In December 1999, Mover of America, Inc., hired Jasmine Talbot as a bookkeeper. Talbot was responsible for maintaining the company checkbook and reconciling it with the monthly statements from Unitrust Bank. She also handled invoices from vendors. Mover's president, Dev Rishi, reviewed the invoices and signed the checks to pay them, but no other employee checked Talbot's work. By the end of her first full month of employment, Talbot had forged six checks totaling more than $22,000, all payable to Triple M Entertainment, which was not a Mover vendor.

By October 2000, Talbot had forged fifty-nine more checks, totaling more than $475,000. A Unitrust employee became suspicious of an item that required sight inspection under the bank's fraud detection standards, which exceeded those of other banks in the area. Talbot was arrested. Mover filed a suit in a Georgia state court against Unitrust. The bank filed a motion for summary judgment. On what basis could the bank avoid liability?

Identifying the Facts and Issues

Mover wanted Unitrust to be liable for the forgeries. Unitrust refused, and Mover filed a lawsuit against Unitrust. The general rule is that a bank

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liable when the bank pays a forged check.

Assessment question

Banks provide their customers with

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bank statements. The

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has the duty to

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examine the monthly statements and report any forgeries within

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days. If the customer fails to report the forgery within the required time, the

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will be liable for the forged checks. If the customer fails to report the forgery within the first thirty calendar days, then the

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is liable for all subsequent forgeries.

Assessment question

The bank can be held liable for payment of forged checks, even if the customer fails to notify the bank of the forgery within the required time, if the bank is

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. The

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has the duty to exercise

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care in establishing and following policies to minimize the risk of forgeries.

Assessment question

In this case, the court would likely find that Unitrust exercised

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care and that its policies

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. Therefore,

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was not liable for the forged checks, and

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assumed the liability.

Assessment question

What If the Facts Were Different?

Assume now that Mover has a policy that requires the checks to be locked in the company safe, and two officers must sign on each check. Employees who do not have signature authority do not have access to the checks and only a limited number of signatures are on file with the bank. Talbot is able to steal a book of checks and forges the checks from this book randomly throughout the year. Mover regularly reviews its monthly statements and has no reason to suspect any forgeries. Unitrust notices the irregular check numbers and that they are all made out to the same company, but its policies are not up to industry standards which would have caused the Mover account to be flagged for possible forgery.

In this case, the bank

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have reason to know that irregular check numbers were all made out to the same company. The bank

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have practices that met industry standards. Unitrust would assume the liability because it

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exercise

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.