Authority of Agent and type of bank account hurdles to summary disposition for check fraud

In an unpublished opinion dated October 9, 2012 in Michalik v JP Morgan Chase Bank, the Michigan Court of Appeals reversed the Wayne Circuit Court’s order granting summary disposition in favor of Chase because there was a question of material fact regarding whether the account in question was a joint account or a representative-payee account.

Wendy Palumbo-Garwood (Garwood) and plaintiff Arthur Michalik (Michalik) opened an account for Garwood to deposit her Social Security Income in. Michalik was the representative payee for Garwood on the account and with the Social Security Administration. In lieu of paying rent to Michalik, Garwood paid Michalik’s utility and cable bills from the account. The parties agreed that Garwood was Michalik’s “bill-paying agent.” The parties agreed that it was a joint account, but it was titled as a representative-payee account.

On November 29, 2007, defendant Garwood deposited a $19,962.19 retirement annuity check payable to Michalik from Detroit Laborers’ Defined Contribution Plan into the account. Garwood allegedly forged Michalik’s signature to endorse the check. She then withdrew $5,000 cash.

The trial court found that Grawood was Michalik’s authorized agent, and that under Article 3, an agent who signs the principal’s name creates a presumption that the signature was authorized.

The Michigan Court of Appeals pointed out that the authority of an agent is not universal, and the principal is not bound if the agent exceeds the scope of the authority. The evidence that defendant Garwood was Michalik’s bill-paying agent did not automatically imply that endorsing his signature to checks made payable solely to him was within the scope of Garwood’s authority as his bill-paying agent.

The distinction between joint account and representative-payee account is important because under Chase’s rules, only benefits payable to the account payee can be deposited into the account. There is no implied agency that would allow the account payee to endorse a check made out solely to the representative in favor of the payee. Also, the status of the account would govern whether Michalik had access to the remaining $15,000. This issue of material fact would defeat the summary disposition.

If you have a check fraud issue, attorneys at the Gallagher Law Firm can help. Contact us today.