Court Opinion

ID: 9792521
Source: CourtListenerOpinion
Date Created: 2023-08-31 02:30:21.700254+00
Date Added: 2024-06-11T07:37:43.441084
License: Public Domain

BOYLE, Justice,
specially concurring.
I concur in the majority opinion and write only to clearly state the basis of my concurrence. A review of the record demonstrates that Aubert enjoyed a relationship with the manager of FNB who never inquired or confirmed Aubert’s claimed additional fiduciary authority. I am of the opinion that such inquiry and confirmation is a necessary step required under the applicable statutes and general principles of agency law. It would have been a simple matter for FNB to confirm Aubert’s claim *826to increased powers and authorities but it failed to do so.
As pointed out in the majority opinion, Aubert advised the manager of FNB in Kellogg that he was the authorized general agent for CDA with full authority to transact all business for CDA in Idaho, including the authority to endorse1 checks made payable to CDA. Although the Uniform Fiduciary Act provides substantial protections to banks, it is not a blanket or absolute limit of liability particularly under the circumstances presented in this action. It is my opinion that the UFA requires more of a bank than the record demonstrates was done by FNB in this case. Simply stated, FNB made no attempt whatsoever to confirm the representations of Aubert that he possessed the additional powers represented, particularly the authority to endorse checks made payable to CDA.
Although it may appear that the majority’s decision is based upon whether the UCC or the UFA applies, the crux of the decision in my opinion rests upon whether Aubert had express, implied or apparent authority to endorse the checks. I concur in the majority’s decision that the result is the same under either the UCC or the UFA.
The UCC specifically states that “[a]ny unauthorized signature is wholly inoperative as that of the person whose name is signed unless he ratifies it or is precluded from denying it.” I.C. § 28-3-404. The comments to this section indicate that an unauthorized signature includes a “signature made by an agent exceeding his actual or apparent authority.” See Comment 1 to official text of I.C. § 28-3-404. Idaho Code § 28-3-403 allows agents to sign for their principals, however, whether or not the principal will be liable for the agent’s act depends upon the express, implied or apparent authority of the agent. The UCC does not set forth the requirements under which this authority is determined but relies upon general agency law. See I.C. § 28-1-103.
The section of the Uniform Fiduciary Act at issue in this case is I.C. § 68-309, which states in part:
If a fiduciary makes a deposit in a bank to his personal credit ... of checks payable to his principal and indorsed by him, if he is empowered to indorse such checks, ... the bank receiving such deposit is not bound to inquire whether the fiduciary is committing thereby a breach of his obligation as fiduciary; and the bank is authorized to pay the amount of the deposit or any part thereof upon the personal check of the fiduciary without being liable to the principal, unless the bank receives the deposit or pays the check with actual knowledge that the fiduciary is committing a breach of his obligation as fiduciary in making such deposit or in drawing such check, or with knowledge of such facts that its action in receiving the deposit or paying the check amounts to bad faith. (Emphasis added.)
The key to both the UCC and the UFA under the circumstances presented here is whether the agent is authorized or empowered to endorse checks. The bank cannot escape liability under either the UCC or the UFA unless the fiduciary is actually authorized or empowered to endorse the checks. The authority to endorse checks does not automatically arise out of every fiduciary or agency relationship. General agents with authority to sell or collect accounts for a principal usually do not have implied authority to endorse checks. However, bank officers, certain employees and corporate officers generally have implied authority to endorse their principal’s checks. See generally 5 Anderson, Uniform Commercial Code §§ 3-202:52— 3-202:56, pp. 438-42 (1984).
In Bellflower Ag Serv., Inc. v. First Nat’l Bank & Trust Co. in Gibson City, 130 Ill.App.3d 80, 85 Ill.Dec. 399, 473 N.E.2d 998 (1985), the court held that although the purpose of the UFA is to facilitate the fiduciary’s performance of his responsibilities by limiting the liability of *827those who deal with him, it does not purport to absolve a bank from liability when it pays a check on an unauthorized endorsement. See also Zions First Nat'l Bank v. Clark Clinic Corp., 762 P.2d 1090 (Utah 1988).
In this instant case there was no substantial conflict in the evidence concerning the agency relationship between Aubert and CDA. Thus, the Court correctly concluded as a matter of law that Aubert’s authority to endorse was limited to restrictive endorsements. See Harding v. Home Inv. & Sav. Co., 49 Idaho 64, 297 P. 1101 (1930).
Some courts have held that agents or fiduciaries limited to restrictive endorsements do not have authority to endorse in blank and that the Uniform Fiduciaries Act does not protect a depository bank under these circumstances. In Levy v. First Pennsylvania Bank, N.A., 338 Pa.Super. 73, 487 A.2d 857 (1985), an attorney was directed to deposit checks in the payee’s account but instead deposited them in his own account. The Pennsylvania Superior Court held that because the attorney had no authority to endorse the checks as he did the bank is not thereby relieved of liability under the Uniform Fiduciaries Act. In Fidelity & Deposit Co. of Maryland v. Marion Nat’l Bank, 116 Ind.App. 453, 64 N.E.2d 583 (1946), the Indiana appellate court held that the Uniform Fiduciaries Act did not apply where a fiduciary’s authority was expressly limited to restrictive endorsement for deposit. See 5A Michie on Banks and Banking § 57(b), p. 196, wherein the author states that “an employee who is authorized to endorse for deposit or negotiates all negotiable instruments and orders for payment of money to his employer is a fiduciary within the Uniform Fiduciaries Act, but restrictive endorsements may render the act inapplicable.”
The Uniform Fiduciaries Act is designed to shield banks from liability only when they have authorization, or have made inquiry and confirmed that the party before them is acting for another. The Act covers situations which arise where one person deals with another whom he knows to be a fiduciary. Specifically, the Act is designed to facilitate transactions between banks and known fiduciaries. Nonetheless the Act still places a burden on banks to make inquiry and reasonably determine the extent of a fiduciary’s agency powers and it does not extend risk-free or unlimited protection to a bank when it does not know whether the fiduciary has the power to endorse, draw or sign negotiable instruments.
A review of the record in the instant case demonstrates that FNB made no inquiry or attempt to confirm or verify the claims of Aubert to have the additional authority to endorse checks payable to CDA. It is clear that the original letter from Gardner to Aubert defining the “General Agent” status did not state that Aubert had authority to endorse checks made payable to CDA. Up until the time Aubert claimed these additional powers, he was only authorized to collect checks payable to CDA and forward them to Gardner for deposit. The record reveals that Aubert had absolutely no authority to endorse the checks until Gardner authorized him to restrictively endorse checks payable to CDA for deposit in the Idaho First account. FNB failed to inquire and confirm Aubert’s representation and accordingly it is not entitled to the protection of the UFA and UCC.

. The word "endorse” is often used instead of the word "indorse" and is an accepted variation with the same meaning. See Webster’s Third New International Dictionary, p. 1154. Idaho Code § 68-309 uses "indorse," however, for convenience sake "endorse" is utilized herein.