King-Of-All Manufacturing, Inc. v. Genesee Merchants Bank & Trust Co.

R. M. Maher, P. J. From an order granting summary judgment in favor of defendant, plaintiff appeals. The parties do not dispute the facts. Plaintiff is the successor to King Manufacturing Company, a sole proprietorship operated by Reta Mclnnes. The company had an agreement with defendant bank that required the signatures of both Robert Mclnnes, Reta Mclnnes’ son, and Ronald Phillips on checks drawn on the company’s account with defendant. Between April, 1970 and August, 1972, defendant paid from the company’s account a number of checks without the signature of Phillips. In September, 1972, defendant refused payment on five checks lacking Phillips’ signature. In October, 1972, the company entered into a new agreement with defendant requiring different signatures on its checks. Plaintiff corporation, which acquired the causes of action of Reta Mclnnes d/b/a King Manufacturing Company in October, 1973, brought this action against defendant in February, 1974. Defendant does not dispute plaintiffs allegation that payment of company checks lacking Phillips’ signature violated the agreement between defend *492 ant and the company. The defense asserted is the one year bar found in MCLA 440.4406(4); MSA 19.4406(4), which provides: "(4) Without regard to care or lack of care of either the customer or the bank a customer who does not within 1 year from the time the statement and items are made available to the customer (subsection (1)) discover and report his unauthorized signature or any alteration on the face or back of the item or does not within 3 years from that time discover and report any unauthorized indorsement is precluded from asserting against the bank such unauthorized signature or indorsement or such alteration.” As did the trial court, we think this preclusion defeats plaintiffs action. Explanation of this position requires reference to several other Uniform Commercial Code provisions. The "unauthorized signature” referred to in MCLA 440.4406; MSA 19.4406 is the signature of the customer "made without actual, implied or apparent authority and includes a forgery”. MCLA 440.1201(43); MSA 19.1201(43). A customer is "any person having an account with a bank”, MCLA 440.4104(l)(e); MSA 19.4104(l)(e), and this definiation encompasses the company. See MCLA 440.1201(28), (30); MSA 19.1201(28), (30), under which "person” includes "any * * * commercial entity”. Unless the company’s signature appeared upon the checks, it could not be liable for them. MCLA 440.3401; MSA 19.3401. In fact, the words "King Manufacturing Company” appear twice on the checks, and the amounts stamped on the checks are preceded by "King Mfg. Co.”. Because of the agreement between the company and defendant, neither Robert Mclnnes nor Phillips alone had *493 authority to execute the company’s signature. Both of their signatures were necessary to make the signature of the company on a check an authorized one. The signature of the company on a check lacking Phillips’ signature was an unauthorized signature of defendant’s customer, the company. MCLA 440.4406(4); MSA 19.4406(4) is applicable here. We recognize that both the Court of Appeals for the District of Columbia Circuit, in G & R Corp v American Security & Trust Co, 173 US App DC 215; 523 F2d 1164 (1975), and the Court of Appeals of Maryland, in Wolfe v University National Bank, 270 Md 70; 310 A2d 558 (1973), have refused to apply UCC § 4-406(4) when situations analogous to the present one were before them. Both courts, however, failed to grasp that the signature referred to in § 4-406(4) is the signature of the customer who alleges that his account has been improperly debited. The Wolfe opinion has been soundly criticized, see 6D Willier & Hart UCC Reporter-Digest, § 4-406, A16; Clark & Squillante, The Law of Bank Deposits, Collections and Credit Cards, 1975 Cum Supp, pp 3-4. We think a recent decision of the Arkansas Supreme Court, Pine Bluff National Bank v Kesterson, 257 Ark 813; 520 SW2d 253 (1975), properly applied UCC § 4-406(4) to a controversy similar to the one now before this Court. Checks drawn on the account of a trust fund were paid even though the checks did not contain, as required, the signatures of the three trustees. Since the authorized signature of the trust fund required the joint signature of three trustees, a check drawn on the trust fund account with fewer signatures would have the unauthorized signature of the trust fund. *494 Plaintiff also argues if notice within one year is required by MCLA 440.4406(4); MSA 19.4406(4), this notice was obtained by defendant when it refused to pay the five checks in September, 1972 that lacked Phillips’ signature. We disagree. The checks previously paid were no longer in defendant’s possession. Defendant had no means of determining whether the signatures of the company on the earlier checks were unauthorized. In fact, it would seem that defendant’s refusal to pay the checks would have encouraged the company to examine the checks previously charged against its account and notify defendant of the irregularities. There is certainly no basis to relieve the company of the duty imposed by MCLA 440.4406;. MSA 19.4406. Affirmed.