I'd like to hear your thoughts and opinions...

In April we accepted for deposit a two party $40K insurance check made to "Bob d/b/a Bob Construction AND Jim". Both are our customers -meaning they each have accounts separately; however we are more familiar with Bob as he is local and makes regular deposits and Jim resides about 120 miles away. Bob presented the check with both endorsements and deposited into HIS account with us.

Fast forward to today (June)... Jim calls us, saying we accepted a check that he never endorsed. And of course, Bob's account has about $5K left in it. Jim did do an Affidavit of Forgery with us. Jim says it's his check, and Bob says it's his. Bob's attorney is hounding us, as we put a hold on the account - stating we have no right to do so.

And unfortunately....legal counsel isn't sure what to do yet.

Any thoughts? Are we liable to anybody, and for how much?

What bank was the check drawn on - if not you, then they are barking up the wrong tree. They need to start there. That bank will then return the check to you for forged endorsement and you will process the return and follow whatever path you usually do when you have an overdrawn customer.