case problem ch.28

Michael Sykes, the president of Sykes Corp., hired Richard Amelung to handle the company's book- keeping and deal with all of its vendors. Amelung entered into an agreement with East- ern Metal Supply to help reduce Sykes's debt to Eastern. Whenever Sykes received a check, Amelung would sign it over to Eastern and allow it to keep 30 percent of the check amount. On 28 checks that totaled $200,000, Amelung indorsed the back as follows: "Sykes & Associates or Sykes Corporation, Richard Amelung." Amelung then turned the checks over to Eastern, and Eastern deposited them into its account at Barnett Bank. Eastern would then write one of its checks to Sykes Corp. for the 70 percent remaining from the checks. When Michael Sykes learned of the arrangement, he demanded the return of the 30 percent from Barnett Bank, claiming that it had paid over an unauthorized signature and that the indorsement was restricted and had been violated by the deposit into Eastern's account. What type of indorsement did Amelung make? Did he have the authority to do so? Should Sykes be reimbursed by Barnett? [Sykes Corp. v. Eastern Metal Supply, Inc., 659 0