Merrill Lynch, Pierce, Fenner & Smith, Incorporated, Respondent v. Chemical Bank, Appellant. (And a Third-Party…

Summary

The New York Court of Appeals reversed the Appellate Division and granted Chemical Bank's motion for partial summary judgment, holding that UCC §3-405 does not shield a drawee bank from liability when the bank is negligent in paying checks with forged endorsements. The court reasoned that the statute provides no standard of care and that negligence defeats the protection, a view joined by a concurring opinion that emphasized the harshness of allowing negligent banks to escape liability.