PAULINE MOURADIAN, RESPONDENT, v. ASTORIA FEDERAL SAVINGS AND LOAN, ET AL.,
DEFENDANTS, MANUFACTURERS HANOVER TRUST, APPELLANT.
91 N.Y.2d 124, 689 N.E.2d 1385, 667 N.Y.S.2d 340 (1997).
December 17, 1997
2 No. 247
(97 NY Int. 0220)
Decided December 17, 1997
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This opinion is uncorrected and subject to revision before publication
in the New York Reports.
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Thomas E. Stagg, for appellant.
Anthony M. Grandinette, for respondent.
New York Clearing House Association, et al., amici curiae.
CIPARICK, J.:
We are asked on this appeal to decide whether a drawee bank, sued for
conversion under UCC 3 419, is entitled to show that the payee
received a benefit from the converted checks andtherefore should
recover less than their face value. We conclude that while a drawee
may claim a setoff for funds actually received by the payee, the rule
of absolute liability stated in UCC 3 419(2) precludes further inquiry
into whether the payee, who has not recovered the funds, in fact
benefitted from the proceeds of the checks.
Plaintiff Pauline Mouradian's estranged husband, Sarkis Mouradian,
forged her signature on three checks drawn by Astoria Federal Savings
and Loan and made jointly payable to plaintiff and her husband. The
checks, totaling $37,890.60, were deposited in accounts at Norstar,
N.A. and Citibank, N.A. The ultimate payments on the checks were made
by Manufacturers Hanover Trust (MHT). Plaintiff brought this action
against Norstar and Citibank, as depository banks, and MHT as drawee
bank for conversion. Plaintiff sued Astoria, the drawer, for breach of
contract and breach of fiduciary duty as well as for conversion.
Plaintiff moved for summary judgment on the third, fourth and fifth
causes of action asserted against MHT on the basis of UCC 3 419(2),
which states:
SNIPPETS:
This opinion is uncorrected and subject to revision before publication in the New York
We are asked on this appeal to decide whether a drawee bank, sued for conversion under UCC 3
We conclude that while a drawee may claim a setoff for funds actually received by the payee,
Plaintiff Pauline Mouradian's estranged husband, Sarkis Mouradian, forged her signature on
Plaintiff brought this action against Norstar and Citibank, as depository banks, and MHT as
"In an action against a drawee the measure of the drawee's liability is the face amount of
The parties' summary judgment submissions reveal that plaintiff was separated from her
plaintiff was unaware of the extent of the damage or the repairs undertaken and was never
In opposition to plaintiff's summary judgment motion, MHT argued that plaintiff is precluded
In response to MHT's equitable arguments, the court noted that plaintiff had no knowledge of
Official Comment 4 to this section indicates that the section is new and leaves no doubt that
we agree that the rule of absolute liability will not preclude a setoff where the payee has
Where the payee receives all or part of the proceeds from either the forger or the wrongfully
Thus, UCC 1 106 is consistent with the general principle that recovery will be denied where
Lund v Chemical Bank is illustrative of this principle.
Contrary to MHT's assertion, however, Lund is distinguishable from the present case.
While the Code allows the consideration of common law and equitable principles, it does so
Hence, the particular provision of UCC 3 419displaces contrary pre Code common law and
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