Opinion ID: 532742
Heading Depth: 2
Heading Rank: 3

Heading: First American Bank's Liability

Text: 29 We uphold the jury's verdict awarding no damages to Kuwait Airways Corporation from First American Bank. Kuwait claims that First American Bank is absolutely liable in conversion under D.C.Code Sec. 28:3-419(2) and that a defense of contributory negligence, pursuant to D.C.Code Sec. 28:3-406 (1981), is not available to FAB. See Brief of Appellant at 21-29. We reject this argument. 30 As an initial matter, there is no merit to Kuwait's contention that section 3-406 does not provide a defense to section 3-419 conversion claims. See, e.g., American Sec. Bank v. American Motorists Ins. Co., 538 A.2d 736, 738 (D.C.1988) ([D]rawer's negligence that contributes to a forgery negates the drawee bank's liability, but only if the drawee bank meets its burden of proving by a preponderance of the evidence that it complied with reasonable commercial standards when it cashed the check.); American Mach. Tool Distribs. Ass'n v. National Permanent Fed. Sav. & Loan Ass'n, 464 A.2d 907, 912 (D.C.1983) (discussing application of section 3-406 to conversion claim). See generally J. WHITE & R. SUMMERS, UNIFORM COMMERCIAL CODE Secs. 16-4, 16-7 (3d ed. 1988). 31 Kuwait further contends that section 3-406 does not apply where the payee's indorsement is missing. However, where, as in this case, we assume that the absence of any indorsement is a forged indorsement within the meaning of section 3-419(1)(c), we must apply a similar reading to the term unauthorized signature in section 3-406. 12 Cf. Empire Moving & Warehouse Corp. v. Hyde Park Bank & Trust Co., 43 Ill.App.3d 991, 2 Ill.Dec. 753, 757, 357 N.E.2d 1196, 1200 (1976) (applying section 3-406 where bank took checks without required indorsements). In other words, the scope of the defense under section 3-406 is coextensive with the scope of the substantive offense defined by section 3-419(1)(c). It would make no sense to construe the statute otherwise. 13 32 In this case, the jury apparently found that a section 3-406 defense was available to FAB because of its adherence to reasonable commercial standards, and because of Kuwait's negligence. There is no basis for us to overturn this judgment. Therefore, we decline to disturb the jury's verdict or the judgment of the District Court awarding no damages on Kuwait's claims against FAB.