Forged Check Claim Against Spouse
Question: Mr. "Jones" came into our branch a few months ago and said there were checks written and paid on his account during the past year while he was in the hospital recovering from an accident. He said they were all paid with forged signatures, that his wife signed them, not him. Both he and his wife have their own individual account with us. When he reviewed his checks, we noted that most of them went to pay bills and utilities, but some were obviously personal checks to hairdressers and jewelry stores. He sorted through them and said that "...this one is OK, but this one is not - and I want to be reimbursed for those." We have not yet made a decision on whether to pay him or not. He is still living with Mrs. "Jones", as he said he has no money until some things get "...straightened out."
Now we have had a check returned to us in the mail from another bank with an affidavit of forged endorsement and a request for reimbursement. This check was deposited into our bank almost three years ago. I've done some investigation on it and learned a few things about the negotiation of the check. The $50,000 check came from the savings fund at another bank in the name of Mr. "Jones" and is payable to him. It was withdrawn while he was in the hospital, and was deposited in his wife's single name account with us, purportedly bearing his endorsement, second endorsed by her. I know he has three years to make a claim on a forged endorsement, according to the Uniform Commercial Code. But don't I have some kind of defense on this? The affidavit says he "...derived no benefit..." from the negotiation of the check.
Answer: Your Mr. "Jones" seems to have a plethora of problems! Let's take the first part of his claim - those checks written over the year, signed by his wife, on his account. Once he passed the terms in his depositor agreement with you that say he has ten days to examine his statements, etc., and said nothing, her signatures became authorized signatures by means of his "non-notification." He doesn't get to pick and choose. At the very most, your liability would be those checks in the first statement she signed, and ten days after you made that statement available. Your liability is minimal there, if at all. I'd argue authorized signature on all of them.
The second problem is interesting. He can make a claim on the bank where he had his savings fund. The withdrawal there, according to him, was forged. The liability is on them on the original transaction. It seems to me that the fictitious payee rule enters here, in that he was never intended to be the payee, even though he was named. (A fictitious payee is defined as a person named as payee in an instrument who does not in fact exist or who does exist but to whom the maker of the instrument does not intend to convey any interest in the instrument.) Section 3-405(1)(b) of the UCC says that in the case of fictitious payee, "... an endorsement by any person in the name of the indicated payee will be effective." The drawee bank could argue they did intend the funds to go to Mr. Jones. However, you could argue their instructions were fraudulently obtained.
Before paying anything on either of these claims, perhaps your best route would be to get a good banking attorney to explain to Mr. and Mrs. Jones (who you learned are still married to each other and living together) that these problems are their problems - not either of the financial institutions involved. I'd also suggest they do their banking elsewhere in the future.
Copyright © 2005 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 15, No. 12, 12/05
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