Opinion ID: 2605270
Heading Depth: 1
Heading Rank: 2

Heading: The Bank's Claims

Text: With respect to the Bank's cross-claims against Russell, the Bank argues that the trial court erred in ruling that Russell had no liability to the Bank for the embezzled monies he received from McCormick. The trial court found, as did the jury in its special verdict, that, without giving any consideration, Russell received funds from McCormick which he knew or should have known belonged to Dr. Angelos. However, the trial court denied the Bank judgment against Russell because it found that Russell had not perpetrated a fraud on the Bank and had not breached any warranty in that Russell did not present any checks for payment or forge any signatures. The California Court of Appeals has set forth the rule of liability as follows: It needs no citation of authority to support the proposition that when a person has stolen, embezzled or misappropriated another's property the injured party should be restored to the possession of his property or its equivalent so long as it has not passed into the hands of a bona fide purchaser without notice. Church v. Bailey, 90 Cal. App.2d 501, 504, 203 P.2d 547, 549 (1949). Accord Newco Land Co. v. Martin, 358 Mo. 99, 213 S.W.2d 504 (1948). This Court has adopted and followed this rule. See, e.g., Corporation of the President of the L.D.S. Church v. Jolley, 24 Utah 2d 187, 467 P.2d 984 (1970). The above-quoted principle has also been extended to banks seeking to recover money paid out on forged checks. See First Federal Savings & Loan Ass'n v. Northside State Bank, Tex.Civ.App., 436 S.W.2d 393 (1969). See generally 5B & 6 Michie, Banks and Banking ch. 9, §§ 264-70 & ch. 12, §§ 20-27 (1973 & 1975). Because Russell is not a bona fide purchaser, he is liable to the Bank for the amount of converted funds that he received from McCormick. We therefore reverse the judgment of the trial court and remand this cause of action for a determination of the amount of converted funds that can be traced through McCormick to Russell and therefore are recoverable by the Bank. Finally, Russell argues that the Bank's claims are barred by the doctrine of avoidable consequences. Our previous discussion regarding that doctrine is also applicable to, and dispositive of, this contention. We affirm in part, reverse in part, and remand the case to the trial court for further proceedings consistent with this opinion. No costs awarded. HALL, C.J., OAKS, and HOWE, JJ., and DAVID SAM, District Judge, concur. STEWART, J., having disqualified himself, does not participate herein. DAVID SAM, District Judge, sat.