Robbed By Your Employees…

Robbed By Your Employees…is the name of an article cited by the appellate court in this opinion. In this case, a corporation’s accounting manager stole some of the incoming checks and took them to a check cashing service, forging the signature of a company officer and receiving hard cash. The corporation’s recoupment effort included suing its own bank, the three check cashing services where the employee took the checks, and the three banks which received those checks from the check cashing services for deposit into those companies’ own accounts. Here, the question was whether the interposition of the check cashing companies between the employee who stole the checks and the three banks who took the checks from three check cashing companies and credited the accounts of those check cashing companies, relieve the banks of all duty of care under Commercial Code section 3405. The appellate court said: “We conclude the answer is no. In this case the three banks were the first banks to process the checks through the banking system, and, as ‘first banks,’ they had a duty of care in the processing of those checks “‘to make certain all endorsements are valid; banks subsequently taking the paper have a right to rely on the forwarding bank.’. . . Check cashing companies are not banks, and should not be treated as banks for purposes of California’s Uniform Commercial Code.” (HH Computer Systems, Inc. v. Pacific City Bank (Cal. App. Fourth Dist., Div. 3; November 6, 2014) 231 Cal.App.4th 221 [179 Cal.Rptr.3d 689].)