Question

Roger Duchow (owner of Duchow’s Marine, Inc.) borrowed money from General Electric Capital Corp. (GECC) to buy boats for his business. He agreed that when he sold a boat, he would deposit the funds in a blocked account at Central Bank. Funds could be withdrawn from this blocked account only with GECC’s signature. Duchow also had a separate, unrestricted account at Central.

Duchow sold a yacht and, in an effort to defraud GECC, told the buyer to wire the $215,000 purchase price to the unrestricted account. The buyer’s bank sent the wire transfer to an intermediary bank, Banker’s Bank. But Banker’s instructions to Central included only Duchow’s name, omitting his account number. As luck would have it, the money was put in the blocked account. Duschow immediately ordered Central to transfer the funds to his unrestricted account, which Central did. Duchow quickly spent the money and had no other assets. Is Central liable to GECC?

What is the argument for Central?

What is the argument for GECC:

Answer 1

If I were the judge I would have decided in favor of GECC and thus Central bank must pay GECC. Duchow who was the customer of Central bank committed this scam and ended up making up money and the issue was further intensified by the error of the Banker’s Bank.

What is the argument for Central?

The argument for the Central will be that the bank did nothing wrong in following the instructions of banker and the payment order had been left off accidentally. It is the fraud committed by Roger Duchow and thus Central cannot be held responsible for this act.

What is the argument for GECC:

The argument for GECC can be that there is an obligation on Central to follow the directions provided by a wire., but as soon as the funds are being transferred to the blocked account, then a non-clerical decision had to be made by central which is to transfer or not to transfer the funds. Transferring of funds is not imposed by any law particularly when the name of GECC was mentioned on the account earlier.