Outdoor Technologies, Inc. v. Allfirst Financial, Inc

Petitioner manufactures and distributes garden accessories and other related goods. Petitioner accepted a check for $706,735.62 from Hechinger, a retailer, as delayed payment for goods. That check was drawn on Hechinger’s account with First Omni Bank, although it mistakenly indicated on the face of the check that it was drawn on an account with First National Bank of Maryland. Knowing that Hechinger was on the verge of filing for bankruptcy, Petitioner sent a representative, John Hurt, to First National Bank of Maryland to secure immediate payment on the check through a wire transfer. Upon arrival, John Hurt was informed that First National Bank of Maryland would not honor the check because it was drawn on Hechinger’s account with First Omni Bank. John Hurt then went to First Omni Bank’s corporate headquarters to inquire about the quickest means to get paid on the check. First Omni Bank’s corporate attorney, William Thomas, stated that if Hechinger maintained sufficient funds in the account and had not yet filed for bankruptcy First Omni Bank would honor the check upon presentation of proper authorization. What constitutes “proper authorization” was not discussed. John Hurt then attempted to negotiate the check at the First Omni Bank branch office presenting a letter authorizing him to do so. There Petitioner was told by William Thomas over the phone that proper authorization would require a resolution from Petitioner’s board of directors authorizing the John Hurt to negotiate the check. John Hurt then sent the check via federal express to a Michigan bank where Petitioner had a depository account. Before the check was paid Hechinger filed for bankruptcy.