, who had drawn the check on an account with another bank. Chalian averred that, after examining Keystone Equity’s account with the defendants, he confirmed that a check which the plaintiff had given to Gucciardo had been returned as unpaid. Chalian further averred that he had several telephone conversations with Pappas during which they discussed the $50,000 dishonored check. According to Chalian, he confirmed Pappas’s identity by “asking him for information, including information about his account that only the account owner would know.” Chalian added that on November 17, 2009, Pappas “explicitly authorized me to transfer $50,000” from the plaintiff’s account to Keystone Equity’s account, and that he wrote on the withdrawal slip the name “George,” along with the account numbers for the plaintiff and Keystone Equity. As a result, Chalian prepared the transfer ticket to effect the transfer in the sum of $50,000.

“[A] motion for summary judgment should not be granted where the facts are in dispute, where conflicting inferences may be drawn from the evidence, or where there are issues of credibility” (LeBlanc v Skinner, 103 AD3d 202, 212 [2012] [internal quotation marks omitted]). On this record, with the facts in dispute and the credibility of the parties sharply at issue, the Supreme Court properly denied the plaintiffs motion for summary judgment on the complaint.

We disagree with our dissenting colleague’s determination that the defendants failed to raise a triable issue of fact. The cases cited by the dissent are distinguishable because none of those cases involved a situation where, as here, a defendant bank averred that a plaintiff specifically authorized the subject transaction. For this reason, the dissent’s reliance upon the defendants’ alleged failure to set forth their security procedures is misplaced. To the extent that our dissenting colleague relies upon article 4-A of the UCC, which relates to wire transfers, we note that the plaintiff specifically argued in support of its motion that the subject transaction “was not a wire transfer subject to the provisions set forth in Article 4-A of the UCC.” Moreover, we note that the applicability of article 4-A of the UCC has not been raised as an issue on appeal.

Accordingly, the order must be affirmed.

Leventhal, J.P., Cohen and Hinds-Radix, JJ., concur.