A QUESTION OF ETHICS Richard Caliendo, an accountant, prepared tax returns for various clients. To ...

A QUESTION OF ETHICS
  Richard Caliendo, an accountant, prepared tax returns for various clients. To satisfy their tax liabilities, the clients issued checks payable to various state taxing entities and gave them to Caliendo. Between 1977 and 1979, Caliendo forged indorsements on these checks, deposited them in his own bank account, and subsequently withdrew the proceeds. In 1983, after learning of these events and after Caliendo's death, the state brought an action against Barclays Bank of New York, N.A., the successor to Caliendo's bank, to recover the amount of the checks. Barclays moved for dismissal on the ground that because the checks had never been delivered to the state, the state never acquired the status of holder and therefore never acquired any rights in the instruments. The trial court held for the state, but the appellate court reversed. The state then appealed the case to the state's highest court. That court ruled that the state could not recover the amount of the checks from the bank because, although the state was the named payee on the checks, the checks had never been delivered to the payee.