ILNews

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. The is an unsigned editorial masquerading as a news story. Almost everyone quoted was biased in favor of letting all illegal immigrants remain in the U.S. (Ignoring that Obama deported 3.5 million in 8 years). For some reason Obama enforcing part of the immigration laws was O.K. but Trump enforcing additional parts is terrible. I have listed to press conferences and explanations of the Homeland Security memos and I gather from them that less than 1 million will be targeted for deportation, the "dreamers" will be left alone and illegals arriving in the last two years -- especially those arriving very recently -- will be subject to deportation but after the criminals. This will not substantially affect the GDP negatively, especially as it will take place over a number of years. I personally think this is a rational approach to the illegal immigration problem. It may cause Congress to finally pass new immigration laws rationalizing the whole immigration situation.

  2. Mr. Straw, I hope you prevail in the fight. Please show us fellow American's that there is a way to fight the corrupted justice system and make them an example that you and others will not be treated unfairly. I hope you the best and good luck....

  3. @ President Snow - Nah, why try to fix something that ain't broken??? You do make an excellent point. I am sure some Mickey or Minnie Mouse will take Ruckers seat, I wonder how his retirement planning is coming along???

  4. Can someone please explain why Judge Barnes, Judge Mathias and Chief Judge Vaidik thought it was OK to re weigh the evidence blatantly knowing that by doing so was against the rules and went ahead and voted in favor of the father? I would love to ask them WHY??? I would also like to ask the three Supreme Justices why they thought it was OK too.

  5. How nice, on the day of my car accident on the way to work at the Indiana Supreme Court. Unlike the others, I did not steal any money or do ANYTHING unethical whatsoever. I am suing the Indiana Supreme Court and appealed the failure of the district court in SDIN to protect me. I am suing the federal judge because she failed to protect me and her abandonment of jurisdiction leaves her open to lawsuits because she stripped herself of immunity. I am a candidate for Indiana Supreme Court justice, and they imposed just enough sanction so that I am made ineligible. I am asking the 7th Circuit to remove all of them and appoint me as the new Chief Justice of Indiana. That's what they get for dishonoring my sacrifice and and violating the ADA in about 50 different ways.

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