Opinion
December 22, 1982
Appeal from the Civil Court of the City of New York, Bronx County, EDWARD H. LEHNER, J.
Cadwalader, Wickersham Taft for appellant.
Michael Cook for respondent.
Order dated January 4, 1982 insofar as appealed from is affirmed, with $10 costs.
Plaintiff, Savemart, Inc., retailer of television sets and appliances, upon delivery of merchandise to a customer, received what purported to be a teller's check issued by the defendant, the Bowery Savings Bank. Bowery had stopped payment on the check because it was one of 1,000 missing blank checks, printed in the form of teller's checks, which were lost or stolen prior to or during shipment to Bowery. While the check was signed "Jerry Smith", Bowery claims that it employs no teller by that name. Special Term denied both plaintiff's motion for summary judgment on the instrument and Bowery's cross motion for summary judgment.
A teller's check is a check drawn by a savings bank on its account with a commercial bank (9 N.Y. Jur 2d, Banks, § 355). Like a cashier's check (a check drawn by a bank upon itself), a teller's check is signed by a bank official and is a primary obligation of the issuing bank to the payee ( Manhattan Imported Cars v Dime Sav. Bank of N.Y., 70 Misc.2d 889 [App Term]; Moon Over the Mountain v Marine Midland Bank, 87 Misc.2d 918, 922). A teller's check is generally treated in the commercial world as a cash equivalent (9 N.Y. Jur 2d, Banks, § 355; Manhattan Imported Cars v Dime Sav. Bank of N.Y., supra).
In the case now before us, the "teller's check" was not signed by a bank official and was thus not validly issued. Since "[n]o person is liable on an instrument unless his signature appears thereon" (Uniform Commercial Code, § 3-401, subd [1]), Bowery cannot be held liable on this instrument. While subdivision (1) of section 3-404 of the Uniform Commercial Code provides that a party may be precluded from denying an unauthorized signature, the official comment to this section explains that the purpose of this section is to recognize the possibility of an estoppel where a person whose name is signed expressly or tacitly represents to an innocent purchaser that the signature is genuine (Uniform Commercial Code, § 3-404, subd [1], Comment 4, p 246). Since no such facts were here alleged by plaintiff, Bowery is not estopped from asserting that the signature herein is a forgery (Uniform Commercial Code, § 1-201, subd [43]). Accordingly, Civil Court's denial of plaintiff's motion for summary judgment on the instrument was correct.
Civil Court's denial of defendant's cross motion for summary judgment was also correct. Section 3-406 of the Uniform Commercial Code provides that "[a]ny person who by his negligence substantially contributes to * * * the making of an unauthorized signature is precluded from asserting the * * * lack of authority against a holder in due course". Since Bowery failed to explain the circumstances surrounding the loss or theft of checks and the precautions taken to prevent damage to third parties, Civil Court found that a triable issue of fact was presented as to Bowery's possible negligence.
Bowery argues that a finding of negligence is precluded by the fact that Bowery owed no duty to Savemart. Teller's checks and cashier's checks, however, have consistently been held to be cash equivalents ( Manhattan Imported Cars v Dime Sav. Bank of N.Y., supra; Kaufman v Chase Manhattan Bank, 370 F. Supp. 276). As such, they are more readily accepted in the commercial world than personal checks because the bank becomes a guarantor of their value and because the bank cannot stop payment on them when validly issued (see Kaufman v Chase Manhattan Bank, supra, p 279). Since a bank issues these checks in furtherance of its business and wishes the public to accept them without question ( Moon Over the Mountain v Marine Midland Bank, supra, p 923), it is not unfair to impose upon the bank a duty to protect innocent third parties by securing its checks and thus minimizing the risk of forgery. Since the facts before us are not dispositive of the issue of Bowery's possible negligence, and since the issue of negligence under section 3-406 of the Uniform Commercial Code is one for the "court or the jury on the facts of the particular case" (Uniform Commercial Code, § 3-406, Comment 7, p 263). Civil Court correctly denied Bowery's cross motion for summary judgment.
