Bank Must Honor Cashier's Check Absent Fraud or Check Being Lost, Stolen, or Destroyed

On May 6, 2014, the Court of Appeals issued a decision in Golden v. Citibank, N.A., 2014 NY Slip Op. 03192, holding that a bank must honor its cashier's checks "unless there is evidence of fraud, or the check is lost, stolen, or destroyed."

The background to the court's brief opinion can be found in the Second Department's decision appealed from:

On December 29, 2009, the defendant, Citibank, N.A. (hereinafter Citibank), issued a cashier's check in the sum of $300,000, payable to "Richard Golden as attorney." This check was deposited by the plaintiff, Richard N. Golden, into his attorney escrow account at JP Morgan Chase Bank hereinafter Chase). Subsequently, Citibank issued a stop payment order on the check, and Chase reversed the credit that had been posted to the plaintiff's account. . . . Citibank did not submit any evidence that the check was fraudulently issued or obtained, [but rather argued] that the check was stopped because a customer of the bank informed the bank that "she made alternate arrangements to have the funds delivered."

The Court of Appeals held that the bank was not excused from honoring the check, explaining:

A cashier's check — essentially, a check drawn by a bank on itself — is presumed to have been issued for value, and the issuance of such a check constitutes an acceptance by the issuing bank, which gives rise to an obligation to pay. When a bank has issued a cashier's check, it cannot stop payment, unless there is evidence of fraud, or the check is lost, stolen, or destroyed. To the extent Gates v Manufacturers Hanover Trust Co./Capital Region (98 AD2d 829 [3d Dept 1983]) holds otherwise, it was wrongly decided and should not be followed.

(Internal quotations and citations omitted).