## Facts

- Citibank employed Yota Kalikas as an operations manager at one of its branch banks.
- Between April 1988 and April 1993, Kalikas embezzled about $2.5 million from Citibank.
- Kalikas was a frequent gambler at the Trump Taj Mahal casino in Atlantic City.
- Over time, Kalikas repeatedly presented Citibank cashier’s checks, signed by Kalikas, to Trump Taj Mahal to pay gambling debts or obtain casino credit.
- During a routine audit by the New Jersey Division of Gaming Enforcement, Kalikas’s repeated use of Citibank cashier’s checks at the casino was discovered.
- Citibank had honored the cashier’s checks through ordinary banking channels; Citibank later sought to recover $565,000 in honored cashier’s checks from the Trump entities.
- Citibank sued in federal district court, claiming Trump was negligent in accepting the checks because they were allegedly irregular enough (on their face and in context) to call their validity into question.
- It was undisputed that Trump had policies and procedures intended to verify checks before crediting a patron.
- Because Kalikas typically presented checks during nonbanking hours, Trump’s cashiers held the checks until regular banking hours and then called Citibank’s toll-free verification number to confirm that the account contained sufficient funds.
- Trump did not take steps to confirm whether Kalikas was authorized to use Citibank cashier’s checks for her personal gambling activity.
- Trump moved for summary judgment, arguing it was a holder in due course of the cashier’s checks and that holder-in-due-course status blocked Citibank’s negligence claim.
- Citibank cross-moved for summary judgment, arguing Trump could not be a holder in due course because it accepted the checks in bad faith.

## Issues

1. Whether Trump Taj Mahal took the Citibank cashier’s checks as a holder in due course under UCC Article 3 (for value, in good faith, and without notice of a claim or defense).
2. Whether the checks and surrounding circumstances were sufficient to show bad faith or notice that would defeat holder-in-due-course status.
3. If Trump was a holder in due course, whether Citibank’s negligence theory could still be used to recover the amounts paid on the checks.

## Decision

- The court granted the Trump defendants’ motion for summary judgment.
- The court denied Citibank’s cross-motion for summary judgment.
- The court held that Trump qualified as a holder in due course of the cashier’s checks.
- The court concluded there was no triable showing that Trump acted in bad faith or had notice of a defect or claim sufficient to defeat holder-in-due-course protection.
- Because Trump was a holder in due course, Citibank could not recover from Trump on a negligence theory based on Trump’s acceptance of the checks.

## Legal Principles

- Under UCC Article 3, a holder in due course is a holder who takes a negotiable instrument for value, in good faith, and without notice of any claim to the instrument or defense against it.
- “Good faith” under Article 3 includes honesty in fact and compliance with reasonable commercial standards of fair dealing.
- “Notice” requires more than a generalized concern; the facts known to the transferee must indicate a problem with the instrument or the transaction sufficient to put the transferee on notice of a claim or defense under the UCC standard.
- A cashier’s check is generally treated as the issuing bank’s own obligation; a recipient may accept an apparently regular cashier’s check without investigating the issuing bank’s internal employee authority, absent facts showing notice or bad faith.
- When a party qualifies as a holder in due course, UCC Article 3 allocates loss in a way that can bar an issuer’s attempt to reframe its dispute as negligence against the holder to recoup amounts paid on the instrument.

## Conclusion

Citibank sought to recover $565,000 in cashier’s checks used by its employee, Yota Kalikas, to fund gambling at Trump Taj Mahal, arguing the casino should have questioned the checks and Kalikas’s authority. The court ruled on cross-motions for summary judgment that the Trump defendants took the cashier’s checks for value, in good faith, and without notice of any defect or claim, making them holders in due course; that status prevented Citibank from shifting its loss to the casino through a negligence claim, so summary judgment was entered for the casino.


Citibank v. Trump Taj Mahal, 1996 WL 640860 (1996)