03/10/2010 Posted by Lee
Berlik
Even in Virginia, which recently placed which recently placed
first in a ranking of the "Best
States for Business" by Forbes.com, businesses often fail.
Particularly in small companies, relationships among the owners sour
and partnership
disputes arise. Here in Fairfax County, where my practice is
located, it is not uncommon for disgruntled partners to attempt to
withdraw large sums from corporate bank accounts prior to dissolution
or to attempt to block other owners' access to the company's
accounts. Banks need to be careful not to get caught in the crossfire
by inadvertently facilitating a wrongful cash grab by one of the
business owners. Fortunately, as illustrated by a recent
decision by Fairfax Judge Bellows, Virginia's adoption of the
Uniform
Commercial Code provides some valuable protection to banks.Khan v. Alliance Bank (Fairfax Circuit Court, Dec. 22, 2009) involved a dispute between two owners of Advantage Title and Escrow, LLC, Khan and Kazmi. Both were authorized signatories on the company's account held with Alliance Bank. After the two had a falling out, Kazmi instructed the bank to remove Khan as a signatory. A few days later, Khan wrote a $35,000 check against Advantage Title's account in exchange for a cashier's check for that amount. Upon learning of the transaction, Kazmi sent an "Affidavit of Unauthorized Transaction" to Alliance Bank. This document alleged, under oath, that Khan obtained the cashier's check through fraud as Khan was (according to Kazmi) not authorized to withdraw funds from the company's account. In reliance on that affidavit, Alliance Bank canceled the cashier's check and credited $35,000 back to the Advantage account.
- See more at:
http://www.lexisnexis.com/community/corpsec/blogs/business-law-blog/archive/2010/03/10/ucc-protects-bank-from-breach-of-contract-allegations.aspx#sthash.vKh28drh.dpuf
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