QUESTION 1:
Jack Slick cashed a check for $200 drawn on his bank account (Third State Bank) at his local supermarket. The supermarket indorsed the check and deposited the check in their bank account at First State Bank and was credited with that amount. The check was then presented for payment at Jack’s Bank, Third State and was dishonored for lack of funds and returned to the supermarket’s bank, First State marked “non-sufficient funds”. Upon receipt of the dishonored check, $200 was charged out of the supermarket’s bank account and the check, along with a notification, was sent to the supermarket. Who has primary signature liability and who has secondary signature liability? Why
QUESTION 2:
Jill was a bookkeeper at a law firm. The firm had a primary bank account in the name of the firm at First State Bank and a secondary bank account at Third State Bank that was in the name of the senior partner of the firm. The secondary bank account was funded by money from the primary bank account. Checks were used from the primary account and were made payable to the senior partner and signed by one of the partners in the law firm. Jill was responsible to keeping the balance of the secondary account at a certain level, and when funding was required, would write a check payable to the senior partner on the primary account, obtain a signature and deposit it into the secondary account. Jill began making extra checks payable to the senior partner and sought signatures from one of the partners, saying that she needed them so that she would not have to bother the partners every time she needed to fund the secondary account. However, she did not use them to fund the secondary account; she forged the indorsement of the senior partner and deposited the checks into her own bank account. Who is liable for the loss caused by the forgery? Why?
Learning Activity #2
QUESTION 1:
Jim Slick, son of Jack, obtained a blank check from his father’s bank account. He wrote it payable to “Cash” (bearer instrument) and forged his father’s signature on the check. He went to the bank where his father had his checking account and cashed the check. The teller cashing the check verified the balance and compared the signature with the signature on file. On that basis, the teller determined the check was good for cash. About a month later, Jack Slick appeared at the bank with his monthly bank statement and canceled checks. He showed the paid check cashed by his son to the bank manager and stated that he (Jack) in fact did not cash the check and that it was his son who cashed it without his (Jack’s) permission or authority. Is the bank liable for the customer’s loss on the forged check cashed by the bank? Why?
QUESTION 2:
After being fired from the law firm, Jill joined another company as bookkeeper. She was given authority to manage the company’s checking account and maintain the checkbook. She also handled the company’s accounts payable and regularly gave checks payable to company vendors to the company president for signature. Soon, she started forging the company’s president’s name on checks, making them payable to her husband’s company, Slick Autos. Over a period of time forged checks totaling over $50,000 were deposited to Slick Autos. A few months later, a bank loss prevention officer visually inspected one of the forged checks and became suspicious of the signature. A copy of the check was faxed to the company president who never dealt with Slick Autos and who knew that Slick Autos was not a company vendor, had Jill immediately terminated and arrested.
The company then sent a letter to the bank demanding the bank credit the total amounts paid to Slick Autos to the company’s account. The bank refused claiming that the company’s failure to provide timely notice of the forgeries barred the company’s claim. The company then sued the bank for negligence and unauthorized payment of forged items. The trial court granted the bank’s motion for summary judgment. The company appealed to the court of appeals. If you were a justice on the court of appeals for this case, how would you vote? Why?
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