High court affirms summary judgment for bank

Jennifer Nelson
January 1, 2008
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A bank that opened an account for a man who used it to fraudulently deposit checks wasn't required under Indiana Code to exercise ordinary care when opening the account, ruled the Indiana Supreme Court.

At issue in Auto-Owners Insurance Company v. Bank One, et al., No. 49S04-0701-CV-27 is whether Bank One violated Section 405 of the Indiana Uniform Commercial Code by not exercising ordinary care when it allowed Kenneth B. Wulf to open a fraudulent account.

Wulf was a resident adjustor for Auto-Owners and worked for the company for 10 years. He handled files for each case of subrogation and salvage claims and it was his responsibility to forward any checks the company received for those claims to the clerical staff to send to the company's headquarters.

In 1991, Wulf opened an account at Bank One in the name of "Auto-Owners, Kenneth B. Wulf" and the bank did not request any documents to confirm he was allowed to open and use an account in Auto-Owners' name. Over the course of eight years, he deposited more than half a million dollars into that account. While he was on vacation, Auto-Owners discovered what he had been up to.

Auto-Owners brought a suit against Bank One, arguing the bank failed to exercise ordinary care when it opened the account and that failure substantially contributed to the company's losses. It also argued Bank One was liable for losses up to the moment of discovery, regardless of any statute of limitations.

The trial court granted Bank One's motion for summary judgment and denied Auto-Owners' motion for partial summary judgment on the statute of limitations issue only. The Court of Appeals affirmed.

In today's ruling authored by Justice Frank Sullivan, the majority affirmed the Court of Appeals decision. The case and the court's decision rested upon Indiana's Uniform Commercial Code, which allows a person bearing a loss because of fraudulent activity to recover from the person failing to exercise ordinary care to prevent the loss.

Section 405 does not mention a bank's responsibilities when opening an account and only requires ordinary care from a bank in the "paying" or "taking" of an instrument, wrote Justice Sullivan. In fact, in the absence of the bank's negligence, the section shifts the responsibility of monitoring employees' activities onto the employer. The employer is in a better position to supervise its employees than the bank, he wrote.

As to the second issue raised on appeal, even if Bank One didn't demonstrate ordinary care by accepting the checks, Auto-Owners still has to show that lack of ordinary care substantially contributed to its losses. To determine whether the conduct has substantially contributed to a loss, the high court looked to I.C. 26-1-3.1-406, to view Bank One's conduct in its entirety. Other than the lack of procedure used in opening the account in 1991, Bank One followed required protocol in depositing Wulf's checks. Even if opening the account was a contributing factor to Auto-Owners' loss, the Supreme Court agrees with the lower courts that the bank's conduct in its entirety does not meet the "substantially contributed" test (Thompson Maple Products v. Citizens National Bank of Corry, 234 A.2d 32 (Pa.Super.Ct.1967)).

Justice Theodore Boehm, in a separate opinion in which Justice Brent Dickson concurred, agreed that the statute of limitations barred much of Auto-Owners' claims but did not agree Bank One is entitled to summary judgment because he believes there are issues of fact not resolvable on summary judgment.

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  1. I had a hospital and dcs caseworker falsify reports that my child was born with drugs in her system. I filed a complaint with the Indiana department of health....and they found that the hospital falsified drug screens in their investigation. Then I filed a complaint with human health services in Washington DC...dcs drug Testing is unregulated and is indicating false positives...they are currently being investigated by human health services. Then I located an attorney and signed contracts one month ago to sue dcs and Anderson community hospital. Once the suit is filed I am taking out a loan against the suit and paying a law firm to file a writ of mandamus challenging the courts jurisdiction to invoke chins case against me. I also forwarded evidence to a u.s. senator who contacted hhs to push an investigation faster. Once the lawsuit is filed local news stations will be running coverage on the situation. Easy day....people will be losing their jobs soon...and judge pancol...who has attempted to cover up what has happened will also be in trouble. The drug testing is a kids for cash and federal funding situation.

  2. (A)ll (C)riminals (L)ove (U)s is up to their old, "If it's honorable and pro-American, we're against it," nonsense. I'm not a big Pence fan but at least he's showing his patriotism which is something the left won't do.

  3. While if true this auto dealer should be held liable, where was the BMV in all of this? How is it that the dealer was able to get "clean" titles to these vehicles in order to sell them to unsuspecting consumers?

  4. He has refused his Assent to Laws, the most wholesome and necessary for the public good. He has forbidden his Governors to pass Laws of immediate and pressing importance, He has erected a multitude of New Offices, and sent hither swarms of Officers to harrass our people, and eat out their substance. He has combined with others to subject us to a jurisdiction foreign to our constitution, and unacknowledged by our laws; giving his Assent to their Acts of pretended Legislation: For imposing Taxes on us without our Consent: He is at this time transporting large Armies of foreign Mercenaries to compleat the works of death, desolation and tyranny, already begun with circumstances of Cruelty & perfidy scarcely paralleled in the most barbarous ages, and totally unworthy the Head of a civilized nation.. He has excited domestic insurrections amongst us, and has endeavoured to bring on the inhabitants of our frontiers, the merciless [ ] Savages, whose known rule of warfare, is an undistinguished destruction of all ages, sexes and conditions. GOD BLESS THE GOVERNORS RESISTING! Count on the gutless judiciary to tie our children down and facilitate the swords being drawn across their throats. Wake Up America ...

  5. Its a valid lawsuit. Since the civil war, States have no rights anyways. Get over it, people! You are all subjects now and merely "citizens of the world" anyways, with human rights and all that. Gov'nor knows that. This is just grandstanding to try and appease the red state troops still smarting over the "Gay rights" shoved down their unwilling throats. Gotta keep them "voting" in the kayfabe elections! After all, since nobody cares about the tens of millions of Mexicans here, what's a few Syrians going to do, anyways? Guess we'll find out! LOL