Fact Pattern 27-2A
Ruth opens an account with State Bank under an agreement in which the bank reserves the right to charge the account for any item returned due to its unau?thorized alteration.
-Refer to Fact Pattern 27-2A. Tom deposits an altered check in Ruth's ac?count. When Unity Bank, the check's drawee bank, re?turns the item due to its alteration, State Bank files a suit against Ruth to recover the amount. The court is most likely to rule that
A) Ruth does not have to pay, because she did not indorse the check.
B) State Bank is entitled to recover under its account agreement.
C) Tom is the party from whom State Bank should seek recovery.
D) Unity Bank is the party from whom State Bank should seek recovery.

Question

Fact Pattern 27-2A 
Ruth opens an account with State Bank under an agreement in which the bank reserves the right to charge the account for any item returned due to its unau?thorized alteration.
-Refer to Fact Pattern 27-2A. Tom deposits an altered check in Ruth's ac?count. When Unity Bank, the check's drawee bank, re?turns the item due to its alteration, State Bank files a suit against Ruth to recover the amount. The court is most likely to rule that
A) Ruth does not have to pay, because she did not indorse the check.
B) State Bank is entitled to recover under its account agreement.
C) Tom is the party from whom State Bank should seek recovery.
D) Unity Bank is the party from whom State Bank should seek recovery.

Quizplus · Accepted Answer

State Bank's account agreement with Ruth gave it the right to charge her account for any item returned due to its unauthorized alteration. Because Tom deposited an altered check in Ruth's account and the drawee bank returned it due to its alteration, State Bank has the right to recover the amount from Ruth under the account agreement. Tom may also be liable for the alteration, but that does not absolve Ruth of her responsibility under the account agreement with State Bank.