I dissent and would grant Bowery's cross motion for summary judgment dismissing this action.
A properly issued teller's check establishes a debtor-creditor relationship between the issuing bank and the payee ( Myers v First Nat. Bank of Scotia, 42 A.D.2d 657, 658) and is generally treated as cash ( Moon Over the Mountain v Marine Midland Bank, 87 Misc.2d 918; Malphrus v Home Sav. Bank of City of Albany, 44 Misc.2d 705). Although the court below recognized that the instant check could not be deemed currency, because it was not properly issued, it concluded that a triable issue of defendant's liability existed under section 3-406 of the Uniform Commercial Code. That section provides: "Any person who by his negligence substantially contributes to a material alteration of the instrument or to the making of an unauthorized signature is precluded from asserting the alteration or lack of authority against a holder in due course or against a drawee or other payor who pays the instrument in good faith and in accordance with the reasonable commercial standards of the drawee's or payor's business."
It is thus not because the instrument in question partakes of the unique character of a teller's check that the court below concluded that a trial was necessary to determine defendant's liability. Rather, the court below suggested that because the defendant failed to fully detail the circumstances under which the 1,000 blank teller's checks were lost, and failed to explain what precautions, if any, the defendant took to thereafter prevent damage to third parties, "a triable issue of fact is presented with respect to the possible negligence of the bank that, if proved, would prevent it from asserting the lack of authority of the person who signed the teller's check."
As Official Comment 5 to section 3-406 of the Uniform Commercial Code notes: "This section does not make the negligent party liable in tort for damages resulting from the alteration. Instead it estops him from asserting it against the holder in due course or drawee * * * The holder or drawee is protected by an estoppel, and the task of pursuing the wrongdoer is left to the negligent party."
The 1,000 checks lost or stolen from defendant's printer were, as noted above, merely blank checks. On the blank check here at issue, a person, or persons, unknown filled in the date of "issuance", the name of the payee, the amount of the check and then proceeded to sign the check, on a line drawn above the word "teller", "Jerry Smith". No such person is employed by the defendant. We thus deal here not with an alteration of a properly executed instrument but with a fabrication of all but the blank form of the instrument. Such a fabrication is possible in regard to the loss of any "blank check", whether a personal or teller's check. Does it follow that liability should be imposed simply because the loss of the blank check was due to the negligence of the party in whose name the blank check was prepared? Neither the plaintiff nor the court below has presented authority for imposing liability upon the defendant under these circumstances, and I have found none in this jurisdiction. In Fred Meyer, Inc. v Temco Metal Prods. Co. ( 267 Or. 230), the plaintiff, as holder of 30 forged checks, sought to recover the loss it incurred after these checks had been stolen during a burglary of defendant's office and then cashed at several of plaintiff's stores. The complaint alleged that defendant had been negligent in failing to place the blank checks in safekeeping; in failing to place its check "protectograph" (used in forging the checks) in safekeeping; and in failing to lock the "protectograph" so as to render it unusable. While the plaintiff relied upon the Oregon counterpart to section 3-406 of the Uniform Commercial Code (i.e., Ore Rev Stats, § 73.4060), the trial court nonsuited the plaintiff on motion and that judgment was affirmed. In so affirming, the Oregon Supreme Court noted that while this is a case in which it is contended that defendant was negligent for failure to foresee that his conduct may involve harm to another through the "criminal" conduct of a third person, under normal circumstances a person may reasonably assume that no one will violate the criminal law (Restatement, Torts 2d, §§ 302 A, 302 B). Even if we could impute some responsibility to the defendant for the loss or theft of the 1,000 blank teller's checks, I do not believe that the bank may be held liable for the subsequent forgery of the check here at issue.
RICCOBONO and SULLIVAN, JJ., concur; TIERNEY, P.J., dissents in a separate memorandum.