Case 27-2 Mid Atlantic

Case 27-2: Mid-Atlantic Tennis Courts v. Citizens Bank and trust Company of Maryland

· Facts

o Mid-Atlantic wanted to expand its business and hired Loy Smith as a commission salesman.

o He was authorized to sell tennis court jobs and to deliver the executed contracts and any customer deposits received directly to the business office of Mid-Atlantic in Virginia.

o Smith was scheming to defraud Mid-Atlantic and entered into 8 contracts with potential customers and did not inform Mid-Atlantic.

o He accepted deposit checks from the customers made payable either to himself only, to Mid-Atlantic only, or to both jointly.

o Smith opened 2 checking accounts with defendant in his own name into which he deposited these checks.

· Issue

o Whether the checks should or should not have been accepted by defendant for deposit in anyone’s account other than Mid-Atlantic’s.

· Rationale

o The only endorsement a bank can supply is that of its customer and it is clear that Mid-Atlantic was not the defendant’s customer.

· Conclusion

o The plaintiff has 2 UCC theories of recovery available with regard to the items that bore nothing more than language “for deposit only:

§ Conversion and breach of restriction, but either theory entitles it to summary judgment on these items, and the recovery is the same.

o Order issued in favor of plaintiff