Legal Question in Business Law in California

Re: bank not notifying us of unauthroized signatures

Banks do not compare the signature on a check against the signature card when the check is processed. Doing so would take forever and would be impractical, since the signature cards are often kept in branch offices while the checks are processed centrally.

If you knew the checks had been stolen you should have so informed the bank. Then the bank would have known not to process the checks regardless of who signed them, and the bank would be at least partially at fault if some of the checks were negotiated.

If you didn't know about the theft (or if you knew and didn't report it) then the bank is only at fault if it acted negligently. To show negligence you would need to do much more than show an unauthorized signature; you would have to show that the bank somehow should have known that the check was not authorized *without* regard to the signature. You probably can't do this.

The person who used the checks is liable for this, both civilly and criminally. Your bank will surely want to help investigate the fraud and track down the culprit. But I doubt you will be able to hold the bank liable for your losses.

Re: bank not notifying us of unauthroized signatures

It's not so much that the bank has the duty. However, you need to notify THEM that the signatures were not authorized, the checks were stolen and forged.

The bank has responsibility for negotiating a forged instrument. Some banks tend to be a bit "stuffy" when it comes time for them to pay rather than you. In such cases you need to force them by filing a lawsuit.

I have previously had a case like this where a couple of checks were stolen from a business and the bank cashed two of them totaling $83,000. We had to sue to get the money from the bank.

Let me know if you need assistance.

J. Caleb Donner

DONNER & DONNER

LEGAL WARRIORS (R)

325 E. Hillcrest Drive, Suite 242

Thousand Oaks, CA 91360

Tel: 805-494-6557

Fax: 805-494-0990

website: www.donnerlaw.com

email: [email protected]

Re: bank not notifying us of unauthroized signatures

I have read and compared the two previous answers and also reviewed the applicable statute, which seems to be Commercial Code section 4406. Both answers are more or less correct, but I think Mr. Hoffman's expression of the law is a little more accurate. In essence, the bank has a duty of diligence and the customer has a duty to read statements and report irregularities, including his knowledge that checks have been stolen. If you let the situation persist over a three-month period, you will have an uphill battle disclaiming your own negligence if you pursue a claim for the bank's negligence in court.