Broadway National Bank v. Barton-Russell Corp.
New York Supreme Court
585 N.Y.S.2d 933 (1992)

- Written by Sean Carroll, JD
Facts
Barton-Russell Corporation (Barton) (defendant) was a customer of Broadway National Bank (Broadway) (plaintiff). Pursuant to a contract with Broadway, Chemical Bank (Chemical) (defendant) processed credit-card charges of Broadway’s customers, including Barton. For a series of Barton’s credit-card charges, Barton assigned incorrect pre-authorization numbers on the credit-card charge slips, or no pre-authorization numbers at all. As a result, Barton fraudulently had cash from the slips available to it the next business day. Chemical did not notice the fraud for several months. When Chemical did discover the fraud, it debited Broadway’s account. Broadway sued Chemical and Barton to recover the funds, alleging breach of contract and negligence. Specifically, Broadway alleged that Chemical’s review procedures prevented it from detecting the fraud. Chemical filed a motion to dismiss for failure to state a claim. Among other things, Chemical argued that its contract with Broadway abrogated its duty to act with ordinary care.
Rule of Law
Issue
Holding and Reasoning (Lebedeff, J.)
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