Login | December 14, 2019

Banks entitled to restitution for forged checks

DAN TREVAS
Supreme Court
Public Information Office

Published: December 2, 2019

Under Ohio law, banks can be considered “victims” of forgery and a court can order a Franklin County man to pay restitution to three banks where he cashed seven checks, the Ohio Supreme Court ruled recently.
In a 6-1 decision, the Supreme Court ruled that a bank, which is required by law to reimburse an account holder when it pays a forged check, can be considered to be victim of a forgery crime. As a result, an Ohio statute, R.C.2929.18, allows a court to order that the forger repay the bank. The decision reversed the ruling of the Tenth District Court of Appeals, which found the banks that cashed the checks Zachary Allen forged were not victims and not entitled to restitution.
In the Court’s majority opinion, Justice R. Patrick DeWine wrote the banks “were the victims of Allen’s crimes under any plausible, common-sense understanding of the word ‘victim.’”
Chief Justice Maureen O’Connor and Justices Sharon L. Kennedy, Judith L. French, Patrick F. Fischer, and Melody J. Stewart joined the opinion.
In a dissenting opinion, Justice Michael P. Donnelly wrote the Tenth District was correct in finding that the banks were “third parties” and that the real victims were the account holders whose checking accounts were debited by the amount Allen took from them. The bank, under contract with the account holders, reimbursed the account holders for the losses, and the banks have other means to recoup the money, he stated.
The Court majority noted that banks are liable under Ohio law for the payment of a forged check, and must reimburse the customers. As a result, the economic loss is on the bank, and not the account holder, the opinion explained. Allen was targeting the banks and successfully tricked them when he presented the forged checks to the bank tellers.
Conviction Leads to Restitution Order
Allen forged checks from three different business accounts and cashed seven checks by going to branches of three different banks in 2016. He pleaded guilty to seven counts of forgery and was sentenced to pay restitution to the banks for the amount he forged. Allen argued that under R.C. 2929.18 the banks were not “victims” and could not receive restitution. The trial court denied Allen’s claim. He appealed to the Tenth District Court of Appeals, which found the banks were third parties under the law and had reimbursed the true victims — the account holders.
The Franklin County Prosecuting Attorney’s Office appealed the decision to the Supreme Court, which agreed to hear the case.
Court Determines Banks are ‘Victims’ of Forgery
Under R.C. 2929.18(A), a trial court can impose financial sanctions against a felony offender, which includes restitution to the victim in the amount of the victim’s economic loss. The opinion stated the trial court could order Allen to pay restitution to the bank if the bank “was a victim” and “suffered an economic loss.”
Because the victim is not defined in the statute, the courts looked to the word’s ordinary meaning. The Tenth District concluded that the account holders, not the banks, were the victims who suffered the direct economic loss when the money from the forged checks was deducted from their accounts. The banks were indirectly harmed when they reimbursed the funds back to the businesses whose accounts Allen took them from, the Tenth District concluded.
“As we explain, the court of appeals’ holding is premised on the misunderstanding of how the banks were harmed by Allen’s check cashing scheme,” the majority opinion stated.
The opinion stated that when a bank customer deposits funds into a checking account, the banks get a “property interest” in the funds. The banks lose something in which they have an interest when they pay fraudulent checks. The banks also have a duty to correct the errors by re-crediting funds back to the depositors’ accounts.
Banks, Not Insurers Are Victims
The Court noted that Allen argued restitution is improper based on previous court decisions finding that insurance companies may not receive restitution as the “victims” of crime. The opinion noted there is a significant difference between banks and insurers that ultimately suffer an economic loss.
An insurer contracts with an individual to pay for any economic loss a victim might suffer from a crime, and, in turn, insurers receive premium payments for the coverage, the Court explained.
“An insurer contracts to take on a risk. It does not become a victim merely because that risk comes to pass,” the opinion stated.
In contrast, banks in a fraudulent-check case are defrauded and are the objects of the crime. The banks suffer the loss and are the victims, the Court concluded.
The Court reinstated the trial court’s judgment requiring Allen to pay restitution.
Dissent Finds Banks Not Entitled to Restitution
In his dissent, Justice Donnelly noted that banks do not qualify under R.C. 2929.18 as victims and the law prior to 2004 allowed for restitution to be made to “third parties” that reimburse victims for the amounts the victims lost.
He noted the Court’s 2014 State v. Aquirre decision found that when the law changed, the Court found the legislature did not intend to make the insurance companies of victims eligible to receive restitution. Several appellate courts have since ruled that banks, similar to insurers, are third parties that reimburse victims and are not entitled to restitution, the dissent stated.
A bank does not automatically re-credit a customer account for an improper withdrawal, and depending upon the contract the customers have with the bank, the customer might not always be reimbursed for a forged check, the opinion stated.
The dissent also noted that the bank tellers had an obligation to examine the signature cards on file before cashing the checks, and Allen’s withdrawals might never have occurred had the banks looked to see if Allen was authorized to sign checks written to the three business accounts he used.
“Banks are well aware of available civil processes for loss recovery. Relieving a bank from fault for charging against a customer’s account without the customer’s authorization put the bank’s burden squarely on the backs of the taxpayers,” he concluded.
The case is cited 2018-0705. State v. Allen, Slip Opinion No. 2019-Ohio-4757.


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