Article 4A of the Uniform Commercial Code in California
In 1990, the Legislature enacted Article 4A of the Uniform Commercial Code as Division 11 (Funds Transfers) of the California Uniform Commercial Code. ( 11101 et seq.)
"The focus of the Article 4A is a type of payment, commonly referred to as a 'wholesale wire transfer,' which is used almost exclusively between business or financial institutions. Payments made by wire transfer, as distinguished from payments made by checks or credit cards, or from electronically based consumer payments, require a separate body of law that addresses the unique operational and policy issues presented by the method. It was therefore the intent of the drafters of Article 4A to provide a comprehensive body of law to govern the rights and obligations resulting from wire transfers. (Prefatory Note to 1989 Act, 2B (Part II) U.L.A. (Master Ed.), p. 6 et seq.; see 7 Anderson 3d (2000 ed.), 4A-101:1 et seq.)" (4 Witkin, Summary of Cal. Law (10th ed. 2005) Negotiable Instruments, 132, p. 505; see also Zengen, Inc. v. Comerica Bank (2007) 41 Cal.4th 239, pp. 252-253 (Zengen).)
"The Code Comment to Uniform Commercial Code section 4A-102, adopted in California as section 11102, states:
'In the drafting of Article 4A i.e., division 11, a deliberate decision was made to write on a clean slate and to treat a funds transfer as a unique method of payment to be governed by unique rules that address the particular issues raised by this method of payment. A deliberate decision was also made to use precise and detailed rules to assign responsibility, define behavioral norms, allocate risks and establish limits on liability, rather than to rely on broadly stated, flexible principles. In the drafting of these rules, a critical consideration was that the various parties to funds transfers need to be able to predict risk with certainty, to insure against risk, to adjust operational and security procedures, and to price funds transfer services appropriately. This consideration is particularly important given the very large amounts of money that are involved in funds transfers.
'Funds transfers involve competing interests--those of the banks that provide funds transfer services and the commercial and financial organizations that use the services, as well as the public interest. These competing interests were represented in the drafting process and they were thoroughly considered. The rules that emerged represent a careful and delicate balancing of those interests and are intended to be the exclusive means of determining the rights, duties and liabilities of the affected parties in any situation covered by particular provisions of the Article. Consequently, resort to principles of law or equity outside of Article 4A is not appropriate to create rights, duties and liabilities inconsistent with those stated in this Article.' (Code Com., reprinted at 23D West's Ann. Cal. U. Com. Code (2002) foll. 11102, pp. 27-28.)" (Zengen, supra, 41 Cal.4th at p. 252.)
Division 11 provides that common law causes of action based on allegedly unauthorized funds transfers are preempted in two specific areas: (1) where the common law claims would create rights, duties, or liabilities inconsistent with division 11; and (2) where the circumstances giving rise to the common law claims are specifically covered by the provisions of division 11. (Zengen, supra, 41 Cal.4th at p. 253.)
That there is fraud involved with the funds transfer does not mean that division 11 does not apply.