Lor-Mar/Toto, Inc., maintained a business checking account at the First Constitution Bank. The…

Lor-Mar/Toto, Inc., maintained a business checking account at the First Constitution Bank. The corporate banking resolution between Lor-Mar and the bank provided that checks drawn on the checking account could be honored upon one authorized signature of the four named officers stated in the resolution, including Loretta A. Van Middlesworth and Louis J. Toto, Jr., its president and vice president respectively. On May 28, 1997, Lor-Mar notified the bank that the signatures of Van Middlesworth and Toto would be “stamped” on Lor-Mar’s checks and provided the bank with samples of its stamped facsimile signatures. Thus, from May 1997 forward, the bank was authorized by Lor-Mar to honor checks bearing a stamped facsimile of either Van Middlesworth or Toto. Beginning in June 2002 a series of five allegedly unauthorized checks totaling $24,350.00 were drawn against the Lor-Mar account. All five checks bore what appeared to be the stamped facsimile signature of Van Middlesworth as provided to the bank on May 28, 1997, and another signature which is illegible. However, the unauthorized checks were a different stock and color than Lor-Mar’s regular checks, which were light yellow in color and the type routinely purchased from banks. On the front, under the preprinted check number, they contained a numerical bank designation of “55-715/21201.” The back of the authentic checks contained a repetitive pattern and the words “ORIGINAL DOCUMENT” with a security message stating: “IMPORTANT: The back of this document has been printed with a patented security process in order to deter check fraud. If you do not clearly see the words ‘Original Document’ and the SecurityWeave pattern, or the word VOID appears to the right of this message, do not cash.” Sample checks provided by the company contained the facsimile signature of Toto and the actual signature of another corporate signatory, Maureen E. Zaleck. In comparison, the challenged checks were computer-generated and laser-printed on light blue paper and contained no bank designation number under the preprinted check number. Their purported security features are different from the legitimate checks; they contain the words “ORIGINAL DOCUMENT” in large letters once on the back with a boxed designation: THIS DOCUMENT INCLUDES THE FOLLOWING VALUGUARD SECURITY FEATURES; EXCEEDING FSA GUIDELINES:




• UV DULL ATTEMPTS TO COPY OR CHEMICALLY ALTER THIS DOCUMENT WILL ACTIVATE VALUGUARD SECURITY FEATURES. Significantly, the unauthorized checks contained repeated duplicate numbers from legitimate checks that had already been issued by Lor-Mar. The five checks were debited to Lor-Mar’s account from June 24 to July 1, 2002, and appeared on Lor-Mar’s statements covering the periods May 31, 2002, through June 28, 2002, and June 28, 2002, through July 31, 2002. Upon receiving the statements, Lor-Mar discovered and reported the unauthorized checks to the bank in July 2002. For each of the five checks, Toto executed an “Affidavit For Forged or Lost Check/Money Order” to the bank attesting that he never signed his name on the check, authorized any person to indorse his name, the indorsement of his name that appears on the check is a forgery, and he never received any of the funds the check represented. Lor-Mar brought suit seeking to have its account recredited for the amount of the unauthorized checks. Is Lor-Mar entitled to have its account recredited for the amount of the unauthorized checks on the grounds the checks were not properly payable from the account?



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