Tom Cooper is a distributor of tools sold by ACME Tools. Cooper had a line of cr

Question

Tom Cooper is a distributor of tools sold by ACME Tools. Cooper had a line of credit with ACME secured by ACME's tools in Cooper's store. In order to expedite payment on Cooper's line of credit, ACME sent a representative to Cooper's bank, Meadows State Bank, to authorize Cooper to deposit any checks made payable to ACME into Cooper's own account. Several years later, some ACME tools were stolen from Cooper's store. The People's Indemnity Insurance Company (People's), which insured Cooper, sent Cooper a check for the loss made payable to "Tom Cooper and ACME Tools" in the amount of $75,000.00. Cooper endorsed the check and deposited it into his account at Meadows. Cooper never paid ACME for the stolen tools. ACME sued Meadows State Bank for accepting the People's check without the proper endorsement. Is Meadows State Bank liable? Why or why not? Cite any case or legal principle discussed in class to support your answer.

Explanation / Answer

The check was issued in the name of "Tom Cooper and ACME Tools". But earlier Cooper was authorized to deposit any cheks made pyable to ACME into Cooper's own account and not the checks issued in the joint name. Also only the checks with name ACME are to be allowed to be credited into Cooper's account, but the check is issued in the name ACME Tools which is a different name. Hence Meadows State bank should not have accepted the check. The principle discussed here "the name of the beneficiary did not match with the account into which it is credited" and there is no proper authorization to deposit such checks into other person's account.

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.