Deceased Payee & Forged Endorsement

Question: We have been contacted by a pension fund to request a return of monies paid to an accountholder of the bank over a period of 16 months (April, 2000 through August, 2001) due to the pensioner's death in March, 2000. The deceased party was on a joint account with her son, who was also her power of attorney. A copy of the durable power of attorney was on record at the branch. All of the checks but one were endorsed with the mother and the son's names, though we know now he obviously forged his mother's signature. We were never formally notified of the death. We originally denied the claim but have now been notified by the pension fund that they are filing suit against us and several other banks for the return of the funds. We were never notified of this problem until May of 2003. The son's endorsement is genuine and as far as our staff knew he was the power of attorney, which we had on file and he and his mother were on a joint account.

The pension company forwarded Forged Endorsement Affidavits for a Deceased Pensioner. However, we acted in good faith when cashing the checks due to the fact they were known, long standing customers and we had not been notified of the death. We feel we exercised ordinary care and good faith in processing and paying the checks and that it was the duty of the Pension Fund to be aware of the death and act accordingly. Is there anything we can do to fight this?

Answer: Unfortunately, by processing the checks, you guaranteed the endorsement of the deceased payee, whose endorsement was obviously forged. That guarantee being good under the Uniform Commercial Code for three years means the Pension Fund made their claim just under the statute of limitations. Your action must be against the son for recovery of your funds. And I would file charges against him as quickly as possible. If he has any other accounts with you, you may be able to offset some or all of your loss, but be careful in doing so if there is not enough for the full amount he owes you. Whatever you take may be considered final payment. The durable power of attorney you had on file for the son ceased to be effective as of the date of his mother's death, so even if you had it on file, it is not a defense. And don't forget to file a Suspicious Activity Report. In cases similar to this, security officers have also been known to issue a 1099 for the amount stolen.

Copyright © 2003 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 13, No. 4, 6/24