Steve Szabo, a Venezuelan resident, had a checking account with the Bank of America in Palm Beach Gardens, Florida. Someone with an internet address in Nigeria hacked into Szabo’s accounts on-line, called customer service to change the telephone number listed on his account and ordered blank checks. 

Someone then wrote a check on Szabo’s account for $120,000 to pay for an investment in Freddie Quimby’s gold mine. On February 20, Quimby presented the check for payment at the Bank of America’s branch in Osburn, Idaho. At Quimby’s request, the branch manager verified through Bank of America’s records that Szabo’s account had sufficient funds to cover the check. The branch manager also called the telephone number in Szabo’s account records and spoke to someone claiming to be Szabo who confirmed that the check was valid. 

Quimby endorsed the check to the bank and received in return a cashier’s check for $120,000, which he deposited to his account at Bank of America in Baker City, Oregon. [You remember that a cashier’s check is a check drawn on the bank itself.] “Szabo” then contacted Quimby, stating that he had changed his mind about the gold mine investment and asking Quimby to return the funds. On February 22, Quimby wired $111,000.00 from his account with Bank of America to an account in Hong Kong. Those funds disappeared and Bank of America has been unable to reclaim them. 

On March 3, the real Szabo reported to the Bank that his signature on the Quimby check was a forgery. The Bank repaid Szabo and then filed suit against Quimby, seeking repayment on the cashier’s check it had issued to him, with interest. The Bank argued that Quimby had violated his transfer warranties when he endorsed the forged check to it. 

Questions:

Did Quimby violate his transfer warranties? Is he liable to the Bank of America for $120,000?