Lawrence v. Central Plaza Bank and Trust Co.
| Decision Date | 22 May 1985 |
| Docket Number | No. 84-2052,84-2052 |
| Citation | 10 Fla. L. Weekly 1302,469 So.2d 201 |
| Parties | 10 Fla. L. Weekly 1302, 41 UCC Rep.Serv. 182 Henry LAWRENCE, Appellant, v. CENTRAL PLAZA BANK AND TRUST COMPANY, Appellee. |
| Court | Florida District Court of Appeals |
D. Turner Matthews, Bradenton, for appellant.
Hugh E. Reams of Goldner, Reams, Marger, Davis, Piper & Bartlett, P.A., St. Petersburg, for appellee.
This appeal involves the question of whether the purchaser of a cashier's check may ever bring suit directly against the collecting bank for cashing the check on a forged endorsement.
According to the fourth amended complaint, Henry Lawrence purchased from the County Bank an $18,000 cashier's check payable to William Morris Agency. The check was given to Charles Grogan, a party with whom Lawrence had been negotiating concerning a concert to be arranged by William Morris Agency. Grogan deposited the check in the trust account of Attorney David L. Schrader at Central Plaza Bank and Trust Company. The check was endorsed "William Morris Agency For deposit only to the act of Atty David L. Schrader. 8-702-3 Escrow act." Grogan was not an agent of William Morris Agency, and William Morris Agency did not authorize this endorsement. Schrader, acting as Grogan's attorney, subsequently disbursed the funds to pay Grogan's debts to the Sarasota Kennel Club. Analogizing Lawrence's position to that of a drawer, the court dismissed the action against Central Plaza Bank on the premise that his recourse was limited to suing the County Bank, the bank which had issued the check.
Under the law of negotiable instruments which predated the Uniform Commercial Code, there was a split of authority on whether the drawer of a check could recover directly from a collecting bank which had received it on a forged endorsement. H. Bailey, Brady on Bank Checks § 23.26 (5th ed. 1979). The post-Code decisions on the subject remain divided. H. Bailey, Brady on Bank Checks §§ 23.27 and 23.28 (5th ed. 1979 & Supp.1984). The courts which permit recovery directly from the collecting bank now appear to be in the slight majority. See Annot., 99 A.L.R.2d 637 (1965 & Supp.1983).
Lawrence's pleadings are couched in a theory of conversion. Section 673.419, Florida Statutes (1983), provides in pertinent part:
(1) An instrument is converted when:
....
(c) It is paid on a forged indorsement.
....
(3) Subject to the provisions of this code 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.
Thus, the Uniform Commercial Code recognizes the possibility of a depositary or collecting bank being held liable in conversion for honoring a forged endorsement. However, the code does not specify to whom such liability may run. See Barnett Bank v. Lipp, 364 So.2d 28 (Fla. 3d DCA 1978), holding that the payee can maintain an action against a collecting bank for the conversion of a check paid on a forged endorsement.
The leading case for the proposition that the drawer's remedy is limited to a suit against the drawee bank is Stone & Webster Engineering Corp. v. First National Bank & Trust Co., 345 Mass. 1, 184 N.E.2d 358 (1962). In that case the plaintiff drew three checks payable to Westinghouse Electric Corporation to whom it was indebted. One of the plaintiff's employees obtained possession of the checks, forged the endorsement of Westinghouse, and cashed them at the defendant bank. The court held that the plaintiff's remedy was only against the drawee bank and that if that drawee bank were held liable, it could recoup its losses from the collecting bank. The court admitted that allowing the drawer to bring an action directly against the collecting bank would avoid a circuity of action. However, the court reasoned that if this were permitted the collecting bank would not be able to raise the defenses under the code which were available to the drawee bank.
Two Florida courts have adopted this view. In Jett v. Lewis State Bank, 277 So.2d 37 (Fla. 1st DCA 1973), the court held that the drawer of a check has no right of action against any bank except the drawee bank for honoring a check on a forged endorsement. The court stated:
The theory behind this rule is that, in an action for conversion against a collecting bank, the essential elements of conversion would be lacking in that the drawer does not have the right to immediate possession of the check because the beneficial ownership of the check is in the payee, not in the drawer. First National Bank v. North Jersey Trust Co., 18 N.J.Misc. 449, 14 A.2d 765 (1940).
In an action sounding in both contract, for moneys had and received, and in tort, for conversion, the drawer of a check has been denied recovery against the collecting bank upon the grounds that the collecting bank had no money in its hands which belonged to the drawer, that the drawer had no right in the proceeds of its own check payable to the payee, and that, not being a holder in due course or an agent for such holder, the drawer could not have presented its check to the drawee bank for payment. The value of the drawer's rights in the check is limited to the physical paper on which it is written and is not measured by its payable amount. The amounts a collecting bank receives from a drawee bank for the check cashed by the collecting bank are the drawee bank's funds and not those of the drawer; and whether the drawer is rightfully or wrongfully deprived of a credit is a matter between the drawer and the drawee bank. In short, the drawer's recourse is limited to an action against the drawee bank, for the only harm which befalls the drawer is the charging of its account by the drawee bank. Stone & Webster...
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