Arizona Auto

Case

Arizona Auto Auction writes a check for $1,800 payable to Central Motors Company. Central Motors deposits this check in its bank, Valley National Bank. Arizona Auto Action discovers fraud by Central Motors goes to its bank, First National Bank of Arizona, and stops payment on the check to prevent Central Motors from getting the money.

When the check arrives at First National, the bank honors the stop payment order and returns the check to Valley National. Unfortunately for Valley National, it has allowed Central Motors to withdraw the funds represented by the check from its account, and no money remains in the account. Because Central Motors has received money that it was not entitled to, Valley national seeks to recover the funds from Central Motors.

However, Central Motors has disappeared and cannot be found. Valley National decides to make Arizona Auto pay the amount of the check. Arizona Auto responds that:

1. It was defrauded by Central Motors and has a perfect legal right to stop payment on the check.
2. Valley National was careless in allowing Central Motors to withdraw the funds without letting the check clear the bank on which it was written (First National).
3. Valley National should be limited in its recovery solely to Central Motors.

Valley National sues Arizona Auto Auction for $1,800.Who wins?