Question: We had the following situation with a check. We had a customer come through the drive in with a friend of his to cash a $2,523.10 check. The teller told him that she couldn't cash it for the other person, so he asked if she would cash it for him. She told him that if he endorsed it and deposited it in his Savings account until the check cleared that we would pay it out of his savings at that time. The date of deposit was 2/1. She put a hold on the item until she was sure the check had cleared and no large item return notice had been received and she gave the money to the customer. On 4/4/, we received the check back in the mail with a notice of forged endorsement (saying the endorsement of the original payee was forged), and the other bank is requesting that we send them a cashier's check. Evidently, the real payee on the check didn't notify the payor of the lost check for a stop payment or we would have received this back a long time ago. Our teller did not ask for the payee's ID.
Answer: Unfortunately, it is not too late for the check to be returned for a forged endorsement. The midnight deadline is inapplicable to such a situation and even the thirty day rule doesn't fit, because it governs the drawer's time for reporting an unauthorized signature or an alteration to his own bank - not a case where an endorsement is forged. You can charge it back to your customer's account under your customer's endorser's liability, and they will have to deal with their fine little friend.
There are some defenses you could raise: for example, if the drawer of the check didn't suffer a loss, or if the drawer didn't act in good faith, etc. The bottom line, however, is that in most instances the loss for a forged endorsement falls on the depositary bank because the depositary bank was in the best position to verify the endorsement properly and avoid the loss.
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