18 Jul No Comments Remik Expert Matters

Facts:  The plaintiff was a law firm that maintained it business and trust accounts the defendant bank.  Over a 30-month period, an employee of the plaintiff arranged for the issuance of a series of checks payable to various vendors and customers of the plaintiff.  The employee then misappropriated the checks, forged the payees’ endorsements and deposited the checks into the employee’s personal account at another bank.  The checks were presented for payment in due course and paid against the plaintiff’s accounts.  When the fraud was ultimately discovered, the plaintiff brought suit against its own bank alleging that the checks were not properly payable from the plaintiff’s accounts due to the forged endorsements.  The bank defended on the basis that the deposit account agreement required the plaintiff to give notice of the payment of a check bearing a forged endorsement within 14 calendar days of the bank sending or making the bank statement containing the check available to the plaintiff.

Issues for the Expert:  Whether or not (1) the payor bank breached its deposit contract with the plaintiff in paying and charging to the account of the plaintiff the checks bearing forged endorsements of the payees; (2) the plaintiff or the defendant bank had an obligation to review the checks for proper endorsement, and (3) whether the 14 calendar day period contractually obligating the plaintiff to discover and report the payment of a check bearing a forged endorsement was unreasonable and/or a breach of the obligation of the defendant bank to act in good faith towards its customers.

Client: The Plaintiff.

Outcome: The trial court granted summary judgment to the defendant bank based on the deposit account agreement.  The appellate court affirmed and the state’s highest court declined to review the case.