Brief Fact Summary. Consolidated Artist’s Payroll Service, Inc and Saks, Inc. brought suit against Security First Network Bank for the return of money electronically transferred from their accounts without authorization into the account held by a “Marvin Goldman” with Security First Network Bank. Security First Network Bank moves to dismiss.
Synopsis of Rule of Law. Because a receiver is a party to the rules, bound by its obligations as well as entitled to its benefit, it can enforce 126.96.36.199 even though the provision applies only to an obligation from one bank to another.
Issue. Whether Saks, Inc. can enforce Security First Network Bank’s warranty to LaSalle Bank National Association Bank that Saks, Inc. had properly authorized the debit issued.
Held. Yes. Saks, Inc. can enforce Security First Network Bank’s warranty using Section:188.8.131.52.
Discussion. Saks, Inc. has a cause of action for breach of warranty under Section:184.108.40.206. Security First Network Bank broke its promise to LaSalle Banks that the debits were authorized resulting in Saks Inc.’s account being improperly debited. Because Saks, Inc. is a party to the rules it can enforce this provision even though the provision applies only to an obligation from one bank to another.
Saks asserts a claim for breach of transfer warranty under the U.C.C. Saks, Inc. contends that NACHA Operating rule Section:13.1.20 expressly incorporates Article 4 of the U.C.C. to debit entries and therefore Saks can resort to applicable U.C.C. provisions. Security First Network Bank replies that no case has relied on Section:13.1.20 and explains that the reference to the U.C.C. was put into the NACHA rules as a gap filler. Since the Saks can assert a breach of warranty claim directly under the NACHA rules, the court declines to rule on this issue. Thus Saks, Inc.’s U.C.C. claim is dismissed.