Lane was unknown, represented herself to be Lavinia Lane, and cashed the check. Has Bank of Omaha taken the check by negotiation? Why or why not?

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Lane was unknown, represented herself to be Lavinia Lane, and cashed the check. Has Bank of Omaha taken the check by negotiation? Why or why not?

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Lavinia Lane received a check from Wilmore Enterprises, Inc., drawn on the Citizens Bank of Erehwon, in the sum of $10,000. Mrs. Lane indorsed the check “Mrs. Lavinia Lane for deposit only, Account of Lavinia Lane” and placed it in a “Bank by Mail” envelope addressed to the First National Bank of Emanon, where she maintained a checking account. She then placed the envelope over a tier of mailboxes in her apartment building along with other letters to be picked up by the postal carrier the next day. Flora Fain stole the check, went to the Bank of Omaha, where Mrs. Lane was unknown, represented herself to be Lavinia Lane, and cashed the check. Has Bank of Omaha taken the check by negotiation? Why or why not?

Explanation & AnswerSolution by a verified expert

Explanation

As per Section 3 (206), the restriction in the context of endorsement should be honored by the bank. In this case, the stolen check is cashed from Bank O by Individual F, who introduced themself as Individual L.The check was stolen by Individual F but not bearer, in nature.This reflects that Bank O has failed to comply with the Individual L's endorsement and did not pay the sum of the check to Individual L as per their endorsement. Since Individual L applies restrictive endorsement, the check is going to be deposited in Individual L's account only.

Verified Answer

In this case, there is a lack of negotiation, which should have been done by the Bank O,since Individual L is restricted the negotiable instrument by restrictive endorsement, but Bank O unknowingly dishonored Individual L's restrictions.

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