Yip

In this case of first impression, we consider the ramifications of an employer’s delegation to an employee of the authority to endorse checks made out to the employer for deposit to the employer’s account. If the employee, so authorized, instead embezzles his employer’s funds by endorsing the checks for deposit to accounts opened in fictitious names, are those endorsements within the scope of his actual authority? Applying the California Uniform Commercial Code and relevant principles of agency law to the facts at hand, we conclude the trial court erred in ruling the endorsements to the sham accounts here were authorized as a matter of law. We accordingly reverse the grant of summary judgment and remand for further proceedings.

Background

Plaintiffs and appellants Oswald Machine & Equipment, Inc. (Oswald) and Charles Oswald, Jr., brought this action against a number of defendants on a variety of theories arising from frauds allegedly perpetrated against the company by a former employee, Jonathan Yip. In the portion of the suit now before the court, Oswald seeks to recover from defendants and respondents Bank of America National Trust and Savings Association (Bank of…