The opinion of the court was delivered by: BERNARD NEWMAN
OPINION, FINDINGS OF FACT, AND CONCLUSIONS OF LAW
BERNARD NEWMAN, Senior Judge:1
Zambia National Commercial Bank Limited ("Zambia National") brings this action against Fidelity International Bank ("FIB"), alleging negligence, breach of contract and conversion in connection with FIB's payment of two forged and counterfeited checks, and seeking to recover $ 345,649.60, the sum of the two forged checks that were drawn on its account at FIB. The relationship between the parties is governed by the relevant provisions of the New York Uniform Commercial Code (the "U.C.C.").
This matter arises under the court's diversity jurisdiction, pursuant to 28 U.S.C. § 1332(a). A bench trial was held from April 12 to 14, 1994. The following constitute the court's findings of fact and conclusions of law in accordance with Fed. R. Civ. P. Rule 52(a).
Zambia National produced the following witnesses: William Holman, the Director of Inspection, Audit and Investigations for Zambia National; Alfred Kumwenda, a former section accountant in the International Banking department at Zambia National; Rose DeGregorio, former manager of the Demand Deposit Accounting area at FIB; and Consuelo Piedrahita and Dietra Jones, the FIB clerks responsible for verifying signatures. Zambia National also offered the deposition testimony of Grace Silumesi, who worked with Kumwenda at Zambia National.
FIB produced the following witnesses: Richard Bendit, the account officer at Fidelity responsible for the Zambia National account; Carl Schaffenberger, a handwriting expert; Joseph Santiso, an expert in bank operations; and Michael McDevitt, Assistant Vice President of FIB.
Before pronouncing its findings in this matter, the court observes for the purpose of clarity that under the U.C.C., a person is not liable on an instrument of commercial paper unless he signs it. See U.C.C. § 3-401(1). Moreover, even if the signature appearing on a check is not a forgery, the instrument upon which it appears may not be "properly payable", U.C.C. § 4-401, if the signature is made outside the scope of the authority of a person purporting to sign for a customer. See Thomas M. Quinn, UNIFORM COMMERCIAL CODE COMMENTARY AND LAW DIGEST, § 3-404[A] at 3-157 (1987 & 1991 Supp.). The term "forgery", therefore, does not capture every variety of "unauthorized signature". It is the term "unauthorized signature", and not "forgery" which is used by the drafters of the U.C.C. to describe the condition pursuant to which a customer may deny the validity of a signature and demand a recredit to his account. For convenience, however, the court here uses the words "forgery" and "unauthorized signature" interchangeably.
Zambia National's Check Writing Procedure:
Zambia National is an African bank with its principal place of business in Lusaka, Zambia. FIB is a New York bank maintaining its principal place of business in New York City. First Fidelity Bank, N.A., New Jersey ("FFB") is a national bank maintaining its principal place of business in Newark, New Jersey. FIB and FFB, along with Fidelity Bank of Philadelphia, are wholly owned subsidiaries of First Fidelity Bancorporation.
During 1988, George Thomas, Richard Bendit and other representatives of FIB visited Zambia National in Lusaka to discuss the possibility of Zambia National's opening an account at FIB in the United States. Zambia National maintained foreign bank accounts in order to pay certain expenses of Zambian citizens overseas, including import/export transactions and small bills requiring payment in hard currency. In November 1988, Zambia National opened Account Number 18028 at FIB in New York.
Payments were made from Zambia National's account by either of two means. Large sums, i.e., amounts over $ 10,000 or $ 20,000, were paid either by letter of credit or by "tested telex", a form of wire transfer authorizing FIB to pay money from a customer's account.
Where such sums were involved, telex payment was preferable from the point of view of the payee because it permitted speedy payment and the opportunity to earn interest at an earlier time than would be possible if the payment were made by check. According to Holman, large sums were paid almost exclusively by telex, with the particular exception of one customer, the ...