Reference no: EM13951708

Question 1. Allstate Insurance Company issued a check payable to "Chuk N. Tang & Rosa C. Tang HWJT" with "Bank of America" on the second line and the following explanation on the front of the check: " Settlement of our rental dwelling loss caused by fire on 11/ 21/ 93." The Tangs indorsed the check and forged the indorsement of Bank of America. When Bank of America objected, the Tangs claimed that only they needed to sign the instrument for further negotiations. The check was intended as a joint payment for Bank of America as the mortgagee on the Tangs' rental property because the insurance policy required that the mortgagee be paid first before any proceeds went to the property owners. Bank of America sued Allstate.

Is Bank of America entitled to recover for the lack of its indorsement? Was its indorsement necessary for further negotiation? [ Bank of America Nat'l Trust & Savings Ass'n v. Allstate Insurance Co., 29 F. Supp. 2d 1129 ( C. D. Cal.)]

Question 2. Elliot, an officer of Impact Marketing, drew six postdated checks on Impact's account. The checks were payable to Bell for legal services to be subsequently performed for Impact. Financial Associates purchased them from Bell and collected on four of the checks.

Payment was stopped on the last two when Bell's services were terminated. Financial argued that it was a holder in due course and had the right to collect on the checks. Impact claimed that because the checks were postdated and issued for an executory promise, Financial could not be a holder in due course. Who was correct? Why? [Financial Associates v. Impact Marketing, 394 N. Y. S. 2d 814]

Question 3. Arthur Odgers died, and his widow, Elizabeth Odgers (Elizabeth Salsman by remarriage), retained Breslow as the attorney for her husband's estate. She received a check payable to her drawn on First National City Bank. Breslow told her to deposit it in her husband's estate. She signed an indorsement "Pay to the order of Estate of Arthur J. Odgers." Breslow deposited this check in his trustee account in National Community Bank, which collected the amount of the check from the drawee, First City National Bank. Thereafter, Elizabeth, as administratrix of the estate of Arthur J. Odgers, sued National Community Bank for collecting this check and crediting Breslow's trustee account with the proceeds. Was National Community Bank liable? Explain. [ Salsman v. National Community Bank, 246 A. 2d 162 ( N. J. Super.)]

Question 4. John G. Vowell and his wife, now deceased, had a checking account and a savings/ money- market account with Mercantile Bank of Arkansas. In June 1997, Dr. Vowell and his wife allowed their daughter, Suzan Vowell, now also deceased, and her boyfriend to move in with them at their home. At that time, they knew that Suzan and her boyfriend had been involved with drugs, alcohol, writing bad checks, and stealing.

They also knew that Suzan had stolen checks from them in the past and forged either Dr. Vowell's or his wife's signatures. They took precautions by hiding Mrs. Vowell's purse, which contained their checkbook, under the kitchen sink. Beginning in June 1997, Suzan forged Mrs. Vowell's signature on 42 checks, drawn on both accounts, and committed nine unauthorized ATM withdrawals in the aggregate amount of $ 12,028.75.

Suzan found her mother's purse hidden under the kitchen sink and stole the checkbooks and ATM card from the purse. She apparently had access to the personal identification number (PIN) for the accounts because the number was identical to the home security system code. The Vowells received the following statements from the bank for the checking and savings accounts:

Date of                                 Amount                                         State date

Transaction                                                                                Covering

July 9,                                   $230.00                                     June-July 7, 1997

1997

 

August 8,                              $1,235.25                                  July 8 - August 6, 1997

1997

 

August 23,                            $5,140.00                                  July 23 -August 21, 1997

1997

 

September 9,                        $1,423.50                                 August 7 - Sept. 7, 1997

1997

 

September 26,                      $4,000.0                                  August 22 - Sept 22, 1997

1997

On September 15, 1997, Dr. Vowell had Mercantile freeze their accounts and begin investigating the alleged forgeries and other unauthorized transactions pursuant to its policy. Suzan was arrested subsequently when she tried to use the ATM card again.

The bank refused to credit the Vowell's account because it maintained that their negligence in handling their daughter caused the losses. The court found that the bank was liable for only $ 6,014.38, one-half of the entire sum of Susan Vowell's unauthorized bank transactions and forgeries. The bank appealed. Can the Vowell's recover? How much and why?