GERBER & GERBER, P.C. v. REGIONS BANK Nos. A03A1952, A03A1953.
596 S.E.2d 174 (2004)
266 Ga. App. 8
GERBER & GERBER, P.C. v. REGIONS BANK. Regions Bank v. Gerber & Gerber, P.C.
Court of Appeals of Georgia.
Reconsideration Denied March 3, 2004.
Parker, Hudson, Rainer & Dobbs, William J. Holley II, James S. Rankin, Jr., Ryan K. McLemore, Atlanta, for appellee.
Over a period of two years, an employee of the Gerber & Gerber, P.C. law firm (G&G) stole from G&G some cashier's checks (endorsed in blank) and some checks payable to G&G (on which she forged G&G's endorsement) and deposited the checks into her personal account at Regions Bank, where G&G also maintained its accounts. Alleging that Regions Bank had acted negligently in accepting the checks for deposit, G&G sued the bank to recover the money lost. The court entered summary judgment in favor of Regions Bank on the cashier's checks but held material issues of fact precluded summary judgment on the forged checks. Both parties appeal the portions of the judgment adverse to their interests. Discerning no error, we affirm.
Construed in favor of G&G, the evidence showed that Cynthia Stafford worked for a law firm as a real estate closing secretary. She stole money from that firm through forging the firm's endorsement on checks made payable to the firm (received at the real estate closings) and depositing them into her personal account. When the forgery was discovered, she confessed and worked out an arrangement to continue at the firm at a reduced salary to repay the stolen money. She then stole a second time and the firm closed. The aggregate amount stolen was about $130,000.
Prior to the firm closing, its principal had merger discussions with G&G, during which the principal disclosed some of Stafford's theft and forgery to Sanford Gerber of G&G. Nevertheless, when the merger talks failed, the principal recommended that G&G hire Stafford because of her competency as a real estate closing secretary and because she had rehabilitated. Mr. Gerber interviewed Stafford and felt also that she had reformed. He hired her but warned her that he knew of her prior theft and that if she stole from G&G, he would make sure she went to jail.
Stafford worked as a real estate closing secretary at G&G for over two years. During this time, she stole 29 cashier's checks received by G&G during real estate closings, which checks the payees had endorsed in blank during the closings. She then endorsed these checks herself and deposited them into her personal account at Regions Bank. She also stole ten checks made payable to G&G, which she endorsed in blank on behalf of G&G (forging Sanford Gerber's signature). She then endorsed the forged checks in her own name and deposited them into her personal account at Regions Bank. Throughout this time, G&G had its escrow and other accounts at Regions Bank and deposited thousands of checks amounting to $150 million to $200 million into those accounts every year. G&G would endorse each deposited check with a rubber stamp for deposit into the G&G account.
The thefts were made possible because G&G did not restrictively stamp the checks immediately at closing but waited until sometime after the closing, during which interim period the checks were kept in an open file left in an area accessible to all G&G employees. Also, at times Stafford was allowed to be the person to stamp and account for the checks. The amount stolen approximated $180,000. Stafford confessed to the thefts, later pleading guilty to criminal charges and receiving a thirty-year sentence (five years to serve). She claimed to have spent the money.
G&G sued Regions Bank to recover the stolen $180,000, alleging counts of conversion and negligence in that the bank improperly accepted the forged checks as well as the true-endorsed cashier's checks into Stafford's personal account. Regions Bank moved for summary judgment, arguing that as a matter of law it had acted appropriately under the Uniform Commercial Code in accepting the checks. The trial court granted the motion insofar as it pertained to the true-endorsed cashier's checks but found that material issues of fact (particularly regarding the parties' comparative negligence) precluded summary judgment as to the forged checks. G&G appealed the partial grant of summary judgment, and Regions Bank cross-appealed the partial denial of summary judgment.
