Henry LAWRENCE, Appellant,
v.
CENTRAL PLAZA BANK AND TRUST COMPANY, Appellee.
District Court of Appeal of Florida, Second District.
*202 D. Turner Matthews, Bradenton, for appellant.
Hugh E. Reams of Goldner, Reams, Marger, Davis, Piper & Bartlett, P.A., St. Petersburg, for appellee.
GRIMES, Acting Chief Judge.
This appeal involves the question of whether the purchaser of a cashier's check may ever bring suit directly against the collecting bank for cashing the check on a fоrged endorsement.
According to the fourth amended complaint, Henry Lawrence purchased from the County Bank an $18,000 cashier's check payable to William Morris Agency. Thе check was given to Charles Grogan, a party with whom Lawrence had been negotiating concerning a concert to be arranged by William Morris Agency. Grogan deposited the check in the trust account of Attorney David L. Schrader at Central Plaza Bank and Trust Company. The check was endorsed "William Morris Agency For deposit only to the act оf Atty David L. Schrader. 8-702-3 Escrow act." Grogan was not an agent of William Morris Agency, and William Morris Agency did not authorize this endorsement. Schrader, acting as Grogan's attorney, subsequently disbursed thе funds to pay Grogan's debts to the Sarasota Kennel Club. Analogizing Lawrence's position to that of a drawer, the court dismissed the action against Central Plaza Bank on the prеmise that his recourse was limited to suing the County Bank, the bank which had issued the check.
Under the law of negotiable instruments which predated the Uniform Commercial Code, there was a split of authority on whether the drawer of a check could recover directly from a collecting bank which had received it on a forged endorsement. H. Bailey, Brady on Bank Checks § 23.26 (5th ed. 1979). The post-Code decisions on the subject remain divided. H. Bailey, Brady on Bank Checks §§ 23.27 and 23.28 (5th ed. 1979 & Supp. 1984). The courts which permit recovery directly from the collecting bаnk now appear to be in the slight majority. See Annot.,
Lawrence's pleadings are couched in a theory of conversion. Section 673.419, Florida Statutes (1983), provides in pertinent part:
(1) An instrument is converted when:
... .
(c) It is paid on a forged indorsement.
... .
(3) Subject to the provisions of this code concerning restrictive indorsements a representative, including a depositary or collecting bank, who has in good faith and in accordance with the reasonable commercial standards applicable to the business of such representative dealt with an instrument or its proceeds on behalf of one who was not the true owner is not liable in conversion or otherwise to the true owner beyond the amount of any proceeds remaining in his hands.
Thus, the Uniform Commercial Codе recognizes the possibility of a depositary or collecting bank being held liable in conversion for honoring a forged endorsement. However, the code does not specify to whom such liability may run. See Barnett Bank v. Lipp,
The leading case for the proposition that the drawer's remedy is limited to a suit against the drawee bank is Stone & Webster Engineering Corp. v. First National Bank & Trust Co.,
Two Florida courts have adopted this view. In Jett v. Lewis State Bank,
The theory behind this rule is that, in an action for conversion against a collecting bank, the essential elements of conversion would be lacking in that the drawer does not have the right to immediate possession of the check because the beneficial ownership of the check is in the payee, not in the drawer. First National Bank v. North Jersey Trust Co.,18 N.J. Misc. 449 ,14 A.2d 765 (1940).
In an action sounding in both contract, for moneys had and reсeived, and in tort, for conversion, the drawer of a check has been denied recovery against the collecting bank upon the grounds that the collecting bank had no mоney in its hands which belonged to the drawer, that the drawer had no right in the proceeds of its own check payable to the payee, and that, not being a holder in due course or an agent for such holder, the drawer could not have presented its check to the drawee bank for payment. The value of the drawer's rights in the check is limited to the physical paper on which it is written and is not measured by its payable amount. The amounts a collecting bank receives from a drawee bank for the check cashed by the collecting bank are the drawee bank's funds and not those of the drawer; and whether the drawer is rightfully or wrongfully deprived of a credit is a matter between the drawer and the drawee bank. In short, the drawer's recourse is limited to an action against the drawee bank, for the only harm which befalls the drawer is the charging of its account by the drawee bank. Stone & Webster Engineering Corp. v. First National Bank & Trust Co.,345 Mass. 1 ,184 N.E.2d 358 (1962).
The decisions which permit the drawer to bring suit directly against the collecting bank rely upon various theories. Perhaps the most notable of these is Sun 'N Sand, Inc. v. United California Bank,
Lawrence argues that the rationale of Jett and Blinn is inapplicable because his check was a cashier's check[2] for which he had already paid. Lawrence relies on Tubin v. Rabin,
In some respects, the purchaser of a cashier's check occupies thе same position as the drawer of an ordinary check because the payee is the party having the right to acquire the funds by cashing the check. Yet, the payee hаs no interest in the check until it is delivered to him. Rex Smith Propane, Inc. v. National Bank of Commerce,
The argument that Central Plaza Bank will lose thе benefit of the defenses guaranteed to the County Bank under section 674.406, Florida Statutes (1983), has no merit because these defenses are predicated upon the drawee bank furnishing its customer with a statement of account accompanied by items paid in good faith in support of the debit entries. In a case of a cashier's check, there is no reason for the customer to receive either a statement of account or the cancelled check. The customer's account is not debited by the drаwee bank upon receipt of the cancelled cashier's check because the check has already been paid for. Of course, the Central Plaza Bаnk is still entitled to a factual determination of its defenses against conversion which are provided by section 673.419(3), Florida Statutes (1983). Barnett Bank v. Lipp.
We reverse the judgment of dismissal and remand the cause for further proceedings.
CAMPBELL and LEHAN, JJ., concur.
NOTES
Notes
[1] This section is identical to section 674.207, Florida Statutes (1983).
[2] A cashier's check has been called "a bill of exchange drawn by a bank upon itself and accepted in advance by the act of its issuance and not subject to countermand by either its purchaser or the issuing bank." Guardian Bank v. San Jacinto Sav. Ass'n,