Pub. 3 2014 Issue 3

l e a d i n g a d v o c a t e f o r t h e b a n k i n g i n d u s t r y i n k a n s a s 20 A CUSTOMER WHO HAD A SAFE DEPOSIT Box at the bank asked that his daughter be authorized to get into the box. Rather than go through the complications of preparing the paperwork for a new box contract, the bank employee had the daughter sign the old contract and had the customer initial the added signature. Eight years later, when the customer’s memory was less than perfect, he claimed his daughter had added herself on the contract without his knowledge. The customer’s attorney reviewed the contract and pointed out that the language of the contract did not allow the adding of a signer in the manner the bank had used. The bank paid a large settlement to the customer. The bank had no valid claim against the daughter for reimbursement of the settlement. The bank received a letter from the president of a corporation stating that they had a new local manager and he wanted to add him as signer on the account. The bank employee had the new manager sign the signature card. Eight months later the corporation claimed the manager signed checks and stole funds from the corporation. The attorney for the corporation claimed the bank was negligent in adding the manager as a signer because the president did not have authority to add a signer and the corporate board had not approved adding the manager as a signer. The bank had failed to request the required corporate resolution before adding the manager. Because the bank was negligent in the manner that it added the manager as a signer, the bank was liable to the corporation for the checks signed by the manager. Cutting corners on changing signers on accounts, even for the convenience of a good, well-known, respected customer, can cause the bank significant losses years later. When safe deposit box contracts are changed, it is necessary to have new, complete contracts signed by all the appropriate parties. When signers on accounts are changed, it is necessary to have all signers sign new complete contracts. Any time a corporate account, LLC account, partnership account, or other business account is involved it is necessary to have a new corporate resolution or partnership document showing that the board of directors of the corporation, or all appropriate partners of the partnership, authorized the new signer as well as all prior signers. Bank employees also need to understand that a Corporate Resolution is not just a meaningless piece of paper. It is a document, usually signed by the President and Corporate Secretary of the corporation, which states that the Board of Directors had a meeting and during such meeting they specifically passed the resolution which is reflected in the minutes of the meeting of the Board of Directors. If the person wishing to open the account or change signers on the account is given a corporate resolution document, it is never correct for that person to simply sign the document and hand it back. It is something that must be taken to the Corporate Board and the Corporate Board must pass such resolution during a board meeting. If the bank employee simply accepts the signature on the document knowing that the Corporate Board could not have held a meeting and passed such resolution, it would be negligence on the part of the bank. Changing signers on accounts should always be done using complete, properly signed documents. If a bank employee knows that the Corporate Board did not actually pass a Corporate Resolution, the bank should refuse to accept the document and explain to the customer that the board of directors needs to pass the resolution before the document is signed and submitted to the bank. For more information, please give us a call at (785) 228-0000. SECURITY OFFICER’S BY-WORD CUTTING CORNERS WHEN CHANGING SIGNERS WILL CAUSE PROBLEMS By Charles M. Towle, KBS President Kansas Bankers Surety, Topeka, Kansas