Opinion ID: 1972876
Heading Depth: 1
Heading Rank: 4

Heading: Interstate Steel Corp. General Pipe & Supply.

Text: On the back of the check, above where endorsements were to be placed, was written the following: Endorsement of this check acknowledges payment as of this date all material and labor at A.I.C. Bldg. 8060 Florence Ave. Downey, Calif. The check was deposited by Interstate Steel in its checking account bearing only its endorsement and that of its president; there was no endorsement by General Pipe & Supply Company. In holding that the bank had been negligent in making payment on the improperly endorsed check, the court noted: ... [T]hat the check was payable jointly to two payees and required the endorsement of both. The two payees were identified on the face of the check as separate entities, one by `Corp.' and one by `Co.', the one name placed on top of the other on separate lines.... In addition, the endorsement on the back of the check made it clear what type of transaction was in progress; it was payment by a general contractor to a subcontractor and the materialman who had supplied the subcontractor. Although direct evidence was not taken below concerning ordinary business practices in the building industry, the notation on the check itself provides evidence of the drawer's intent to pay two parties jointly (citation omitted); he was discharging a debt owed to the subcontractor while protecting the company against the lien of an unpaid materialman.... 28 Cal. App.3d at 734-35. In Thompson Maple Products v. Citizens National Bank, supra , the wrongdoer was entrusted with a number of checks over a period of some three years, ostensibly for the purpose of delivering them to the rightful payees. He then forged the payee's signature on each check and either cashed or deposited them in his bank account. The court there answered the contention that the checks were not paid in accordance with reasonable commercial standards by observing that the checks were regular on their face and bore the purported endorsement of the named payee. 234 A.2d at 36. In the final analysis, as with the other components of § 3-406, what constitutes a breach of reasonable commercial standards must be decided in the context of a specific set of facts, Note, Forgeries and Material Alterations: Allocation of Risks Under the Uniform Commercial Code, 50 Boston Univ. L. Rev. 536, 547 (1970). Here, the bank employee who handled the transaction with Gabriszeski questioned him concerning the use of two names in his trade name, and received what was a reasonable explanation under the circumstances. Gabriszeski then filled out a signature card with his name, addresses and telephone numbers for home and business; and also furnished his social security number. He told the employee he was an acoustical tile contractor and deposited the check in the new account under the trade name. We might also note in passing that it was not improper for her to accept the check for deposit without requiring his personal endorsement, Art. 95B, § 4-205. This was not a case in which the check reasonably appeared to be payable to joint payees; nor was First National made aware, either by the manner in which the check was drawn or by notification of the joint pay agreement, of any intention to make the check jointly payable to the subcontractor and the materialman. There was nothing on the face of the check to justifiably arouse any suspicion on the part of First National, nor was there any other irregularity in the transaction. Considering that this was a deposit of the check by an ostensible payee who freely identified himself  and not a case involving a forgery of the drawer's signature  Dominion failed to establish sufficient facts from which the court below could have found that First National acted contrary to reasonable commercial standards of the banking business. By its negligence, Dominion substantially contributed to the making of the unauthorized signature; and since First National acted in accordance with reasonable commercial standards, Dominion is precluded by § 3-406 from asserting the forgery. Thus, the circuit court correctly affirmed the ruling of the district court. Judgment affirmed; appellant to pay costs.