Reliable Janitorial Service, Inc., maintained a bank account with AmSouth Bank. Rosa Pennington was.

Reliable Janitorial Service, Inc., maintained a bank account
with AmSouth Bank. Rosa Pennington was employed by Reliable as a
bookkeeper/office manager. She deposited checks made payable to Reliable but
did not have authority to write checks on Reliable’s account. Beginning in
January, Pennington obtained counter deposit slips from AmSouth. She wrote on
the deposit slips that the depositor was “Reliable Janitorial Services, Inc.,”
but in the space for the account number, Pennington wrote the account number
for her own personal account with AmSouth. She stamped the checks that were
made
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Reliable Janitorial Service, Inc., maintained a bank account
with AmSouth Bank. Rosa Pennington was employed by Reliable as a
bookkeeper/office manager. She deposited checks made payable to Reliable but
did not have authority to write checks on Reliable’s account. Beginning in
January, Pennington obtained counter deposit slips from AmSouth. She wrote on
the deposit slips that the depositor was “Reliable Janitorial Services, Inc.,”
but in the space for the account number, Pennington wrote the account number
for her own personal account with AmSouth. She stamped the checks that were
made payable to “Reliable Janitorial Service, Inc.” with the indorsement “For
Deposit Only, Reliable Carpet Cleaning, Inc.” Over an 11-month period, Pennington
was able to deposit 169 checks so indorsed. AmSouth credited the deposits to
Pennington, not Reliable. Pennington spent all the funds that she diverted to
her account. When Reliable discovered the fraud, it brought suit against
AmSouth for conversion and sought to have its account credited with the
improperly paid checks. Was AmSouth Bank liable to Reliable for the value of
the restrictively indorsed checks that it paid inconsistently with the
indorsement?

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