Al was a well-respected attorney in a small town. A couple ...

[LCritchfi]

Al was a well-respected attorney in a small town. A couple retained Al to represent them on the purchase of a home. Before closing, Al informed the couple of payments that they were required to make by check at the closing. Among the required payments the attorney told the couple to make were a check for 1,500 to Bob Brown and a check for 610 to Susan Lee. The attorney explained that the check to Brown was for a survey of the property and the check to Lee was for termite control work that the couple had authorized. The checks were issued and taken by Al who promised to deliver them. Al did not, however, deliver them. Instead, Al forged the indorsements of the respective payees and cashed the checks. When Al was later arrested on a similar matter, the couple learned what had happened. The couple made a claim against its bank for reimbursement, claiming the bank was not authorized to pay these checks because they had not been effectively negotiated to the bank. When the facts came to light, no person named Bob Brown had done a survey on the property, but the termite work had been done by Lee. Decide both cases.

Question 2

First United American Title is the escrow agent for the closing of a sale of property between Georgia Pines and Alexander Pope. Georgia is carrying the financing for Pope, and Pope has given Georgia a mortgage. First United American failed to record the mortgage even though the escrow instructions specified that it be recorded. Pope has defaulted on the loan, and Georgia has discovered there is no mortgage. First United American:
 A)Is not liable since the mortgage is still valid.
 B)Is not liable unless there was negligence .
 C)Is liable for the failure to record.
 D)None of the above

[aruss1303]

Answer to Question 1

The couple will not recover on the check to Brown because the impostor rule applies when the drawer is fraudulently fooled by an employee into issuing a check to a dummy payee. However, the couple may recover on the check to Lee because this was a valid check to an actual creditor. Accordingly, the forged indorsement is not treated as effective to negotiate the Lee check. The couple had not been fooled by its employee into issuing the Lee check.

Answer to Question 2

C

[LCritchfi]

Excellent

[rachel]

Thanks for the timely response, appreciate it