Who Gets to Pass the Buck on a Forged Indorsement?

FACTS Tom West goes to Libertyville Currency

Exchange to cash a check for $$3,525.$ The check belongs to

West's friend, John Reston, who accompanies him. The

check is a certified check drawn on NationsBank and made

payable to the order of "Piscitello Enterprises, Inc." and

indorsed on the reverse side by "Joe Piscitello."

Because West often transacts business at the currency

exchange, the clerk, Rita Bosworth, recognizes him as soon

as he walks in$.$ West indorses the check and hands it to Bos$-$

worth, who dispenses the cash. West immediately turns to

Reston, giving him some money.

Later, Libertyville Currency Exchange deposits the check

with First National Bank, which eventually files a claim

against the currency exchange because the indorsement "Joe

Piscitello" has been forged. The currency exchange pays the

claim, then brings an action against West.

During the trial, Bosworth testifies that she saw

Reston hand some money back to West when the two

men turned away from her. West vehemently denies this.

He says that he received no money in exchange for help$-$

ing Reston.

Libertyville Currency Exchange claims that West

breached his warranty of good title under the transferor's

warranty by obtaining payment for a check on which the

payee's indorsement was forged. West, on the other hand,

argues that he signed the check to lend his name to

another party and that he is thus an accommodation

party. He maintains that he is not liable to Libertyville

Currency Exchange because NationsBank did not give him

timely notice that the signature on the check was forged

and also because the Currency Exchange paid the check,

thus releasing him from liability as an accommodation

indorser.

Social, Policy, and Ethical Considerations

How could the bank have prevented this problem? Is a

clerk responsible for knowing exactly who is cashing a

check and who gave value for it$?$ What steps, if any,

could Rita Bosworth have taken to verify the check's

indorsements?

Did Tom West have a responsibility to ensure that his

friend's check was legitimate? Should he have inquired

about the indorsement?

What issues relating to the transfer of a negotiable

instrument are involved here? What liability does the

bank face? What liability does Tom West face? What

warranties apply to each party?