Also known as: fraudulent indorsement · fraudulent endorsement · fraudulent endorsements · forged indorsements · forged endorsements
Written by attorneys — see sources below.
A forged indorsement purporting to be that of the employer on an instrument payable to the employer, or that of the identified payee on an instrument issued by the employer.
Flagship Logistics entrusted its accounts payable clerk Fiona Foster with preparing and processing checks to vendors. Foster prepared a check payable to Fulton Shipping but forged Fulton Shipping's indorsement and deposited the check into her personal account at a local bank. Because Foster had responsibility for the instrument, the forged indorsement binds Flagship Logistics for purposes of the bank's good-faith payment.
Stone & Webster drew three checks on its account payable to Westinghouse for goods and services. An employee in possession of the checks forged Westinghouse's indorsement before delivery and presented the checks to First National Bank & Trust Co. for cash. The bank paid the proceeds to the employee, who kept the funds for personal use.
Stone & Webster Engineering Corp. had its usual place of business in Boston. Between January 1, 1960, and May 15, 1960, it drew three checks on its checking account at The First National Bank of Boston payable to Westinghouse Electric Corporation. The checks were dated January 5, March 8, and May 9, 1960, in the respective amounts of $36,982.86, $10,416.58, and $17,355. Each check was made payable to the order of "Westinghouse Electric Corporation, 10 High Street, Boston." An employee of the plaintiff who had possession of the checks forged the indorsement of Westinghouse before any delivery to the payee. The employee presented the checks to the defendant, First National Bank & Trust Co. The defendant cashed the checks and delivered the proceeds to the plaintiff's employee, who used the money for his own purposes. The defendant then forwarded the checks to the drawee bank and received from it the full amounts of the checks. The drawee charged the plaintiff's account with those amounts and refused to recredit the account. The plaintiff brought an action of contract or tort against the defendant in four counts for the same cause of action. Count 1 alleged the facts of the checks and the forged indorsements in contract form seeking recovery of $64,755.44 with interest. Count 2 was on an account annexed for the same sum as proceeds of the checks cashed by the defendant. Counts 3 and 4 were in tort for conversion of the checks and for negligence in cashing checks with forged indorsements. By order of court, copies of the three checks were filed and treated as part of each count. The first two checks bore a typewritten indorsement "For Deposit Only: Westinghouse Electric Corporation By: Mr. O. D. Cos-tine, Treasury Representative" followed by an ink signature of O. D. Costine. The third bore a typewritten indorsement "Westinghouse Electric Corporation By: [Sgd.] O. D. Costine Treasury Representative." All three also carried a rubber-stamp indorsement guaranteeing prior indorsements and directing payment to any bank. The defendant demurred to each count for failure to state a cause of action. The demurrer was sustained, and the plaintiff appealed under G. L. (Ter. Ed.) c. 231, § 96.
View caseThe indorsement binds the employer when the employer entrusted the employee with responsibility for the instrument and the employee makes a fraudulent indorsement in the name of the payee. The bank that pays in good faith can treat the indorsement as effective.
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It is a forged indorsement that purports to be that of the employer on an instrument payable to the employer or that of the identified payee on an instrument issued by the employer.
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Yes. If the person paying or taking the instrument fails to exercise ordinary care and that failure substantially contributes to the loss, the person bearing the loss may recover from the negligent party to the extent the negligence contributed to the loss.
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