Question

In 1992, Eric M. Schmitz executed two “Limited Power of Attorney” forms with Georgetown Financial, a Wisconsin company that provided investment, insurance, and financial services. James O’Hearn was the sole owner and chief executive officer of Georgetown Financial. Georgetown Financial purchased mutual funds through Putnam Investments for Schmitz. Putnam issued two checks and mailed them to Schmitz, in care of Georgetown Financial, as designated in the account application. O’Hearn presented both checks to Firstar Bank for deposit into a Georgetown Financial account. The larger check did not include an endorsement by or on behalf of Schmitz. The smaller check included an endorsement bearing Schmitz’s name that Schmitz claims is a forged signature. Both checks were stamped with a Georgetown Financial deposit stamp and marked “for deposit only.” Firstar Bank deposited the face value of both checks into a Georgetown Financial account. Schmitz never received the funds deposited into the account. Schmitz argued that because Georgetown Financial did not have authority to endorse the larger check, Firstar Bank was liable as a matter of law for making payment on this check, which was presented by Georgetown Financial without his actual or purported signature. Should Firstar Bank be held liable for cashing both checks? How did the court decide? [Schmitz v. Firstar Bank Milwaukee, 2003 WI 21 (2003).]

Answer 1

In this case, it is clear that Eric Schmitz given limited power of attorney to Georgetown Financial, a Wisconsin company which provides financial services, investment options and Insurance and the CEO of that company is James O’Hearn. On behalf George Financial purchased two check form Putnam investments for Schmitz.

The limited power of attorney of forms that are clearly says Georgetown financial has a limited power to process. Whereas the Bank without verifying the details even if it is larger or smaller check the signature verification and other details like Pan and name on the check is also important to process the deposit. These are the minimum bank policies for check deposits.

Yes, The Firstar Bank here is liable for casing both checks without following the basic bank polices. It’s very important to verify the primary persons details and check issues person along with signature verification.

The court will be considering the primary issue maker will be the Firstar bank for not verifying the details of the check holder, name and signature and processed without any primary verification. The Firstar bank will be liable for re-process of the check and deposit the same in Schmitz.

The court will check the forms of power of attorney and cross verify the checks and details that are updated. Even the signature that is made on behalf of the owner will be verified thoroughly whether is a genuine or forgery.

Bank policies and process of checks will be verified to identify the Firstar has followed polices or simply processed the check without primary checks and verification. Based on all the details the court will decide what action has to be taken and who will be liable in the case.