## Facts

- LeRoy Willoughby responded to an unsolicited email that purported to come from Itochu Corporation, a Japanese company, offering him a part-time role in the United States to deposit checks and wire funds for a 5% commission.
- The email was awkwardly worded and suggested Itochu’s board members did not speak English, so the company needed a representative in the United States or Canada.
- Willoughby had worked in Japan for about 25 years and was familiar with Itochu; he had also taught English to some Itochu managers, which made the solicitation seem plausible to him.
- After Willoughby accepted, he received a $150,000 check drawn on an account at Canadian Imperial Bank of Commerce (CIBC).
- Willoughby became concerned when he was told he was actually working for a Chinese company rather than Itochu, but he continued with the transaction.
- Willoughby endorsed and deposited the check into a newly opened account at Wachovia Bank, which was later succeeded by Wells Fargo Bank, N.A. (collectively, Wells Fargo).
- Willoughby stated that he told Wells Fargo employees he was suspicious about the check (without explaining the reason); the employees indicated the funds would be “okay” if the check cleared.
- Wells Fargo credited the $150,000 to Willoughby’s account.
- Willoughby withdrew $5,500 as his commission and, at the purported employer’s direction, wired $96,905 to a Japanese account in the name of “Asako Tradings.”
- A few days later, CIBC returned the check dishonored.
- The Japanese bank later stated the wire transfer could not be reversed and that “Asako Tradings” was a fictional entity; the scammer was never identified.
- Wells Fargo alleged it suffered an approximate $97,000 loss and sued Willoughby under the Uniform Commercial Code (UCC) to recover the amount.
- Wells Fargo moved for summary judgment; Willoughby argued he was also a victim of the fraud and did not intend to defraud Wells Fargo.

## Issues

1. Under the UCC, may a depositary bank recover from its customer when the bank credits a deposited check that is later dishonored and the customer has already withdrawn or wired the funds?
2. Does the customer’s claim that he was an innocent victim (and lacked intent to defraud) defeat the bank’s UCC claim for reimbursement or charge-back?
3. Do alleged statements by bank employees that the funds were “okay” if the check cleared prevent the bank from recovering after the item is returned unpaid?

## Decision

- The court ruled for Wells Fargo on its UCC-based claim seeking reimbursement for the loss tied to the dishonored $150,000 check.
- The court granted Wells Fargo’s motion for summary judgment.
- Willoughby was held responsible to repay the bank for the funds that were advanced/credited and then transferred out before the check was dishonored.

## Legal Principles

- Under UCC bank-collection rules, a bank’s credit for a deposited item is generally provisional until final payment; if the item is dishonored, the bank may seek to reverse the credit (charge-back) or obtain reimbursement from its customer.
- Allocation of loss under these UCC provisions does not require proof that the customer intended to commit fraud; the question is whether the customer received and used funds tied to an item that was not finally paid.
- A customer’s status as a victim of a third-party scam does not, by itself, shift the loss from the customer to the bank when the customer withdraws or wires funds against a deposit that is later returned unpaid.
- General statements that funds are “okay” conditioned on the check clearing are consistent with provisional credit practice and do not, without more, convert the credit into a bank guarantee against dishonor.

## Conclusion

In *Wells Fargo Bank, N.A. v. Willoughby*, the District of Oregon held that Wells Fargo could recover its loss under the UCC after Willoughby deposited a $150,000 check received through an email-job scam, wired out most of the credited funds, and then learned the check was dishonored; the court granted summary judgment for Wells Fargo despite Willoughby’s claim that he lacked fraudulent intent and was himself deceived.


Wells Fargo Bank, N.A. v. Willoughby, 2015 WL 5665115 (2015)