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In 35 City Island, LLC v. Banco Popular, Banco Popular sought to prove that it did nothing wrong when it allowed a check payable to "Vera Westin Restaurant Corp. dba Neptune Inn & 35 City Island Avenue LLC" to be deposited and cashed.
Apparently, only Vera Westin signed the check and misappropriated the money.
When 35 City Island later sued, Banco Popular argued that the use of the ampersand "equally joined Neptune Inn and 35 City Island LLC as one entity that reflected an assumed name for Vera Westin," leading the employee to believe that only one signature was necessary.
After the Bronx County Supreme Court sided with 35 City Island, an appeal to the Appellate Division, First Department, followed.
The AD1 noted that when there is an ambiguity as to the name of an entity placed on a check, a bank should treat the instrument as a "two-party check." It further observed, "To accept [Banco Popular's] argument that its employees were not required to know" how to properly respond to an ambiguous name "would encourage ignorance, rather than knowledge, of the law, which would be particularly inappropriate given the obligation of [the bank] to inspect the check for proper endorsement."
WIth that, we're signing off.
To download a copy of the Appellate Division's decision, please use this link: 35 City Island, LLC v. Banco Popular
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Comments
Does anyone at the bank ever really look at the checks? Most tellers take anything I hand them and just make sure it's endorsed. Could the combination of time savings gained by not having tellers scrutinize checks too closely, combined with a low fraud rate, make banks just factor in the occasional situation like this as part of the cost of doing business?
When I worked in retail, the company automatically assumed a certain percentage of the store's goods would be shoplifted every month (shoplifting rates increase during the holidays when the stores are crowded) and factor the loss into the store's monthly operating expenses. If we could keep "shrink" below the projection, the company would split the difference with staff 50/50 as a bonus.
Does anyone know if banks factor "shrink" into their operating expenses?
Posted by: Gines Pasamonte | August 4, 2008 5:30 PM