Does the Burden of Proof Fall on a Bank to Establish That It Acted In a Commercially Reasonable Manner ?
In Putman v. Manufacturers Hanover Trust, 74 N.Y.2d 340, 547 N.Y.S.2d 611, 546 N.E.2d 904, the Court of Appeals held that a bank has the burden of proof concerning the issue of establishing that it acted in a commercially reasonable manner:
"While section 4-103(3) is silent as to which party bears the burden of proving clearing house rules or general banking usage, we conclude that the burden should rest on the bank-the party seeking the advantage offered by the provision-not on the customer.
First, the bank is by far in the better position to come forward with proof on this issue.
It knows its own practices, and is surely better situated than the customer to be aware of how those practices compare to those of other banks.
In fact, given the breadth of what can quality as "general banking usage" (see, UCC 4-103, comment 4), it is at the least inefficient to impose on the customer the burden of disproving all these possibilities, in the absence of any indication on the bank's part of which general practices support its own.
Moreover, the "prima facie" language of 4-103(3) itself suggests that conclusion.
Generally, a party makes out its own prima facie case, leaving rejoinder for the adversary.
It is both awkward and purposeless to require plaintiff to establish the existence of relevant rules and usage, and then to demonstrate either that the defendant's action was inconsistent with them or that the rules and usage were unfair or unreasonable ( UCC 4-103, comment 4).
Unless a defendant advances a genuine issue on this point, it is unnecessary and potentially confusing to ask a plaintiff to make both sides of the issue.
In addition, a general banking usage is a species or trade usage ( UCC 1-205), and the burden of proving a trade usage has generally been placed on the party benefitting from its existence (see, 1 White & Summers, Uniform Commercial Code 3-3, n. 42, at 140 [Practitioner's-3d ed.]).
Thus, we conclude that the Appellate Division erred in charging plaintiff for the failure to prove that MHT's check-review procedures were not consistent with clearing house rules or general banking usage.
That was the bank's burden. the bank adduced no such evidence, thus failing to establish its entitlement to the "safe harbor" of UCO 4-103(3)."
Thus, in Putnam the Court held that the defendant bank was liable because the evidence demonstrated that the bank failed to exercise reasonable care in paying 37 forged checks and failed to offer any evidence of "general rules or usage".
Plaintiff was entitled to money judgment in the amount of $ 43,737.02.