537 S.E.2d 573 (Va. 2000), 992557, Gina Chin & Associates, Inc. v. First Union Bank

Docket Nº:Record No. 992557.
Citation:537 S.E.2d 573, 260 Va. 533
Opinion Judge:[6] The opinion of the court was delivered by: Justice Lawrence L. Koontz, Jr.
Case Date:November 03, 2000
Court:Supreme Court of Virginia

Page 573

537 S.E.2d 573 (Va. 2000)

260 Va. 533




Record No. 992557.

Supreme Court of Virginia

November 3, 2000

Page 574

[260 Va. 536] Simon M. Osnos, Falls Church, for appellant.

Daniel S. Fiore, Arlington, for appellee.

Present: All the Justices.

KOONTZ, Justice.

In this appeal, we consider whether the trial court erred in striking the evidence at the conclusion of the plaintiff's case-in-chief by ruling, as a matter of law, that a bank teller who participated in a scheme to deposit forged checks was acting outside the scope of his employment, thus relieving his employer from civil liability for those acts.


Under well settled principles of law, we will review the evidence in the light most favorable to the plaintiff, the non-moving party. See, e.g., Lenders Financial Corp. v. Talton, 249 Va. 182, 188, 455 S.E.2d 232, 236 (1995).

In 1994, Henry Steven Cardenas was employed as a teller by First Union Bank. His duties included, among other things, the receiving of cash and checks for deposit into the accounts of the bank's customers. At the beginning of his employment, Cardenas received "about two weeks" of training. During that training, First Union instructed Cardenas not to accept checks made payable to [260 Va. 537] businesses for deposit into personal accounts or to accept checks for more than $7,000 for deposit without a supervisor's approval.

Prior to beginning his employment with First Union, Cardenas was acquainted with Amie Cheryl Lehman, who was dating Cardenas' brother. Shortly after Cardenas began working as a teller, he moved into an apartment with his brother and Lehman. Lehman, who had formerly been a teller at Signet Bank, was employed at that time by Gina Chin & Associates, Inc. (Chin), a food wholesaler, as the firm's accounts payable clerk.

After Cardenas had been working at First Union "a little over a year," Lehman, relying on her knowledge as a former bank teller, requested his assistance in depositing a forged check into her First Union account. The check was drawn on Chin's account at Signet Bank, 1 and was made payable to one of Chin's suppliers. Lehman created the check by entering a false invoice into Chin's accounts payable computer program, which produced the check on a printer. Lehman then forged both the signature of Gina Chin, Chin's president, as drawer and the endorsement of the supplier making the check payable to Lehman.

Cardenas at first refused to assist Lehman, "but then she kept on insisting and

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insisting and then she convinced me, I guess, by offering me some money on the side." Lehman told Cardenas that "it wouldn't come back to [him] at all" because she reconciled the bank statements for Chin's account and could intercept the statements with the forged checks before they came to the attention of the firm's principals. Cardenas thereafter deposited the check into Lehman's First Union account. The drawer bank paid the check, debiting the amount from Chin's account.

Ultimately, using the forgery scheme outlined above, Lehman and Cardenas succeeded in depositing $270,488.72 in forged checks into Lehman's personal account at First Union. 2 Cardenas received approximately 20 percent of the funds deposited. After Lehman left her employment with Chin, Signet Bank discovered the forgery scheme and reported its findings to Chin and the police. Lehman and [260 Va. 538] Cardenas subsequently were convicted of one count of bank fraud each in federal court.

On June 11, 1996, Chin filed a motion for judgment against First Union seeking $270,488.72 in damages resulting from the forgery scheme of Lehman and Cardenas. Chin alleged that First Union was negligent when it accepted for payment checks drawn on Chin's accounts bearing both forged signatures of the drawer and forged endorsements of the payees. Chin further alleged that First Union was vicariously liable for Cardenas' criminal acts.

The trial court initially sustained First Union's demurrer to Chin's motion for judgment and entered summary judgment in favor of First Union on the ground that under the factual circumstances asserted by Chin certain provisions of the Uniform Commercial Code barred an action by the drawer of a check against the depository bank. We awarded Chin an appeal from that judgment, reversed it, and remanded the case for further proceedings. Gina Chin & Associates v. First Union Bank, 256 Va. 59, 63, 500 S.E.2d 516, 518 (1998). In doing so, we held that "Chin's motion for judgment pled a cause of action pursuant to §§ 8.3A-404 and § 405 of the Uniform Commercial Code, Code §§ 8.1-101 through 8.11-108." Id. at 61, 500 S.E.2d at 517. We explained that pursuant to these statutes the concept of comparative negligence is employed to determine liability to the person sustaining the loss based upon the premise "that all participants in the process have a duty to exercise ordinary care in the drawing and handling of [checks]." Id. at 62, 500 S.E.2d at 517. Thus, in the context of the present case, the ultimate issue of comparative negligence, which is solely a jury issue, centers upon the conduct of First Union through its employees and that of Chin through its employees. In short, there is no dispute that while First Union accepted the forged checks for payment and Chin permitted access to its checks by its employee who forged them, the ultimate issue still undecided at that point in the proceedings was whether First Union was negligent or whether First Union and Chin were both negligent and, if so, to what comparative extent.

Upon remand, a jury trial was commenced in the trial court on July 17, 1999. After First Union prevailed on its motion in limine to exclude the anticipated testimony of Chin's expert witness regarding established banking customs and standards, the trial court stated "the primary issue is scope of employment." Chin then proceeded to produce its evidence to the jury.

[260 Va. 539] Cardenas, Lehman, and Donald Chin, Chin's treasurer, were each called as witnesses for Chin. Consistent with the facts previously related herein, Cardenas and Lehman detailed the scheme to forge the checks and to deposit them into Lehman's account. Cardenas further testified that after he left his employment with First...

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