Question

Paris won a lawsuit against railroad, and was given a settlement check. the check somehow came to be in eddy's possession. eddy indorsed the check to himself and deposited it in his account at bank. paris sued bank, alleging that it was liable to her for having paid the check over an unauthorized indorsement. is bank liable to paris?

Answer 1

Yes under the theory of conversion.

Step-by-step explanation:

Conversion occurs when an individual takes possession of an item and excercises ownership of it in a way that is in conflict with the real owner's right of possession.

In this instance Eddy paid in a cheque that was not owned by him. The onus was on the bank to confirm from the account owner the real beneficiary of the check.

This would have prevented the conversion of the check through an illegal indorsement.

Conversion is a common type of fraud with regards to dividend warrants where dividend warrants edited to present a different person as the owner of the check.