Owensboro Nat. Bank v. Crisp, 78-CA-401-MR
| Decision Date | 14 October 1980 |
| Docket Number | No. 78-CA-401-MR,78-CA-401-MR |
| Parties | 30 UCC Rep.Serv. 240 The OWENSBORO NATIONAL BANK, Movant, v. Sam CRISP, Respondent. |
| Court | United States State Supreme Court — District of Kentucky |
Ronald M. Sullivan, Holbrook, Gary, Wible & Sullivan, Owensboro, for movant.
Stewart B. Elliott, Elliott & Carroll, Owensboro, for respondent.
This case involves the application of the Uniform Commercial Code. Sam Crisp lived in Daviess County, Kentucky, and had a personal checking account in the Owensboro National Bank. He was swindled out of $6,200 by Bill Carter upon the failure of the bank to exercise reasonable commercial standards in the cashing of a check in this manner: Early in the morning of January 22, 1975, Carter and a confederate stopped their car at Crisp's home. Carter went to the house and the other person stayed in the car. Carter represented to Crisp that the lightning rod on the residence needed repairs and that he would make the repairs for the sum of $12.50. With this Crisp agreed. He wrote out a check for $12.50 and left the name of the payee blank and an open space preceding the amount for which the check was issued. Not long after the bank opened for business, a person identifying himself as Bill Carter presented the check for payment. The check had been altered so that the amount for which it was issued had been raised to $6,212.50 and the name of Bill Carter, the name with which he identified himself to Crisp, had been inserted as the payee. The check looked regular on its face. At the time the check was presented for payment, it had a stamp of "Southern Construction" on the back side, and the cashier had Carter endorse it in her presence. At about 1:30 p. m. on the date the check was issued, the bank received a stop-payment order. The check had, however, been paid by that time and Bill Carter, alias Josh Nell Westbrook, was long gone.
On June 6, 1977, Crisp filed suit in the Daviess Circuit Court against the bank seeking to recover his loss. The bank denied liability. At the conclusion of a trial of the issues before a jury, the trial judge submitted the issues to the jury in an interrogatory which required the jury to decide whether the employees of the bank failed to follow reasonable commercial standards in paying the check and, if so, whether such failure was a substantial factor in causing Crisp's loss. Ten of the twelve jurors found in the affirmative. Accordingly, a judgment was entered in respondent's favor in the sum of $6,200. An appeal was taken to the Court of Appeals where the judgment of the Daviess Circuit Court was affirmed. This court granted review on May 6, 1980.
Movant contends that the evidence shows that Bill Carter, the person to whom the check was drawn, was an imposter and, as such, the bank was not liable. KRS 355.3-405(1)(a). The circuit court held that Carter was not an impostor as used in this statute. The Court of Appeals held that Carter was such an impostor.
KRS 355.3-405(1)(a) provides as follows:
The issue requiring a definition of the word "impostor" as used in this statute has not heretofore been before this court. The effect of the Uniform Commercial Code is to put the loss on the customer and not on the bank. Accordingly, the word "impostor" must be considered in that light. Consequently, an endorsement by any person of a named payee is effective if someone has induced the maker to issue the instrument to him in the name of the payee. A further clarification of the meaning of the word "impostor" as used herein is that if the maker of a check draws it payable to a creditor and the payee represents to the paying bank that he is the creditor and thus receives the proceeds of the check, then, and in that event, the payee is not an impostor in relation to the drawer and the paying bank may not charge that sum against the drawer's account. Crisp contracted with Carter to do...
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