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BANK LEUMI TRUST CO. v. BALLY'S PARK PLACE

December 1, 1981

BANK LEUMI TRUST COMPANY OF NEW YORK, Plaintiff,
v.
BALLY'S PARK PLACE, INC., Defendant



The opinion of the court was delivered by: BRIEANT

MEMORANDUM AND ORDER

In this diversity action between a bank and the proprietor of a gambling casino, the Court is called upon to decide where the loss or damage, as between the payee-depositor of a check known to be bad, on the one hand, and a drawee bank guilty of computer induced negligence, on the other hand, shall be imposed. The Court believes that there is nothing in the Uniform Commercial Code or prior New York caselaw which requires the Bank to suffer the resultant damage as between the parties. *fn1"

The relevant facts, stated below, are not in dispute. Plaintiff's motion for summary judgment is granted and defendant's motion for the same relief is denied.

 Defendant Bally's Park Place, Inc. ("Bally's"), is a New Jersey corporation which is the proprietor of a gambling casino located at Atlantic City, New Jersey. Plaintiff Bank Leumi Trust Company of New York ("the Bank" or "Bank Leumi"), is a commercial bank and trust company incorporated under the laws of the State of New York. The Bank had a checking account customer, one Allen Brinker, a resident of New York.

 In June 1980, Brinker visited Atlantic City and took a walk on the Boardwalk, followed by a bath at Bally's. He issued a personal check drawn on his account at Bank Leumi in the amount of $ 60,000, payable to Bally's to cover the markers for his gambling losses.

 In order to shuffle and process the vast amount of paperwork which checks of retail banking customers entail, all United States banks today process checks drawn by their customers by computer. They do this by issuing specially imprinted checks to bank customers. These pre-printed checks contain numbers along the bottom of the face of the check identifying the customer's bank, branch and account number. Such numbers are printed or "micro-encoded" in magnetic ink, which is capable of being read by computers without the intervention of human hands, eyes or minds. When such a check is then deposited by the payee with a collecting bank, the collecting bank further imprints the check with computer readable magnetic ink identifying the amount of the check. If the check has been deposited with a collecting bank out of the area of the drawee bank, as occurred in this case, the check is then processed through the Federal Reserve Bank system.

 During the processing two things take place: the check is physically transferred to the drawee bank, and a credit for the amount of money due on the check is transferred by computers from the account of the maker at the drawee bank to the account of the payee at the collecting bank.

 On Saturday evening, June 7, 1980 and early Sunday morning, June 8, 1980, while Brinker was gambling at Bally's, he issued several checks or markers to Bally's in return for gambling chips. Brinker had in previous months incurred debts to Bally's of $ 22,000, $ 22,100 and $ 40,000, which were promptly satisfied, and Bally's was therefore willing to extend him further credit. In the early morning hours of Sunday June 8, 1980, Brinker issued a single check drawn on Bank Leumi for $ 60,000 to Bally's to consolidate and replace the earlier smaller markers issued during Saturday night and Sunday morning. *fn2"

 Neither this consolidation check nor the earlier smaller checks were issued on the ordinary pre-printed, numbered and computer readable check forms provided by Bank Leumi to its customers, including Brinker. Instead, an ordinary blank form check prepared for Bally's was used. This check form showed the words "Bally's Park Place Casino Customer Check," printed on the top and Bally's logo printed on the background. The payee was pre-printed as "Pay to the Order of Bally's Park Place, Inc." *fn3"

 On this blank check furnished by Bally's were written in ink the name of the drawee bank, its location, its American Banking Association identification number, the amount of the check and the name, address and signature of Brinker. This check was completed at two different times and it appears that two or three different persons filled in different portions of the check. *fn4" In one handwriting are the words "Bank of Leumi," Bank Leumi's American Banking Association identification number, the words "Consolidation Check," the date "6-7-80," the amount, and Brinker's printed name. In what appears to this Court to be another handwriting, is Brinker's signature. In the latter entry and possibly still a third handwriting are Brinker's address and the location of his branch of Bank Leumi. It is likely that Bally's filled out the name of Brinker's bank, his account number, Bank Leumi's identification number, the date, the amount and printed Brinker's name and gave the check to Brinker for him to sign. At some later time Bally's then added Brinker's address and the location of his branch of Bank Leumi. Since this was not a pre-printed check and since Brinker's account number and banknumber were handwritten, this check was not computer readable.

 On June 27, 1980, Brinker cashed in his chips for the last time, apparently leaving an insolvent estate of less than $ 5,000.00. Somehow, Bally's became aware of Brinker's death shortly thereafter. On July 7, 1980 Brinker's account at Bank Leumi was closed.

 On or before July 15, 1980, Brinker's attorney and named executor Ronald Wohl, received a call from Bally's seeking to collect the $ 60,000.00 from Brinker's estate. Wohl informed Bally's that there was less than $ 5,000.00 in the estate, that the estate would not even be able to pay Brinker's burial expenses, and that there were no funds from which to pay Bally's claim. Wohl found it surprising that Bally's extended Brinker $ 60,000 in credit because Brinker had been adjudicated as a bankrupt two years earlier and was generally unable to obtain credit. He had only one credit card, from Avis Rent-A-Car.

 On July 15, 1980, Bally's submitted a formal claim against the estate for $ 60,000.00.

 On Saturday, September 6, 1980, Bally's prepared a large deposit which included Brinker's check. This deposit was picked up by the armored car service for Bally's bank, the First National Bank of South Jersey (the "collecting bank"). The check was processed by the collecting bank on Monday, September 8, 1980. The check was deposited on this particular date, the 91st calendar day following the date of the check, because it is Bally's policy to wait at least 90 calendar days but less than 90 banking days after a check is drawn, to deposit it. This procedure appears to comply with the requirement of the New Jersey statute governing the granting of credit to gamblers by casinos. N.J.S.A. § 5:12-101. The fact that Bally's held the check for this length of time is relevant only insofar as it is clear that when the check was deposited, Bally's had already known for some time that the check was bad, that Brinker was dead, and that his estate was insolvent. The logical inference is that Bally's knew that it was unlikely that the check would be paid ...


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