Joseph Stell, an attorney, employed Bernice Ruff as a secretary and bookkeeper.

Over a one-year period, Ruff purloined 29 checks intended for attorney Stell by forging the necessary indorsements on those checks. Ruff then cashed some of the checks at two banks, Union Bank and Crocker Citizens National Bank, and deposited the remainder to her personal account at the latter bank (Crocker Citizens National Bank). The entire amount of such deposits was subsequently withdrawn by Ruff prior to discovery of the forgeries. Certain of the checks were forwarded to and paid by defendants Crocker Citizens National Bank, Security First National Bank, and First Western Bank and Trust Company. Stell sued both the collecting banks as well as the payor banks to recover the amounts of the instruments handled by them on the forged indorsements.

CASE QUESTIONS

1. Are the defenses available to the collector banks and to the payor banks the same or different? What are these defenses?

2. Who will prevail in this case? Stell or the banks?