On December 9, 2024,^[FN1] Plaintiff, People's Alliance Federal Credit Union (hereinafter "Plaintiff"), commenced this action against Defendant, Patricia G. Campbell (hereinafter "Defendant"). Plaintiff alleges that Defendant was unjustly enriched by fraudulently misrepresenting her identity as Patricia G. Lord-Campbell (hereinafter "Lord-Campbell"), the rightful account holder, and wrongfully withdrawing funds from Lord-Campbell's account. Plaintiff seeks relief in the form of a judgment directing Defendant to return the sum of $21,027.73 to Plaintiff so that it may reimburse the rightful owner, K.F., together with damages including costs, interest, reasonable attorney's fees, and such other and further relief as the Court deems just and proper.

On June 6, 2025,^[FN2] the Court granted Plaintiff's motion for default judgment without opposition and scheduled the matter for an inquest.^[FN3] A Note of Issue was filed on June 10, [*2]2025.^[FN4] On July 16, 2025, Plaintiff filed an Affidavit of Service with Notice of Inquest, providing notice to Defendant that the inquest had been rescheduled to September 29, 2025, at 2:30 p.m.^[FN5]

On September 29, 2025,^[FN6] an inquest was held, at which Defendant failed to appear and was deemed to have defaulted in appearance. Plaintiff was represented by its assigned counsel, Eileen M. Burger, Esq., who called one witness, Paula Joslyn (hereinafter "Joslyn"), Plaintiff's Senior Manager of Branch Operations. Joslyn testified that Plaintiff is a federally chartered credit union operating multiple branches within the State of New York. She further testified that Lord-Campbell is Defendant's mother, and that Lord-Campbell was a member of the Credit Union who maintained an account with Plaintiff. That account was jointly held with her minor grandchild, K.F., who was designated as the primary account holder.^[FN7]

Joslyn further testified that, upon information and belief, it was her understanding that on or about February 24, 2023, Lord-Campbell executed a Power of Attorney appointing her other daughter, Tabitha Davis-Simpson (hereinafter "Davis-Simpson"), as her agent.^[FN8]

Joslyn testified that on or about May 21, 2024, Defendant entered Plaintiff's Brooklyn branch and sought to withdraw funds from her late mother's account. She recounted that Defendant presented identification to a teller,^[FN9] who, without properly verifying the identification, proceeded to close a Certificate of Deposit (hereinafter "CD") and withdraw the remaining funds from the account after Defendant explained that she was "moving." Joslyn further testified that Plaintiff did not become aware of Lord-Campbell's passing, which had occurred on January 23, 2024, until September 6, 2024, when Davis-Simpson visited Plaintiff's JFK branch to make a deposit. On that same date, Davis-Simpson discovered the fraudulent withdrawal and promptly initiated an internal investigation.^[FN10] Davis-Simpson also filed a police report,^[FN11] and commenced a criminal matter against Defendant resulting in the issuance of a warrant due to Defendant's failure to appear.

Joslyn further explained that, although Plaintiff is certain that Davis-Simpson was not involved in the fraudulent transaction, the withdrawn funds were segregated from Plaintiff's general fund pending resolution of this matter. She testified that Plaintiff has not yet reimbursed the rightful account holders, as there were penalties incurred due to Defendant's premature invasion of the Certificate of Deposit. Joslyn stated that the funds are ready to be tendered to the rightful owner upon the entry of judgment in Plaintiff's favor.

This Court disagrees with Plaintiff.

In General Sewer Serv. of Richmond County, Inc. v SI Bank & Trust, the court held that:

Generally, a bank must exercise a duty of ordinary care in cashing checks. UCC4-406(3). The Uniform Commercial Code imposes strict liability on banks for any instrument presented that is not "properly payable." UCC 4-440; Montreal v Fleet Bank, 95 NY2d 204, 206-07 (2000). A check with a forged signature is not properly payable and generally cannot be charged to the customer's account. Id. However, the UCC also places a heavy burden on the customer to promptly review bank statements and notify the bank within one year of the date of the bank statement of any irregularity (UCC 4-401; Guardian Life Ins. Co. of Am. v. Chemical Bank, 94 NY2d 418, 422 (2000) (holding that UCC "provisions relating to check fraud further a policy of assigning loss based upon the relative responsibility of the parties . . . [and generally] shifts the risk of loss from the drawee to the drawer in situations where the drawer is the party best able to prevent the loss"). Courts have further supported the proposition that "the drawer should bear the loss occasioned by its own employee or agent as a risk of his business enterprise, 'because the drawer is normally in a better position to prevent such forgeries by reasonable care in the selection or supervision of his employees [or agents], or, if he is not, is at least in a better position to cover the loss by fidelity insurance; and the cost of such insurance is properly an expense of his business rather than of the business of the holder or drawee.'" Id.

It is evident from Plaintiff's witness testimony that the teller deviated from Plaintiff's own internal security protocols by failing to properly verify the identification presented by Defendant. This deviation from established procedures directly facilitated the fraudulent transaction and resulted in Plaintiff's breach of its duty to the account holders, thereby causing negligent financial loss. Furthermore, the evidence demonstrates that Davis-Simpson discovered the fraud and promptly reported it to both the bank and law enforcement authorities within the required time frame. Accordingly, Plaintiff must reimburse the affected account in full, without imposing any penalties resulting from Defendant's unauthorized invasion of the CD, and must also remit interest from May 20, 2024, the date of the fraudulent transaction, to present.

It is the opinion of this Court that Plaintiff, through its lapse in procedure, created the very opportunity for the fraud to occur. Plaintiff was not misled in any material respect; rather, the loss resulted from its own failure to follow established safeguards. Although Defendant misrepresented her identity, adherence to protocol would have prevented this matter from [*3]arising. Based upon the evidence submitted and the testimony given at the Inquest, this Court finds that Plaintiff is not entitled to the sought relief, and it is DENIED in its entirety.

Accordingly, it is hereby:

ORDERED that Plaintiff shall reimburse the rightful account holder, K.F., $21,027.73 plus any penalties as the result of the CD invasion as well as statutory interest from May 20, 2024, until present within 20 days of this order, and it is further

ORDERED that Plaintiff shall serve a copy of this Order with Notice of Entry upon Defendant and Davis-Simpson within thirty (10) days from the date of entry.

This constitutes the Decision and Order of this Court.