Clyde issues a check payable to Discount Mart. Ethel, Discount's cashier, forges the store's indorsement and deposits the check in her bank account. Clyde's bank, Farmers State Bank, pays the check. Clyde can recover from
A) Ethel, but not the bank.
B) the bank, which cannot recover from Ethel.
C) the bank, which can recover from Ethel.
D) neither Ethel nor the bank.

Question

Clyde issues a check payable to Discount Mart. Ethel, Discount's cashier, forges the store's indorsement and deposits the check in her bank account. Clyde's bank, Farmers State Bank, pays the check. Clyde can recover from​
A) ​Ethel, but not the bank.
B) ​the bank, which cannot recover from Ethel.
C) ​the bank, which can recover from Ethel.
D) ​neither Ethel nor the bank.

Quizplus · Accepted Answer

Clyde can recover from the bank because the bank paid on a forged indorsement, which is unauthorized. The bank can then seek to recover from Ethel, who committed the forgery.

Clyde Issues a Check Payable to Discount Mart