Court Opinion

ID: 9703239
Source: CourtListenerOpinion
Date Created: 2023-08-25 23:46:57.319828+00
Date Added: 2024-06-11T18:21:46.725931
License: Public Domain

FOSHEIM, Justice
(concurring in result).
I do not agree that the signatures in question were forgeries as contemplated by the UCC. The question of Mary Apland’s subjective intent is relevant only to a deter*290mination of her civil or criminal liability. It has no bearing on the respective civil liabilities of First Federal and Union Bank as between themselves. The signature stamp which appeared on the checks here in question was identical to that which appeared on all checks issued by First Federal; there was no falsification or alteration whatsoever. Thus, it was “genuine” under UCC § 1-201(18) in the sense that it was free from forgery or counterfeiting. It was, however, clearly an “unauthorized signature” (a broad definition which includes a forgery) under UCC § 1-201(43) because it was made “without actual, implied or apparent authority.” I believe it is unnecessary and, perhaps, ill-advised to tie the lack of authority to the existence of criminal intent on the part of Mary Apland. For purposes of analysis in the present case, all we need find is a simple lack of authority and this properly triggers the Court’s inquiry into the conduct of the parties to the suit in order to determine their respective liabilities.
More significant is the manner in which the case is decided. I believe that this action is derivative in nature and that First Federal’s true claim is against its drawee-payor, Northwestern National Bank. Northwestern, however, would apparently have a complete defense in that First Federal did not exercise reasonable care and promptness to examine its statements and discover the unauthorized signature of its vice-president on the checks. Neither could it be said that Northwestern failed to exercise ordinary care in paying the items. See: SDCL 57-21-10 through 57-21-13. There is no codal basis, under the facts of this case, for allowance of a direct suit by a drawer . against a depositary-collecting bank, although numerous courts have done so to avoid circuity of action (as noted in the footnote to the majority opinion). However, the cases which have allowed such suits have involved factual paradigms wherein the drawer could have recovered against the drawee-payor. It is reasoned in such cases that, because the drawee-payor would have a claim (in the amount of its liability to its drawer) against prior banks in the chain of negotiation for breach of warranties made upon presentment, there is no sound reason to disallow a direct suit. The courts have then employed an assignment or third-party beneficiary analysis to extend to the drawer the warranties made to the drawee-payor bank by those presenting or transferring the instrument. See: SDCL 57-19-13 through 57-19-15. At the same time, the depositary-collecting bank has the benefit of the defenses set out under SDCL 57-21-10 through 57-21-14. SDCL 57-19-14(2), however, suggests that no warranty with regard to the signatures could be extended to the drawer “with respect to the [effectiveness of the] drawer’s own signature, whether or not the drawer is also the drawee.” Thus, I see no manner in which a direct suit against Union Bank could be sanctioned here.
Finally, I have serious doubt that Union Bank can be deemed to have acted in accordance with reasonable commercial standards. While prior course of dealing and custom and usage of trade are relevant in determining what is commercially reasonable in a given setting, they should not be used to render “reasonable” any practice that is followed, irrespective of its commercial advisability. I agree that First Federal’s negligence was more significant than that of Union Bank. I also agree with Justice Henderson that it is not our function under the Code to delineate general standards of reasonableness in commercial transactions; some flexibility is essential in view of ever-changing commercial practices. However, I believe it is manifestly unreasonable for a bank, under any circumstances, to cash a check for an individual who bears absolutely no relationship to the instrument on its face. The fact that Union Bank knew of First Federal’s share-loan practices does not make its actions reasonable; that very knowledge, it seems, would have alerted it to the possibility of defalcation. However, since in my view First Federal has no true claim against Union Bank, I concur in the result.