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Thursday, July 10, 2008

Distributor Label Products, Inc. d/b/a Certified Data Products v. Fleet National Bank, et al.

07-08-08 A-3260-06T5

This case concerns the liability of a drawee bank for checks with forged endorsements.

Plaintiff's employee had embezzled monies by writing checks to a legitimate vendor and then depositing the checks into his personal account with another bank. Some of the checks were fraudulently endorsed in the name of the payee and others were marked "for deposit only" with the account number. Since plaintiff failed to exercise ordinary care with respect to supervising the employee thereby substantially contributing to the loss and the drawee was not negligent, plaintiff was precluded from recovery under N.J.S.A. 12A:3-406. Plaintiff's recovery for those checks fraudulently endorsed in the name of the payee was also barred by N.J.S.A. 12A:3-405. Since no material issues of facts were present, the trial court's granting of summary judgment for the drawee bank was affirmed.