Opinion ID: 1984744
Heading Depth: 2
Heading Rank: 2

Heading: Reasonable Commercial Standards

Text: The trial court held in Conclusion of Law No. 3 that there was a conversion of checks made payable to AMTDA and deposited into Budlong's account at National Permanent. In Conclusion of Law No. 7, supra, the trial court further concluded that National Permanent acted in accordance with the reasonable commercial standards of its business. However, based on the entire record, we hold that this conclusion is clearly wrong and without supporting evidence. D.C.Code § 17-305 (1981). We hold that as a matter of law National Permanent did not follow the reasonable commercial standards of its business. Several courts have held as a matter of law that it is commercially unreasonable for a bank to accept for deposit in an individual account a check made payable to a corporation, without first ascertaining, or at least inquiring as to, the authority of the depositor/endorser. Aetna Casualty & Surety Co. v. Hepler State Bank, supra, 630 P.2d at 728; Gresham State Bank v. O & K Construction Co., supra, 370 P.2d at 733-34 (employees of payor lulled themselves into false inference of authority by individual who was paid); Swiss Baco Skyline Loggings, Inc. v. Haliewicz, supra, 567 P.2d at 1148 (bank's own teller manual requires finding specific authority before cashing checks payable to or endorsed by corporation); [9] Von Gohren v. Pacific National Bank, supra, 505 P.2d at 474. Other courts have taken judicial notice that a bank is required to at least inquire as to the reason and authority for depositing a check with a corporate payee into a third party's account. National Bank of Georgia v. Refrigerated Transport Co., Inc., 147 Ga.App. 240, 243-44, 248 S.E.2d 496, 499-500 (1978) (bank is not relieved of duty to inquire even when depositor of check is customer of the bank); Belmar Trucking Corp. v. American Trust Co., 65 Misc.2d 31, 35-36, 316 N.Y.S.2d 247, 251-52 (N.Y.Civ.Ct.1970); Mott Grain Co. v. First National Bank & Trust Co., supra, 259 N.W.2d at 671; Seattle-First National Bank v. Pacific National Bank, supra, 587 P.2d at 625 (factual findings similar to evidence presented by AMTDA). Beginning in August 1973, National Permanent accepted for deposit into an individual account checks made payable to AMTDA. The evidence presented at trial indicated that no inquiry as to Budlong's authority was made even though National Permanent was shown, by AMTDA, to have had the following internal policies throughout 1973-77: 15. DO NOT ACCEPT CHECKS FOR DEPOSIT WHEN THE PAYEE AND/OR ENDORSEMENT IS THAT OF A CORPORATION AND IS OFFERED FOR DEPOSIT TO ANY ACCOUNT OTHER THAN THE CORPORATION ACCOUNT. (Plaintiff's Exhibit 29). It is an absolute NO-NO to accept checks to personal accounts when such checks are made payable to corporations, churches, associations, partnerships, organizations, etc. If such checks are received and accepted they must be credited to an account in the same name as the payee. Example: Check made payable to ABC Corporation must be credited to an account in name of ABC Corporation  NO EXCEPTIONS! (Plaintiff's Exhibit 11.) [10] National Permanent's two witnesses on the subject of savings and loan practices, Heitmuller and Brown, testified to the existence of similar policies at their respective institutions. [11] Although both men indicated that tellers do not normally verify account ownership when they have become familiar with and recognize the customer, they also testified that it was not considered sound practice to accept for deposit into the account of a third party (an individual) a check which is made payable to a corporation. The trial court's Conclusion of Law No. 7, supra at 11-12, is clearly erroneous because it is contrary to the evidence and because the reasoning is not sound. The evidence failed to establish that National Permanent's employees had reason to know that AMTDA is a corporation. However, neither this nor the fact that National Permanent tellers may have thought Budlong and AMTDA were one in the same justify National Permanent's conduct. Continental Bank v. Wa-Ho Truck Brokerage, supra, 595 P.2d at 212; Gresham State Bank v. O & K Construction Co., supra, 370 P.2d at 733; Seattle-First National Bank v. Pacific National Bank, supra, 587 P.2d at 625. Further, although it is generally true that reasonable commercial standards permit acceptance for deposit checks endorsed by a rubber stamp, this practice was not shown to be reasonable under the facts of this case. See Perley v. Glastonbury Bank & Trust Co., supra, 368 A.2d at 155 and First National Bank v. Hovey, supra, 412 N.E.2d at 894-95 which hold that even though a practice is shown to be common in an industry, it must still be shown to be reasonable. [12] The fact remains that checks made payable to a corporation, AMTDA, were accepted for deposit into the account of an individual, one who was not the named payee of the checks. Based on all the foregoing, we hold that as a matter of law, National Permanent's conduct did not comport with the reasonable commercial standards of its business. We, therefore, reverse and remand for a determination of the amount of damages and order that judgment be entered for AMTDA against National Permanent in the amount commensurate with its liability for conversion. [13] So ordered.