Opinion ID: 532742
Heading Depth: 2
Heading Rank: 4

Heading: American Security Bank's Liability

Text: 33 Under section 3-419(3), if ASB, the depositary bank, acted in accordance with the reasonable commercial standards applicable to the business, it is not liable in conversion beyond the amount of any proceeds remaining in [its] hands. D.C.CODE ANN. Sec. 28:3-419(3) (1981). Commercial reasonableness is a question of fact for the jury. It is not an issue to be decided as a matter of law, as Kuwait contends. See Brief of Appellant at 20-21. 34 Several courts, including the District of Columbia Court of Appeals, have determined that it is commercially unreasonable as a matter of law for a bank to take for deposit in an individual account a check made payable to a corporation, without first ascertaining the authority of the depositor/indorser. See, e.g., American Mach. Tool Distribs. Ass'n v. National Permanent Fed. Sav. & Loan Ass'n, 464 A.2d 907, 913-14, 915 (D.C.1983) (citing similar determinations in other jurisdictions). But aside from this one fairly widely recognized exception, whether a bank acted in a commercially reasonable manner is usually a question of fact. See, e.g., Hydroflo Corp. v. First Nat'l Bank, 217 Neb. 20, 349 N.W.2d 615, 619 (1984); cf. American Sec. Bank v. American Motorists Ins. Co., 538 A.2d 736, 739-41 (D.C.1988) (upholding trial court's finding of fact that bank had not complied with reasonable commercial standards when it cashed a series of forged checks in which forged name misspelled). The District Court properly submitted this issue to the jury. 35 It is also clear that a depositary bank that has not acted in a commercially reasonable manner in taking checks over forged indorsements may have available to it the defenses of ratification and apparent authority. See, e.g., Senate Motors, Inc. v. Industrial Bank, 9 U.C.C.Rep.Serv. (Callaghan) 387, 390-92 (D.C.Sup.Ct.1971) (discussing defenses both of ratification and apparent authority). Thus, Kuwait's claim that, under D.C.Code Sec. 28:3-419, American Security Bank is absolutely liable if it acted in a commercially unreasonable manner, see Brief of Appellant at 16-17, misapprehends the law. Indeed, the U.C.C. itself preserves the common law defenses: 36 Unless displaced by the particular provisions of [the U.C.C.], the principles of law and equity, including ... the law relative to ... principal and agent, estoppel ... or other validating or invalidating cause shall supplement its provisions. 37 D.C.CODE ANN. Sec. 28:1-103 (1981). See also id. Sec. 28:3-404 (ratification); id. Sec. 28:1-201(43) (apparent authority); J. WHITE & R. SUMMERS, UNIFORM COMMERCIAL CODE Sec. 13-3 (3d ed. 1988). 38 Given the verdict in this case, it appears that the jury found that, after notification from ASB to Kuwait in 1984 of the existence of the 640 Account, Sensi's conduct was clothed with apparent authority. ASB contends, however, that the District Court erred in denying ASB's motion for judgment n.o.v. on the issue of ratification. In other words, ASB asserts that Kuwait ratified Sensi's actions and this had a retroactive and prospective effect of relieving ASB of all liability. We reject this claim. 39 The question of ratification is one of fact. G & R Corp. v. American Sec. & Trust Co., 523 F.2d 1164, 1171 (D.C.Cir.1975). Therefore, the District Court properly submitted the question to the jury. Furthermore, [i]f fairminded people may differ as to the conclusion, or if there is substantial conflicting evidence, the judgment n.o.v. motion must be denied. Carter v. Duncan-Huggins, Ltd., 727 F.2d 1225, 1227 (D.C.Cir.1984). This court has previously noted that 40 [t]he crucial inquiry in determining whether an act was subsequently ratified concerns the intention of the party allegedly ratifying the act. Although the intention to ratify can be inferred from the totality of the circumstances in each case, the courts hesitate to find ratification where the facts allegedly showing ratification can be easily explained on other grounds. 41 G & R Corp., 523 F.2d at 1171 (citations omitted). The District of Columbia Court of Appeals subsequently articulated an even more exacting standard for finding ratification: For an unauthorized act to be ratified, the principal must have knowledge of the act and may ratify the act impliedly, but the conduct which implies ratification must be conduct which is inconsistent with any other hypothesis. Lewis v. Washington Metro. Area Transit Auth., 463 A.2d 666, 671-72 (D.C.1983). The facts of this case certainly do not compel the conclusion that Kuwait ratified Sensi's deposits into and withdrawals from the 640 Account of funds paid to Kuwait by the Embassy of Kuwait. The facts are susceptible of other interpretations. Consequently, we reject ASB's motion for judgment n.o.v.