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The Bank/First Citizens Bank v. Citizens and Associates

Supreme Court of Tennessee
82 S.W.3d 259 (2002)


Citizens and Associates (Citizens) (defendant) issued three checks payable to Allied Mortgage Capital Company (Allied Mortgage) and gave the checks to Allied Mortgage’s branch manager, Frieda Gray, to deliver to Allied Mortgage’s main office. Gray forged Allied Mortgage’s indorsement on the checks and deposited the checks into her individual account at The Bank/First Citizens Bank (The Bank) (plaintiff). Citizens demanded repayment from The Bank. The Bank refused and filed suit against Citizens, seeking a declaratory judgment that The Bank was not liable on the checks. The trial court held that The Bank had failed to exercise ordinary care in allowing checks payable to a corporation to be deposited into a personal account, but that Citizens was also negligent in delivering the checks to Gray without confirming that Gray was authorized to accept the checks. The trial court allocated 80 percent of the loss to Citizens and 20 percent to The Bank. The court of appeals affirmed. Citizens appealed.

Rule of Law


Holding and Reasoning (Barker, J.)

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