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New Cases of Interest - December 22, 2014
HH Computer Systems, Inc. v. Pacific City Bank (2014) 231 Cal.App 4th 221. Three banks were dismissed from a cause of action for negotiating forged checks with the banks arguing that the checks had first been passed through a check cashing company and the banks therefore had no obligation to verify signatures. The trial court accepted that argument but the court of appeal reversed finding that the actions of the check cashing companies did not relieve the banks of their duty of care under Commercial Code § 3405. The banks involved were the first true banks to process the checks through the banking system and as such "the first banks" within the meaning of the statute. The court concluded that check cashing companies are not banks for this purpose, noting that they do not give their customers checking accounts and are not depositary institutions and therefore should not be treated as "banks" for the purposes of the Commercial Code.