BILLS AND NOTES-NEGLIGENCE OF THE DEPOSITOR-RIGHT OF THE DRAWEE TO CHARGE THE ACCOUNT

A depositor in the defendant bank was a large firm with a payroll clerk who prepared the employees\u27 checks for signing by the proper officer. The clerk prepared checks for employees not then on the payroll, which the officer signed without investigation. The clerk then indorsed as the named payee, signed in her own name as final indorser, and cashed the checks at various banks. Such conduct did not seem unusual to the banks, as she would frequently cash properly indorsed checks as a favor to other employees. The returned vouchers were not examined by the depositor to detect errors. The plaintiff surety company sued on the depositor\u27s claim against the drawee bank for improperly charging these checks against the depositor\u27s account. Held, judgment for the bank affirmed. Depositor\u27s negligence in issuing the checks caused the loss and precluded recovery. United States Guarantee Co. v. Hamilton National Bank, (Tenn. 1949) 223 S.W. (2d) 519