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Outdoor Technologies, Inc. v. Allfirst Financial, Inc.

Delaware Superior Court
44 UCC Rep. Serv. 2d 801 (2001)


Hechinger, Inc. (Hechinger) issued a check to Outdoor Technologies, Inc. (Outdoor) (plaintiff). The check was drawn on Hechinger’s account at First Omni Bank (Omni) (defendant), but incorrectly designated First National Bank of Maryland (FNB) (defendant) as the location of the account. Outdoor learned that Hechinger was readying to file for bankruptcy. Consequently, instead of initiating the slower process of depositing the check into Outdoor’s corporate account, Outdoor’s controller, John Hurt, went to FNB to more quickly obtain payment. Hurt was notified that FNB could not negotiate the check because it was drawn on an Omni account. Hurt then traveled to Maryland Bancorp (Bancorp) (defendant), which owned Omni. William Thomas, a corporate attorney, told Hurt that Omni would negotiate the check only if Hechinger had sufficient finds in the account and had not yet filed for bankruptcy, and if Hurt presented the check along with “proper authorization” to negotiate in person. Hurt did not ask, and Thomas did not explain, what constituted proper authorization. Hurt later arrived at Omni and presented the check and a letter signed by Outdoor’s president stating that Hurt was authorized to negotiate the check. Omni told Hurt that proper authorization must be in the form of a resolution from Outdoor’s board of directors. Because acquiring a board resolution would take too long, Hurt deposited the check into Outdoor’s corporate account. However, before Omni could pay, Hechinger filed for bankruptcy, preventing all payment from his accounts. Outdoor filed suit against Omni, FNB, and Bancorp, alleging fraud and negligent misrepresentation. The defendants moved for summary judgment.

Rule of Law


Holding and Reasoning

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