N.Y. Uniform Commercial Code Law § 3-419: Conversion of Instrument; Innocent Representative

Section 3--419. Conversion of Instrument; Innocent Representative.

(1) An instrument is converted when

(a) a drawee to whom it is delivered for acceptance refuses to

return it on demand; or

(b) any person to whom it is delivered for payment refuses on

demand either to pay or to return it; or

(c) it is paid on a forged indorsement.

(2) In an action against a drawee under subsection (1) the measure of

the drawee's liability is the face amount of the instrument. In any

other action under subsection (1) the measure of liability is presumed

to be the face amount of the instrument.

(3) Subject to the provisions of this Act concerning restrictive

indorsements a representative, including a depositary or collecting

bank, who has in good faith and in accordance with the reasonable

commercial standards applicable to the business of such representative

dealt with an instrument or its proceeds on behalf of one who was not

the true owner is not liable in conversion or otherwise to the true

owner beyond the amount of any proceeds remaining in his hands.

(4) An intermediary bank or payor bank which is not a depositary bank

is not liable in conversion solely by reason of the fact that proceeds

of an item indorsed restrictively (Sections 3--205 and 3--206) are not

paid or applied consistently with the restrictive indorsement of an

indorser other than its immediate transferor.