BANKS AND BANKING - GUARANTY OF INDORSEMENTS - RECOVERY BY PAYER

Authors

Abstract

Relying on fraudulently prepared documents purporting to authorize the president to borrow money, P Bank loaned $100,000, taking the promissory note of the state university executed by such president. The amount of the loan was advanced by means of a cashier's check payable to the order of the university. This check, indorsed by the president without authority, was taken by D Bank , and the amount thereof added to the credit balance of the university in a checking account carried in that bank. Through the clearing house P Bank paid D Bank the amount of the check, which bore the customary "Indorsements Guaranteed" stamp. The day after the deposit, D Bank permitted the president, again without authority from his institution, to withdraw from the account the amount of the previous day's deposit. The funds so withdrawn were misappropriated by the president. The university repudiated the entire transaction, and P Bank sued D Bank for breach of the guaranty of prior indorsements, thus endeavoring to make good its loss due to the refusal by the university to pay the note on which the money was advanced. Held, reversing the trial court, that P Bank should recover. Hibernia Nat. Bank v. Nat. Bank of Commerce, (La. 1943) 16 So. (2d) 352.

Recommended Citation

BANKS AND BANKING - GUARANTY OF INDORSEMENTS - RECOVERY BY PAYER, 42 Mich. L. Rev. 1124 (1944).
Available at: https://repository.law.umich.edu/mlr/vol42/iss6/12