Forged Checks. Roy Supply, Inc., and R. M. R. Drywall, Inc., had checking accounts at Wells Fargo Bank. Both accounts required all checks to carry two signatures—that of Edward Roy and that of Twila June Moore, both of whom were executive officers of both companies. Between January 2006 and March 2008, the bank honored hundreds of checks on which Roy’s signature was forged by Moore. On January 31, 2009, Roy and the two corporations notified the bank of the forgeries and then filed a suit in a California state court against the bank, alleging negligence. Who is liable for the amounts of the forged checks? Why? (See pages 416–418.)
Generally, it is the bank’s responsibility to verify the customer’s signatures before processing the checks but most of the banks do not process these checks manually. In these banks the checks are processed by specific machines which read the MICR number on the check.