Practice point: A bank is strictly liable to its customer when it pays a check on a forged signature. However, the bank 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.
Student note: Here, in moving for summary judgment, the defendant did not
establish, prima facie, that it acted in a commercially reasonable
manner, as it did not submit evidence of the procedures that it used to
detect forged signatures. Since the defendant failed to meet its prima facie
burden, the court need not consider the sufficiency of the papers submitted in
opposition.
Case: R.A. Contr., Co. v. JP Morgan Chase, NY Slip Op 05683 (2d Dept. 2013).
Here is the decision.
Monday's issue: A coop board's invocation of the business judgment rule, and injunctive relief.
