Magazine article American Banker

Judge Dismisses Suit against Morgan over Delay in Transfer Notification

Magazine article American Banker

Judge Dismisses Suit against Morgan over Delay in Transfer Notification

Article excerpt

NEW YORK -- A state supreme court justice has dismissed a $458,000 damage suit for lost profits against Morgan Guaranty Trust Co. The suit charged that the bank delayed transmitting instructions for a wire transfer of funds, causing a profitable stock transaction to be foregone.

Justice Martin B. Stecher ruled last week that the firm transferring the the funds, Bellmore Investment Ltd., was responsible for the delay, because it did not inform the bank that "time was of essence."

Central Coordinates Inc., the plaintiff, as assignee of Bellmore, charged that Morgan Guaranty was guilty of negligence and breach of contract due to the delay.

The facts of the case are essentially undisputed, according to the decision.

The dispute arose over Bellmore's request on July 8, 1983, for a $91,500 funds transfer from its account at the Union Chelsea National Bank, New York, to Barclays, Bank's New York branch, with the funds to be credited to an account of a Barclays customer in the Bahamas.

Union Chelsea, having no direct or correspondent relationship with Barclays, wired the funds on July 11 to Morgan Guaranty, Barclays' correspondent bank, via the Federal Reserve communications system, known as Fed Wire.

Union Chelsea instructed Morgan to credit the account of the Barclays customer.

Morgan acknowledged receipt of the funds to the account of Barclays customer on the same day. However, Morgan failed to forward instructions as to the specific account to be credited.

When the recipient inquired about the whereabouts of the funds on July 14, 1983, Morgan discovered that there was no record that the instructions had been delivered to Barclays.

The proper instructions were sent late on July 14, after the bank had closed and after the expiration of a stock option for which the money was to be used. Bellmore claimed it lost $458,000 in profits by not being able to execute the stock purchase. …

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