The opinion of the court was delivered by: PRATT
JOHN H. PRATT, United States District Judge
FINDINGS OF FACT AND CONCLUSIONS OF LAW
The plaintiff, Fidelity Bank (Fidelity) of Philadelphia instituted suit against the United National Bank (United) of Washington, D.C. for breach of warranty, claiming that United presented a check bearing forged endorsements to Fidelity, which Fidelity accepted and paid. This matter was tried without a jury on June 5, 1985.
Pursuant to Rule 52, Fed.R.Civ.P. the court enters the following Findings of Fact and Conclusions of Law.
The essential facts of this case are not in dispute. On August 26, 1983, Fidelity executed a check drawn on itself in the amount of $74,449.69, to the order of "John J. Ryan." The check was intended as payment for certain municipal bonds ordered by a Fidelity customer and was to be delivered in exchange for the bonds to a representative of Ryan Beck & Co., a brokerage firm which was listed with Fidelity under its former name of "John J. Ryan and Company." The check was prepared by a Fidelity employee, Wilbert Thomas, pursuant to an order which listed the description of the security, the order number, the price, the broker number and broker name. It was not conclusively established at trial whether the order listed the broker's name as "John J. Ryan" or as "John J. Ryan and Company."
Thomas presented the check and order to Bruce Eskew, an authorized signatory for Fidelity, for his signature. Eskew was obligated to verify, before signing, that the name of the payee on the check precisely matched the name of the payee on the order. After being signed, the check was to have been taken to a "cage" area to be held for the broker. Whether this check was actually delivered to the cage is not established. The cage itself is a secure area but it was accessible to Thomas and other employees on a daily basis.
On September 8, 1983, the Fidelity check was presented to the defendant United by a man identifying himself as John J. Ryan. At this time, the check had already been endorsed in the name of John J. Ryan and stamped with Fidelity's "signature guaranteed" stamp. These stamps were described as being readily accessible to non-authorized employees working within the Fidelity trust department. In fact, the endorsement was a forgery and the use of the signature stamp was not authorized by Fidelity. On the recommendation of an established United customer, and based on the matching of the man's second endorsement with the already "guaranteed" initial endorsement, as well as the production of a driver's license, United opened a checking account in Ryan's name. Following its normal practice, United placed a six day freeze on the account and placed the check into the collection channels for payment. Fidelity paid the check on September 9, 1983.
Prior to the expiration of the six day hold, United received several requests from "Ryan" to release some of the frozen funds. These inquiries aroused suspicion, and Blenna Cunningham, Senior Vice President for United, attempted to investigate John J. Ryan. On September 20, 1983, she called Fidelity's bookkeeping department to inquire about John J. Ryan, explaining that Fidelity had given him a $74,000 check. The Fidelity employee responded that Fidelity had many customers named "John J. Ryan" and that she could not provide any information. Ms. Cunningham then contacted an acquaintance, Emma Chappel, of Continental Bank in Philadelphia and requested that she make inquiry at Fidelity on United's behalf. Ms. Chappel was also unable to obtain any information about Ryan from Fidelity. Thereupon, United permitted the release of substantially all of the funds, after September 20, 1983.
Fidelity representatives did not suspect that the securities had not been delivered to the bank and that the check had not been received by the brokerage firm until October 24, 1983. At that time, John Penza, the Operations Manager of the Security Clearance Unit had performed a routine check of "failed transactions," or transactions which had been incomplete for over thirty days. The transaction in question had in fact remained unsettled for nearly sixty days. Mr. Penza discovered on October 24, 1983 that the bonds had never been delivered and that the check was missing. United was notified on October 25, 1983.
Fidelity claims in this suit that United breached its presentment warranty of good title under § 4-207 of the Uniform Commercial Code (UCC), which the District of Columbia has adopted. D.C. Code § 28:4-207(1)(a). The basis of plaintiff's prima facie claim is that United did not have good title to the check which was presented to and paid by Fidelity because it contained unauthorized forged endorsements. United raises two defenses under the UCC sufficient to bar the plaintiff's recovery, notwithstanding the fact that United did not have good title to the instrument. We reject as inapplicable United's third defense, based on UCC § 3-405(1).
Section 4-207(4) of the UCC provides that
unless a claim for breach of warranty under this section is made within a reasonable time after the person claiming learns of the breach, the person liable is discharged to the extent of ...