ABC Equipment(ABC) employs Hilda as its office manager. ABC regularly uses a facsimile rubber stamp to issue its checks and stores the stamp in the President of the company's unlocked office desk. Hilda, as well as several other officers of the company regularly use the stamp. Hilda writes an unauthorized check payable to Robert Gamble(Gamble) for $500.00 using the rubber stamp. She actually owes Gamble $5,000.00 as a gambling debt. Gamble alters the check changing the dollar amount to $5,000.00 and deposits the check in his account at First Fraud Bank(FFB). ABC's bank The Blind Side Trust Company(BST) does not notice the alteration and pays the $5,000 check to the credit of FFB, who in turn credits Gamble's account $5,000.00. Gamble withdraws the $5,000.00 in cash goes to the Racino and prompltly loses all the money, leaves town, and is nowhere to be found. ABC gets monthly bank statements, but does not notice the unauthorized check until it re-examines its books and all of its statements six months later when Hilda fails to report for work. It immediately notifies its bank BST and wants its account credited $5000.00. Does BST have to credit the account at all? What issues need to be considered? What timetable rules apply? How much should ABC be credited if at all? Can BST pursue an action against FFB to get reimbursed if it ends up crediting ABC"s account?
ABC Equipment(ABC) employs Hilda as its office manager. ABC regularly uses a facsimile rubber stamp to issue its checks and stores the stamp in the President of the company's unlocked office desk. Hilda, as well as several other officers of the company regularly use the stamp. Hilda writes an unauthorized check payable to Robert Gamble(Gamble) for $500.00 using the rubber stamp. She actually owes Gamble $5,000.00 as a gambling debt. Gamble alters the check changing the dollar amount to $5,000.00 and deposits the check in his account at First Fraud Bank(FFB). ABC's bank The Blind Side Trust Company(BST) does not notice the alteration and pays the $5,000 check to the credit of FFB, who in turn credits Gamble's account $5,000.00. Gamble withdraws the $5,000.00 in cash goes to the Racino and prompltly loses all the money, leaves town, and is nowhere to be found. ABC gets monthly bank statements, but does not notice the unauthorized check until it re-examines its books and all of its statements six months later when Hilda fails to report for work. It immediately notifies its bank BST and wants its account credited $5000.00. Does BST have to credit the account at all? What issues need to be considered? What timetable rules apply? How much should ABC be credited if at all? Can BST pursue an action against FFB to get reimbursed if it ends up crediting ABC"s account?
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