Outdoor Technologies, Inc. v. Allfirst Financial, Inc.
Delaware Superior Court
44 UCC Rep. Serv. 2d 801 (2001)
Hechinger, Inc. issued a check to Outdoor Technologies (plaintiff), drawn on an account at First Omni Bank (Omni) (defendant) but incorrectly listing First National Bank of Maryland (FNB) (defendant) as the account location; on learning Hechinger was preparing to file for bankruptcy, Outdoor's controller John Hurt tried to expedite payment by presenting the check in person, first unsuccessfully at FNB, then at Maryland Bancorp (Bancorp) (defendant), Omni's owner, where a corporate attorney told him Omni would negotiate the check only with sufficient account funds, no bankruptcy filing yet, and "proper authorization" presented in person, without clarifying what that authorization required. When Hurt returned with a letter from Outdoor's president rather than the board resolution Omni ultimately said was required, he instead deposited the check into Outdoor's own account, but Hechinger filed for bankruptcy before Omni could process payment, and Outdoor sued Omni, FNB, and Bancorp for fraud and negligent misrepresentation; the defendants moved for summary judgment.
Whether a payor bank may be held liable to a payee for declining to accept and pay a check presented for negotiation before the drawer's bankruptcy filing cut off all payment from the account.