## Facts

- A law firm maintained an attorney trust account at a bank.
- The firm’s bookkeeper forged an authorized signature on eight checks drawn on the trust account between October and December 1996.
- The checks, totaling about $76,975, were payable to two individuals who negotiated them.
- The bank paid seven forged checks and charged the trust account before the fraud was discovered.
- The firm discovered the defalcations in December 1996 and notified the bank.
- The firm’s fidelity insurer reimbursed the loss and, as subrogee, sued the bank for breach of the deposit agreement and for violations of U.C.C. Articles 3 and 4 based on alleged lack of ordinary care and commercially reasonable practices.
- The trial court granted summary judgment for the insurer against the forger and the payees, granted partial summary judgment for the bank as to three checks, and later granted summary judgment for the bank on the remaining checks processed through the bank’s central processing unit after limiting further discovery into actual processing conduct.

## Issues

1. Whether summary judgment for the bank was premature where material factual questions remained about whether the bank exercised ordinary care and followed reasonable commercial standards in processing forged checks through its central processing unit.
2. Whether the trial court abused its discretion by limiting discovery into the bank’s actual practices and compliance with its own verification procedures.
3. Whether the customer’s failure to promptly review account statements could be resolved on summary judgment to bar or reduce recovery despite unresolved questions about the bank’s conduct.

## Decision

- The Appellate Division reversed the summary judgment entered for the bank and remanded.
- The court ordered additional discovery focused on the bank’s actual conduct in processing the forged checks, measured against its verification policy and applicable commercial standards.
- The court held that evidence of written policies and training alone did not resolve the ordinary-care/commercial-reasonableness questions as a matter of law.
- The court treated the customer’s failure to review statements as a fact-sensitive allocation issue that could not be conclusively decided on the incomplete record.

## Legal Principles

- In forged-check disputes under U.C.C. Articles 3 and 4, a bank’s “ordinary care” and “reasonable commercial standards” turn on actual processing conduct, not merely the existence of internal policies.
- Summary judgment is improper when material facts bearing on commercial reasonableness and ordinary care require discovery into operational practices and compliance with bank procedures.
- A customer’s duty to examine statements may affect loss allocation, but it does not automatically bar recovery where the bank’s conduct and comparative fault remain fact-dependent and undeveloped.

## Conclusion

The court required further factual development before deciding forged-check liability, holding that the bank’s liability under the U.C.C. could not be resolved on a record limited to policy descriptions and that discovery into actual central-processing practices was necessary.


Travelers Indem. Co. v. Good, 325 N.J. Super. 16, 737 A.2d 690 (App. Div. 1999)