Case Name: Pauline Mouradian, Respondent, v. Astoria Federal Savings and Loan, Defendant, and Norstar Bank, N. A., et al., Appellants
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 1997-02-10
Citations: 236 A.D.2d 451
Docket Number: 
Parties: Pauline Mouradian, Respondent, v Astoria Federal Savings and Loan, Defendant, and Norstar Bank, N. A., et al., Appellants.
Judges: 
Reporter: Appellate Division Reports
Volume: 236
Pages: 451–455

Head Matter:
Pauline Mouradian, Respondent, v Astoria Federal Savings and Loan, Defendant, and Norstar Bank, N. A., et al., Appellants.
[653 NYS2d 654]

Opinion:
—In an action, inter alia, to recover the face amount of three checks paid on a forged indorsement, the defendants Norstar Bank, N. A., now doing business as Fleet Bank, Citibank, N. A., and Manufacturers Hanover Trust appeal from so much of an order of the Supreme Court, Nassau County (Alpert, J.), entered May 31, 1995, as granted the plaintiff's motion for summary judgment on the third, fourth, and fifth causes of action in her complaint asserted against Manufacturers Hanover Trust. Justice Sullivan has been substituted for the late Justice Hart (see, 22 NYCRR 670.1 [c]).
Ordered that the order is affirmed insofar as appealed from, with costs.
The plaintiff's estranged husband received three checks jointly payable to him and the plaintiff. He forged her indorsement on each of them and the defendant Manufacturers Hanover Trust (hereinafter MHT) ultimately made payment on the checks. Nor star Bank, N. A., now doing business as Fleet Bank (hereinafter Nor star), and Citibank, N. A. have agreed to defend MHT pursuant to UCC 3-803. Therefore, Norstar and Citibank are aggrieved by the order appealed from.
The Supreme Court properly granted the plaintiff's motion for summary judgment on her conversion causes of action asserted against MHT, the drawee bank (see, UCC 3-419 [1] [c]; [2]). Pursuant to UCC 3-419 (2), the measure of the drawee's liability for conversion is the face amount of the instrument. While we agree with our dissenting colleagues that the rule of absolute liability under UCC 3-419 (2) does not preclude a drawee bank from seeking a setoff where the payee has recovered all or part of the proceeds, in this case the plaintiff never received any of the proceeds of the checks and had no control over or input into how the funds were used (compare, Ellinger v Bank of N. Y., 185 AD2d 578).
By contending that the plaintiff received the benefit of the checks, MHT is asking the court to look behind the face of the instruments to the purpose of the funds. Essentially, MHT is arguing that the plaintiff had no personal interest in the proceeds themselves since the funds were earmarked for repairs to the home jointly owned with her estranged husband. To permit a setoff where the drawee bank contends that the payee derived a benefit from the converted proceeds requires the type of inquiry which is precluded by UCC 3-419 (2).
The inequity which may result from the application of UCC 3-419 (2) against a drawee bank has been addressed by UCC 3-420, which eliminates the rule of absolute liability and, as noted by the dissent, has been adopted by many States. New York, however, has not yet enacted this legislation.
We have examined the appellants' remaining contentions and find them to be without merit. Miller, J. P., Sullivan and Altman, JJ., concur.