Author Question: Debt and equity both provide sources of funds for a company. a. True b. False Indicate whether ... (Read 118 times)

Destiiny22 · **on:** Jun 24, 2018

Debt and equity both provide sources of funds for a company.
a. True
b. False
Indicate whether the statement is true or false

Question 2

A QUESTION OF ETHICS
Richard Caliendo, an accountant, prepared tax returns for various clients. To satisfy their tax liabilities, the clients issued checks payable to various state taxing entities and gave them to Caliendo. Between 1977 and 1979, Caliendo forged indorsements on these checks, deposited them in his own bank account, and subsequently withdrew the proceeds. In 1983, after learning of these events and after Caliendo's death, the state brought an action against Barclays Bank of New York, N.A., the successor to Caliendo's bank, to recover the amount of the checks. Barclays moved for dismissal on the ground that because the checks had never been delivered to the state, the state never acquired the status of holder and therefore never acquired any rights in the instruments. The trial court held for the state, but the appellate court reversed. The state then appealed the case to the state's highest court. That court ruled that the state could not recover the amount of the checks from the bank because, although the state was the named payee on the checks, the checks had never been delivered to the payee.

bdobbins · **Reply #1 on:** Jun 24, 2018

Answer to Question 1

TRUE

Answer to Question 2

A QUESTION OF ETHICS
1. According to the court, significant practical considerations supported its conclusion. When a payee (the state in this case) has never possessed a check, it is more likely that any forged indorsement resulted from the drawer's negligence. This issue could not be readily contested in an action between the payee and the depositary bank. Moreover, the payee is not left without a remedy: it can sue on the underlying obligation (in other words, the state can sue the taxpayers for the unpaid taxes). This course would also result in judicial economy, avoiding circuitous lawsuits and placing the ultimate responsibility on the parties at fault. In that circumstance, however, it is most likely that the taxpayers, instead of the state or the bank, would bear the loss.
2. No, it doesn't matter. As the court pointed out, t is a general rule that putting a check in the hands of the drawer's own agent for purpose of delivery to the payee does not constitute delivery to the payee; this is so because the drawer has control of the agent and the check is revocable and ineffective until the agent delivers it. Here, of course, Caliendo had no agency or other relationship with the State which might have imputed his possession of the checks to it. Indeed, the State does not contend that it knew of Caliendo's dealings with the drawers or even of the checks' existence. Besides, as the often-quoted aphorism has it, ignorance of the law is no excuse.