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06
May
2022

Fraudulent Check Endorsement by Borrower

In the case of Union Bank & Trust v. Elmore County National Bank (Supreme Court of Alabama, Case No. 1900804), the Union Bank’s loan to a debtor resulted in a $10,900 loss.

Here, Union Bank issued a loan to one Bill Burnette in the amount of $10,900 for the purpose of purchasing a Dodge Caravan.

The bank issued the draft to Bill Burnette and the auto dealer from whom Burnette indicated he was purchasing the vehicle.

Burnette actually had no intention to purchase the vehicle and he forged the dealer’s name on the reverse side of the check. Burnette then deposited the check, after endorsing his own name, in an account at Elmore County National Bank (ECNB). ECNB accepted the check even though they had not verified the dealer’s signature.

The loan subsequently went into default and both banks discovered Burnette’s forgery of the dealer’s endorsement. Burnette had already withdrawn and spent the $10,900.

Union Bank demanded the funds from ECNB for their failure to require proper verification of the dealer’s endorsement. ECNB alleged that Union Bank was negligent in initially issuing the check.

The Court held that there was a material question of fact as to which bank was negligent in either issuing the check or depositing the draft without proper endorsement. Here, the issue will be presented to a jury for final determination. Author: Charles R. Harroun, Attorney at Law



This entry was posted on Friday, May 6th, 2022 at 11:13 am and is filed under National. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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