Ent Credit v. Sayre
24CA0002
Colo. Ct. App.Aug 1, 2024Background
- Sayre & Harris Law, P.L.L.C. (defendant) operated a COLTAF account with Ent Credit Union (plaintiff) and became the victim of an email scam, depositing a fraudulent cashier’s check and wiring funds overseas.
- Ent provided provisional credit for the deposited check, which Sayre & Harris mistakenly assumed meant final payment had been received.
- The cashier’s check was later found to be fraudulent, resulting in an unrecoverable wire transfer and a $114,540.14 account overdraft.
- Sayre & Harris notified Ent of the fraud after the funds had already left the account and could not be recalled.
- Ent sued Sayre & Harris to recover the overdraft amount, interest, attorneys' fees, and costs, asserting breach of contract and other claims.
- The trial court granted summary judgment for Ent, and Sayre & Harris appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Risk of loss for provisional credit on dishonored check | Membership agreement places risk on depositor | Ent did not act reasonably/carefully in processing the check | Risk remains with depositor until check clears |
| Bank’s duty to detect counterfeit/fraud | No legal or contractual duty to do so | Bank must have reasonable procedures to detect fraud | No duty to detect counterfeit checks |
| Timeliness of notice to depositor of dishonor | Notice provided and not cause of loss | Late notice delayed wire recovery/prevented mitigation | Defendant’s own notice was already too late |
| Notice required for alternative breach of transfer warranties | Not necessary as contract claim suffices | Required timely notice for alternative theory | Not addressed—contract claim dispositive |
Key Cases Cited
- Lamson v. Com. Credit Corp., 531 P.2d 966 (Colo. 1975) (risk of loss remains with depositor until check clears)
- Mercantile Bank & Tr. Co. v. Hunter, 501 P.2d 486 (Colo. App. 1972) (bank may revoke provisional settlement when check dishonored)
- Flatiron Linen, Inc. v. First Am. State Bank, 1 P.3d 244 (Colo. App. 1999), rev’d on other grounds, 23 P.3d 1209 (Colo. 2001) (bank’s notice and charge-back obligations)