In: Operations Management
Spacemakers of America, Inc., hired Jenny Tripplet as its bookkeeper. Pacemakers did not inquire about any prior criminal record or conduct a criminal background check of Triplett. If it had taken those steps, it would have discovered that Triplett was on probation for 13 counts of forgery and had been convicted of theft by deception. All convictions were the result of Triplett forging checks of previous employers.
Spacemakers delegated to Triplett sole responsibility for maintaining the company’s checkbook, reconciling the checkbook with monthly bank statements, and preparing financial reports. Triplett also handled the company’s accounts payable and regularly presented checks do Dennis Rose, the president of Spacemakers, so he could sign them.
Just weeks after starting her job at Spacemakers, Triplett forged Rose’s signature on a check for $3,000 made payable to her husband’s company, Triple M Entertainment Group, which was not a vendor for Spacemakers. By the end of the first full month of employment, Triplett forged 50 more checks totaling approximately $475,000. All checks were drawn against Spacemaker’s bank account at SunTrust Bank. No one except Triplet reviewed the company’s bank statements. Subsequently, a SunTrust employee visuasilly inspected a $30,670 check She became suspicious of the signature and called Rose. The SunTrust employee faxed a copy of the check to Rose, which was made payable to Triple M. Rose knew that Triple M was not one of the company’s vendors, and a Spacamekrs employee reminded Rose that Triplett’s husband owned Triple M. Rose immediately called the police and Triplett was arrested.
Spacemakers sent a letter to SunTrust Bank, demanding that the bank credit $523,106 to its account for the forged checks. The bank refused, contending that Spacemaker’s failure to provide the bank with timely notice of the forgeries barred Spacemaker’s claim. Spacemakers sued SunTrust for negligence and unauthorized payment of forged items. The trial court granted SunTrust’s motion for summary judgment. Pacemakers appealed.
Using IRAC, how should this case have been decided and why? Please, do not copy from google. I need original answer.
The issue in the case of Spacemakers versus SunTrust Bank is in whether SunTrust Bank owed an obligation to compensate pacemakers for the payments made against the forged checks, arising out of neglect of its duty of care leading to a tortuous claim.
The four major elements of existence of a tort are namely duty, breach of Duty, position and injury, with a tort being identifiable as an intentional tort, tort arising due to negligence or a strict liability tort. An intentional tort results due to purposeful acts of an individual which cause subsequent injury or damage to another. Tort arising due to negligence result mostly from a person not applying due care to ensure the action would not cause injury to another and does not provide the required duty of care owed to another person. Strict liability torts only require proof of causation of injury by a product or animal, intention of the company or the person responsible for the animal is not relevant. the normal duty of care in various cases referred to as ordinary care is established by law. Ordinary care in the case of a person who is engaged in business refers to adequate performance of all ancillary duties required to ensure minimizing of risk and no harm or curse bye examining all statements and records for accuracy and correctness as a personal responsibility which cannot be absolutely delegated due to the importance of the responsibility and the final accountability being with the owner of the business. Inability to fulfill ordinary care in maintaining the financial accounts by implementation of adequate monitoring and control for accuracy and reconciliation amounts to professional negligence as the basic standard of care required within the circumstances has not been applied. Spacemakers of America incorporated, cannot hold the bank liable for non performance of basic duty of care and claim it has been negligent in performance of its duties, when in truth the negligence to apply ordinary care in analysis of financial statements of bank accounts to ensure that they are accurate or implement simple control measures by providing a cross-check within the procedure as through involvement of multiple individuals, was neglected by the company. Suntrust Bank is not responsible for undue verification of signature of every check unless it is brought to their notice by the account holder, through identification of ambiguous entries in the monthly statements. The bank utilizes a fraud detection software system and processes a large number of checks per day. Therefore, the bank applied all ordinary due care in performance of its duty but the fraud was undetected and hence it fulfilled its duties and obligation towards its customer. Reasonable commercial standards do not require banking staff to carefully scrutinize every check which has already been process by fraud detection software and is not part of the fraud detection policies and procedures followed by the bank. The customers duty was clearly specified by the bank as having an obligation to carefully examine all statements issued along with cancelled check and to secure an account by not providing bookkeepers absolute authority to retain possession of or prepare checks for the company as final responsibility and accountability was with the account holder, for any payment made by the bank due to errors or wrongdoing committed by such third person who has been provided absolute authority by a customer.
Suntrust Bank therefore had applied all ordinary care required on its part to avoid any harm to the customer and also informed all required care to be taken by the customer to avoid suffering harm due to wrongdoing by a third party accessing the check book. Spacemakers however failed to apply due care in performance of its duties of checking the statements, retaining adequate control and monitoring the checkbook and issue of checks, and also was negligent in employment of its bookkeeper who had extensive financial access and power within the organisation. Therefore, the case should be decided in favour of suntrust bank with no claim being admissible for payment of the loss incurred by spacemakers due to forgery by its bookkeeper.