Indiana Uniform Commercial Code (UCC)

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7^th Circuit Court of Appeals

Case Name: Approved Mortgage Corporation v. Truist Bank

Case No.: 22-3163

Officials: Ripple, Jackson-Akiwumi, and Lee, Circuit Judges.

Focus: Indiana Uniform Commercial Code (UCC)

Approved Mortgage Corporation, a mortgage company, initiated two wire transfers that were altered by a third party. As a result, the funds were mistakenly deposited into a Truist Bank account flagged as suspicious, and later withdrawn via cashier’s checks. Approved Mortgage subsequently sued Truist, seeking damages equivalent to the transferred amounts. The company brought forward claims under the Indiana Uniform Commercial Code (UCC), which governs bank-customer relationships in electronic funds transfers, as well as a common law negligence claim.

Initially, the district court dismissed the UCC claims citing lack of privity between Approved Mortgage and Truist. Additionally, it dismissed the negligence claim, asserting it was preempted by the UCC, which limits remedies to the bank that received the payment.

The Seventh Circuit upheld the dismissal of the UCC claims, concurring that the UCC does not provide an independent remedy and must be interpreted alongside other UCC provisions. However, the appellate court overturned the dismissal of the negligence claim. It ruled that to the extent the negligence claim stemmed from Truist’s issuance of cashier’s checks after depositing funds into the suspicious account, it was not preempted by the UCC. The case was sent back to the district court for further proceedings.

Affirmed in part, reversed in part and remanded.

Decided 06/28/24

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