1. With regard to the blank-endorsed cashier's checks, the court correctly granted summary judgment in favor of the bank. Under the applicable portion of OCGA § 11-3-420(a), a bank converts an instrument if the bank "makes or obtains payment with respect to the instrument for a person not entitled to enforce the instrument or receive payment." The holder of an instrument is a person entitled to enforce the instrument, even though the person is in wrongful possession of the instrument. OCGA § 11-3-301. A person is a holder of a negotiable instrument if that person possesses the instrument and the instrument is payable to bearer. OCGA § 11-1-201(20). An
Accordingly, when here the payees of the cashier's checks endorsed the checks in blank, the checks then became bearer paper and could—similar to cash—be transferred by possession alone. See La Junta State Bank v. Travis,
2. More problematic, however, are the forged checks. Although these were also endorsed in blank, the payee's signatures were forgeries and were therefore ineffective as endorsements by the payee. See OCGA § 11-3-403(a). Accordingly, Stafford was not entitled to enforce the instruments or to receive payment thereunder, and Regions Bank converted the instruments when it made or obtained payment on them by allowing them to be deposited into Stafford's personal account. See OCGA § 11-3-420(a).
Regions Bank argues that G&G failed to exercise ordinary care, which substantially contributed to the making of the forged signatures. Regions Bank contends that accordingly G&G was precluded under OCGA § 11-3-406(a) from asserting the forgery against the bank. Indeed, where some evidence shows that the corporate payee acted negligently in failing to prevent the forgery of its endorsement, a jury should decide whether that negligence substantially contributed to the making of the forgery—but only if the defendant bank in good faith paid the instrument or took it for value or for collection. See OCGA § 11-3-406(a); cf. Trust Co. of Ga. Bank, &c. v. Port Terminal, &c. Co.,
Regions Bank has presented evidence that it knew nothing of the possible forgery at the time it accepted the checks. The first Regions Bank learned of the forgery was from G&G after the fact. G&G has presented no evidence to contradict this, and thus the undisputed evidence shows Regions Bank's honesty in fact. Cf. Stebbins v. Ga. Power Co.,
However, disputed evidence does exist on the question of whether Regions Bank's actions were in observance of reasonable commercial standards of fair dealing. Significantly, reasonable commercial standards of fair dealing are different from reasonable commercial standards of due care. "Although fair dealing is a broad term that must be defined in context, it is clear that it is concerned with the fairness of conduct rather than the care with which an act is performed. Failure to exercise ordinary care in conducting a transaction is an entirely different concept than failure to deal fairly in conducting the transaction." UCC § 3-103, Official Comment 4 (2003);
Although some older Georgia cases define the reasonable commercial standards of due care (see, e.g., Trust Co. Bank v. Henderson,
In determining whether the conduct of Regions Bank complied as a matter of law with reasonable commercial standards of fair dealing, we note that Henderson, supra, 258 Ga. at 704(1),
In light of these cases, we hold that it is at least a fact question whether Regions Bank violated the reasonable commercial standards of fair dealing when it violated known commercial banking practices by accepting checks made payable to G&G into Stafford's personal account. Since Regions Bank also serviced G&G's business accounts and therefore knew that G&G normally placed a restrictive endorsement stamp on checks made payable to G&G, Regions Bank was on heightened notice of the irregularity of the endorsements on the checks deposited by Stafford and therefore could be held to have dealt with G&G unfairly by not making inquiry into the legitimacy of those endorsements. Thus, whether Regions Bank acted in good faith in this matter is a question to be resolved by the jury, which means that its defense under OCGA § 11-3-406(a) cannot be resolved on summary judgment.
Regions Bank also argues that it was a holder in due course under OCGA § 11-3-302 and therefore entitled to summary judgment on the claims asserted in the complaint. For Regions Bank to be a holder in due course, this statute requires that the bank have taken the instruments at issue "[i]n good faith." OCGA § 11-3-302(a)(2)(ii). Since the same definition of good faith discussed above applies to this statute (see OCGA § 11-3-103(a)(4)), the same disputed issues of fact also discussed above preclude Regions Bank on summary judgment from conclusively establishing its status as a holder in due course on the forged checks.
The trial court correctly denied Regions Bank summary judgment on the ten forged checks.
Judgment affirmed in both cases.
SMITH, C.J., and RUFFIN, P.J., concur.
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