New Jersey Steel Corp. v. Warburton

The opinion of the Court was delivered by

GARIBALDI, J.

This appeal concerns the allocation of check-fraud losses under specific provisions of Articles 3 and 4 of the Uniform Commercial Code (“UCC”), adopted in New Jersey as N.J.S.A. 12A:3-406 and N.J.S.A 12A:4-406. The Court must allocate those losses between a corporation whose negligence allowed the defalcation to occur and a depository-payor bank that accepted checks for deposit without following its own procedures for inspecting the endorsements on those checks. Defendant Midlantic National Bank (“Midlantic Bank”) failed to discern…