Halifax Corporation v. Wachovia Bank
Supreme Court of Virginia
604 S.E.2d 403 (2004)
A Halifax Corporation (plaintiff) officer fraudulently endorsed $15.4 million in company checks to herself over several years, forging the company president's signature and depositing them into her own accounts at Wachovia Bank (defendant), even though bank employees noticed the unusually large deposits relative to her modest salary and the pattern's resemblance to fraud. Halifax sued Wachovia, arguing that UCC § 3-406 supported an affirmative negligence claim against a depository bank that accepts forged instruments, relying on a prior Virginia decision that had allowed similar claims under different UCC sections. The trial court granted Wachovia summary judgment, finding no such cause of action existed under § 3-406.
Whether UCC § 3-406 provides an affirmative negligence-based cause of action against a depository bank that accepts forged or altered instruments.