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Forged Endorsement Of A Cashier's Check: Who's responsible?

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We are in the middle of a situation with one of our customers and our check vendor who supplies us with Cashier checks. One of our customers purchases a cashier check from us for $60,000.00. We have a contract with one of the big check vendors who supply us with our cashier checks that are drawn on their bank. A lot of banks do this. This is our situation. The customer purchases the check for $60,000 and had the check payable to a corporation to purchase a module home. After several months went by he received a phone call from the company looking for the deposit of $60,000. The customer came into the bank and asks us to see if the check was cashed. It turns out that the check was cashed. So we requested a photo copy of the check and found out that our customer gave the check to a business friend who was to deliver the check directly to the company. After reviewing the endorsement of the check, it turns out that the business friend took the check and went to his local bank and forged the name of the company on the back, signed his name and deposited directly into his personal account. WE have been dealing with our vendor to recovery the funds from the bank of first deposit for over 5 months. They keep telling us, our check vendor, that the bank of first deposit has a right to try to recovery the funds from their customer first. How long does the bank of first deposit have? Our customer thinks our bank should reimburse him? Who’s liable here? What are our customer’s legal rights? What are Mercantile responsibilities? Obviously the bank of first deposit should not have accepted the check double endorsed and deposited it into a personal account with out verifying that the corporation had signed over the check. It’s my understanding that all corporate checks have to be deposited into the company account first away and can not be signed over to another party. This looks very clear to me that the bank of first deposit is dragging their feet. Are we right on how we see this situation?

Your check vendor may be misreading the Uniform Commercial Code. I am assuming you sent the original check back with an affidavit of forgery from the original payee to the depository bank. The depository bank, under their guarantee of endorsement, is obliged to make you whole if the endorsement of the payee is not genuine. In your case, I would send a demand letter to the depository bank telling them I want immediate reimbursement of the check. You might even want to tell them you'll have to initiate legal action. (Talk to your attorney first!) After they reimburse you, they can then take all the time they want to try to get their money back from their depositor.

One word of caution here - has your customer made any legal charges against his "friend" who took the check? And have you thoroughly investigated the incident? I'd want to be positive there was no collusion involved.

First published on 8/12/02

First published on 08/12/2002

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