Mid-Pacific
Mid-Pacific Tennis Courts (MPTC), a small family-held corporation, hired Leroy Jacob as a salesperson. Jacob devised a scheme to defraud MPTC. Using MPTC customer leads, Jacob entered into contracts with potential customers to build tennis courts without informing MPTC. Jacob accepted checks from potential customers made payable to MPTC. Jacob then deposited those checks in his personal bank account with Peoples Bank & Trust Co. (Peoples Bank) without indorsement or permission by MPTC. Jacob took the money and disappeared.
When MPTC learned of the fraud and discovered that the checks were accepted for deposit by Peoples Bank in Jacob’s personal account, MPTC sued Peoples Bank to recover the amount of the checks in question. Did Peoples Bank properly accept the checks for deposit?
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The Uniform commercial Code (UCC) has the following requirements for instrument to be negotiable: the instrument must be in writing, the instrument must be payable to order of or to the bearer, the instrument must include an unconditional promise, the instrument must state a fixed amount of money, the instrument must be payable on demand, and (the instrument must be signed by the payee, the instrument must state a variable amount of money, the instrument must include a conditional order to pay, the instrument must be signed by the maker or the drawer, the instrument must be oral).
A transfer of an order instrument requires the (indorsement, documentation, compensation) of the payee. An indoresement is a (signature on an instrument, makers mark, drawee guarantee), which is typcially placed (in the files of an attorney, on the back of a check, in storage with a bank).
Generally, the purpose of an indorsement on an instrument is to (transfer ownership rights of the instrument, confirm the name of the drawee, state the busienss purpose for which the insturment is written). The check deposited by Jacob (were, were not) indorsed by MPTC. Therefore, Peoples Bank (improperly, properly) accepted the checks for deposit.
-Assume that Jacob convinced the potential customers to write checks out to him personally, rather than MPTC. Jacob then signed the checks and deposited them with Peoples Bank. Peoples Bank had no notice of the fraud.
In this case, (Peoples Bank, MPTC, Jacob, the potential customer) is the drawer and (the potential customer, People Bank, Jacob, MPTC) is the payee.
According to :The Uniform commercial Code (UCC) has the following requirements for instrument to be negotiable: the instrument must be in writing, the instrument must be payable to order of or to the bearer, the instrument must include an unconditional promise, the instrument must state a fixed amount of money, the instrument must be payable on demand, and ---(1)the instruments must be signed by the maker or the drawer -(the promise or order must not state any other "undertaking or instruction by the person promising or ordering payment to do any act in addition to the payment of money).
A transfer of an order instrument requires the (2)Indorsement and name (as payable to or order to) of the payee.
An Indorsement is a (3)signature on the instrument , other than that of a signer as maker, drawer, or acceptor, which is typically placed (4)on the back of a check . Generally purpose of Indorsement of an instrument is to (5) (i) negotiating (transfer ownership right) the instrument, (ii) restricting payment of the instrument, or (iii) incurring indorser's liability on the instrument.
The checks deposited by Jacob (6)were not Indorsed by MPTC. Therefore, Peoples Bank (7) improperly accepted the checks for deposit.
In other situation:
Assume that Jacob convinced the potential customers to write checks out to him personally, rather than MPTC. Jacob then signed the checks and deposited them with Peoples Bank. Peoples Bank had no notice of the fraud.
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