## Facts

- On March 26, 2012, Dale M. Smith gave The State Bank what appeared to be a J.P. Morgan Chase Bank, N.A. cashier’s check for $294,500.99 to deposit into Smith’s account.
- The State Bank accepted the check for deposit.
- On March 27, 2012, Smith asked The State Bank to wire $275,000 from his account to an account in Japan.
- Before sending the wire, a State Bank representative called a local Chase branch and confirmed the check number, the account number, and the amount, and was told there were no stop-payment orders on the item.
- The State Bank processed Smith’s wire-transfer request.
- On March 28, 2012, Chase returned the check to The State Bank marked “refer to maker.”
- The State Bank presented the check to Chase again, and Chase returned it again.
- A Chase official compared the item to Chase’s cashier’s check form and noted multiple inconsistencies, including an incorrect number of digits in the check number, the absence of an audit number, a missing security symbol, and the absence of the only authorized signature used for the account number printed on the check.
- The Chase official concluded immediately that Chase had not issued the check.
- The State Bank sued Smith and Chase in Michigan state court; its claim against Chase alleged wrongful dishonor of the cashier’s check.
- Chase moved for summary disposition, arguing it had no duty to pay because the check lacked an authorized Chase signature.
- The State Bank argued that it was a holder in due course and that Chase should be prevented from denying liability based on the telephone confirmation (including theories of equitable estoppel and apparent authority).
- The trial court granted Chase’s motion for summary disposition, and The State Bank appealed to the Michigan Court of Appeals.

## Issues

1. Whether Chase was obligated to pay a purported cashier’s check that did not bear an authorized Chase signature, even if The State Bank qualified as a holder in due course.
2. Whether The State Bank could use holder-in-due-course status to require payment where the instrument was not issued by Chase because the signature was unauthorized.
3. Whether Chase was equitably estopped (or bound through apparent authority) from denying liability based on the Chase branch employee’s telephone confirmation of the check details and the absence of a stop-payment order.

## Decision

- The Michigan Court of Appeals affirmed the trial court’s grant of summary disposition to Chase.
- The court held that Chase was not liable on the purported cashier’s check because it lacked an authorized signature and therefore was not Chase’s obligation.
- The court rejected the argument that holder-in-due-course status could impose liability on Chase where Chase never became bound on the instrument.
- The court also rejected The State Bank’s equitable estoppel and apparent authority arguments based on the phone call to the Chase branch.
- Because the undisputed record showed the item was not issued by Chase, summary disposition for Chase was proper.

## Legal Principles

- A party is not liable on a negotiable instrument unless the instrument bears that party’s authorized signature; an unauthorized signature is generally ineffective as the signature of the person whose name is signed.
- Holder-in-due-course status can limit certain defenses to enforcement of an existing obligation, but it does not create an obligation where none arose because the purported issuer did not authorize the signature.
- Equitable estoppel requires proof of a material representation, reliance, and resulting prejudice; confirmation of basic check data and the absence of a stop-payment order is not, by itself, a representation that a check is genuine or properly signed.
- Apparent authority depends on the principal’s manifestations that would lead a reasonable third party to believe the agent has authority to bind the principal; a branch employee’s limited telephone statements did not bind the bank to honor a check lacking an authorized signature.
- Summary disposition is appropriate when the evidence, viewed in the light most favorable to the nonmoving party, shows no genuine issue of material fact and the movant is entitled to judgment as a matter of law.

## Conclusion

The Court of Appeals held that Chase did not wrongfully dishonor the check because the item was not Chase’s obligation: it lacked an authorized Chase signature and showed multiple indicators that it was not issued by Chase. Even assuming The State Bank took the item as a holder in due course, that status could not impose liability on Chase where no enforceable obligation was created, and the bank’s phone confirmation did not support estoppel or apparent-authority theories.


State Bank v. Smith, 2014 WL 6088513 (2014)