Clark v. Griffin
| Decision Date | 06 August 1985 |
| Docket Number | No. 1-1284A300,1-1284A300 |
| Citation | 41 U.C.C.Rep.Serv. 876,481 N.E.2d 170 |
| Parties | 41 UCC Rep.Serv. 876 George CLARK, Plaintiff-Appellant, v. Jesse GRIFFIN and Mutual Trust Bank, Defendants-Appellees. |
| Court | Indiana Appellate Court |
George R. Carter, Louisville, Ky., Frank A. Nelson, David L. Mirkin, New Albany, for plaintiff-appellant.
John A. Cody, Jr., Cody & Cody, New Albany, for defendants-appellees.
George Clark appeals the general judgment of the trial judge in favor of Jesse Griffin and Mutual Trust Bank (MTB). We reverse and remand.
Griffin purchased a house on contract from Margie and William Dietrich. The deed remained with the Dietrichs until the full purchase price was paid. In 1981, while Griffin was still making payments, the house was extensively damaged by fire. In an insurance settlement, Indiana Insurance accepted the estimate of Clark, a general contractor, in the amount of $19,180 to repair the house. Indiana Insurance delivered two drafts to Clark; one in the amount of $15,000, which is not in issue, and the other for $4,180. Each check was made payable to Clark, Griffin and the Dietrichs. The proceeds of the $15,000 check were given to Clark so he could buy materials and get started. The $4,180 check was, by agreement of both Clark and Griffin, to be kept by Griffin while construction took place and released to Clark when Griffin was satisfied with the repair work.
From this point on, the testimony of Clark is in direct conflict with that of Griffin. Despite the agreement, Griffin took the $4,180 check and cashed it at his bank, MTB. The cancelled check bears the endorsement of the Dietrichs, Griffin and Clark. Griffin admitted he signed Clark's name on the back of the check but asserts that Clark told him to do so. Clark maintains he never authorized Griffin to endorse the check and continued to believe the check was in Griffin's lock box while he worked on the house. Clark testified he learned the check was cashed after talking with the insurance company.
Clark brought this action against Griffin for conversion for forging his signature. Also named as defendants were MTB, the depositary bank, and American Fletcher National Bank, the drawee bank. The action against American Fletcher was dismissed without prejudice due to improper venue. After a bench trial, the court entered a general judgment in favor of the defendants. Clark brings this appeal.
Restated the issues presented for review are as follows:
1. Did Griffin forge Clark's name?
2. Is MTB liable for conversion?
3. Is Griffin liable for conversion?
As this is a general judgment we must affirm the trial court if the judgment can be sustained on any legal theory. General Plating & Engineering, Inc. v. SYN Industries (1985), Ind.App., 472 N.E.2d 1290; Penwell v. Western & Southern Life Insurance Co. (1985), Ind.App., 474 N.E.2d 1042. We must therefore begin by considering whether or not a forgery occurred. Since Griffin admits he signed Clark's name, the precise issue is whether Clark authorized Griffin to endorse the check on Clark's behalf. Indiana Code section 26-1-3-202(2). If not, the signature constituted a forgery. Indiana Code section 26-1-1-201(43). On this particular issue, Griffin is appealing from a negative judgment. In such a case we may neither reweigh evidence nor judge credibility of witnesses. We may reverse only if the uncontradicted evidence supports no reasonable inference in favor of the decision or if our review of the record leaves us with a definite and firm conviction a mistake has been made. Burnett v. Heckelman (1983), Ind.App., 456 N.E.2d 1094.
Griffin argues we must affirm solely because the evidence concerning authorization was conflicting. He contends, under the circumstances, we must accept the trial judge's implicit decision to believe his testimony. At trial, Griffin stated that he received a phone call from Clark where Clark instructed him to sign Clark's name to the check and cash it. According to Griffin, Clark was concerned that the check would become stale after ninety (90) days and another would have to be obtained from the insurance company. In fact, it was written directly on the check that it would be void after ninety days. Normally, we would be compelled to accept this testimony as conclusive despite Clark's testimony to the contrary. However, our search of the record reveals Griffin's testimony was inherently incredible and we are, therefore, convinced a mistake has been made.
When the uncontradicted evidence is compared to Griffin's testimony it is clear that the check could not have been cashed with Clark's authorization. Griffin testified that he received the check from Clark and carried it in his billfold for "awhile." He then put the check in his lockbox "for a couple of days." Then, after receiving authorization from Clark, he went back to MTB, obtained the check from his lock box and cashed it. However, the uncontradicted evidence shows the check was given to Griffin on Saturday December 5, 1981. The check was cashed with Griffin endorsing his own name and Clark's, on Monday December 7, 1981. Griffin deposited $200 in his checking account and took the remainder in cash. After this transaction, he went directly to his lock box located in the same bank. In light of this evidence we consider Griffin's testimony that he cashed the check after receiving authorization incredible. The only possible conclusion from the undisputed evidence is that Griffin cashed the check at his earliest opportunity. It is undisputed that Griffin brought the check to the bank on December 7, 1981. Griffin claims he put the check in his lock box for a couple of days until receiving authorization to cash it. However, it is clear the check was cashed on December 7, 1981, from other undisputed evidence. Therefore, Griffin's testimony that the check remained in the lock box until talking to Clark a couple days later is inherently incredible. The check cannot be both cashed and in the lock box at the same time. Accordingly, Griffin's claim he cashed the check with authorization cannot be believed and the only other evidence is Clark's testimony that he never told Griffin to endorse his name and cash the check. Thus, the check was cashed over a forged endorsement.
Now that we have established that Clark's endorsement was forged, we consider whether he can recover from either MTB or Griffin for conversion. Our first inquiry is whether Clark may sue on a theory of conversion. In Indiana it is well settled that the proper party to bring a conversion action on a forged or unauthorized endorsement is the check's payee. Indiana National Bank v. Holtsclaw (1884), 98 Ind. 85; Johnson v. State (1973), 158 Ind.App. 611, 620, 304 N.E.2d 555, 562. Since Clark was a payee on the check, he has standing to bring this action.
We now consider whether MTB is liable for conversion in its capacity as a depositary bank. Clark asserts that Indiana Code section 26-1-3-419(1)(c) specifically authorizes suit against MTB. "(1) An instrument is converted when ... (c) it is paid on a forged indorsement." However, the only suit clearly contemplated by this provision is one against the drawee bank. J. White and R. Summers Handbook of the Law Under the Uniform Commercial Code p. 586 (2d Ed.1980). Since MTB was the depositary bank we must look to the qualifying limitation placed on a depositary bank's liability under Sec. 3-419(3).
"(3) Subject to the provisions of this act [26-1-1-101--26-1-10-106] concerning restrictive indorsements a representative, including a depositary or collecting bank, who has in good faith and in accordance with the reasonable commercial standards applicable to the business of such representative dealt with an instrument or its proceeds on behalf of one who was not the true owner is not liable in conversion or otherwise to the true owner beyond the amount of any proceeds remaining in his hands."
In light of this language and the facts of the present case, MTB can be liable only if, by cashing the check, it failed to act in a commercially reasonable manner.
We first note that the burden of proof at trial was on MTB to show it acted in a commercially reasonable manner. Travelers Insurance Company v. Jefferson National Bank at Kendall (1981), Fla.App., 404 So.2d 1131. Therefore, we do not review this issue as a negative judgment. Rather, we must determine whether there is sufficient evidence to support a finding that MTB acted pursuant to commercially reasonable...
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