Answer:
by John Burnett:
What banking errors? First, Bank B erred in accepting the check without indorsement by Smith Jones Construction. It also erred in accepting it for deposit into Jones' personal account unless Smith Jones Construction happens to be a sole proprietorship owned by Mr. Jones (a highly unlikely circumstance, since most construction companies are LLCs or corporations to insulate their owners from liability).
Bank A had a right to refuse payment on the cashier's check when it was presented for payment without the appropriate indorsement.
Answer:
by Jim Bedsole:
And as I understand it, Bank A had a right to refuse payment, but not an OBLIGATION to refuse payment based on incorrect indorsement. Bank B is likely to have some liability exposure to the construction company, but I don't think Bank A will.
Answer:
by Randy Carey:
Bank B is ultimately liable.
The depository bank is ultimately liable in the case of a forged or missing endorsement because of its warranty to the payor bank under section 4.208(a)(1). A depository bank warrants to a payor bank to which a missing endorsement check is presented for payment that it was entitled to enforce the draft on behalf of a person entitled to enforce the draft. Thus, a depository bank is liable for conversion as a matter of law when it accepts for deposit into a third party's account checks that were not endorsed in the name of the payee.
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