Seymour Gillman, as Assignee for the Benefit of Creditors of Jamaica Tobacco & Sales Corp., Appellant, v. Chase Manhattan Bank, N. A., Respondent, 73 N.Y.2d 1

Summary

The bank, without notice to the customer, segregated a bank deposit by transferring it from a checking account to an account over which the customer had no control. The trial court concluded that the parties' security agreement was unconscionable and unenforceable and that the bank acted illegally in transferring the funds. The appellate court reversed, holding that the security agreement was not unconscionable. The court agreed, ruling that the security agreement provided protection by giving the bank a security interest in the deposits of the customer, under which the bank had a right, in good faith, to segregate the customer's bank deposits without notice. The court found that the security agreement was sufficiently specific to create a security interest in the customer's checking account and that the bank had not acted in bad faith when it took steps to safeguard the fund in which it had an existing security interest. Moreover, the court found that in segregating the customer's ...