In payment of a claim for a loss due to a fire that destroyed the mobile home belonging to Russell, the Oklahoma Farm Bureau Mutual Insurance Company

(Farm Bureau) negotiated a $69,000 settlement and issued a joint check in this amount payable to Russell and Conseco Financial. Conseco Financial was the mortgagee of the property and was entitled to payment under the policy. The check was drawn on Farm Bureau’s account at Bank of Nichols Hills (BNH), and Russell deposited the check into his personal account at Bank of Oklahoma

(BOK). The check contained an authentic indorsement by Russell and a forged indorsement for Conseco. Upon receipt, BOK presented the check to BNH. BNH paid the $69,000 check and notified Farm Bureau that the check had been paid from its account. When Conseco Financial learned of the check, it demanded that Farm Bureau pay off the balance of the mortgage. Farm Bureau paid Conseco Financial and notified BNH of the forgery. BNH reimbursed Farm Bureau the amount paid to Conseco. BNH then sued BOK on a theory of breach of presentment warranty.

CASE QUESTIONS

1. Which presentment warranty is at issue?
2. Who prevails and why?