“Taken together, these three considerations—the banks having lost something in which they had a property interest at the moment of the crime, the banks bearing the economic loss by operation of statute, and the banks having been the targets of Allen’s crimes—establish that the banks are victims under any common-sense understanding of that term.”
Justice DeWine, majority opinion
“A bank operates with the obligation to examine the signature cards on file for its customers’ accounts. It is therefore arguable that in this case, Allen’s unauthorized withdrawals would not have occurred… had the banks examined the signature cards on file for each of the businesses.”
Justice Donnell, dissenting opinion
On November 21, 2019, the Supreme Court of Ohio handed down a merit decision in State v. Allen, Slip Opinion No. 2019-Ohio-4757. In a 6-1 opinion written by Justice DeWine, the court held that a bank that cashes a forged check and recredits the depositor’s account is a victim entitled to restitution from the thief. Justice Donnelly dissented. The case was argued May 8, 2019.
Case Background
Zachary Allen cashed seven forged checks at three different banks in the Columbus area. He pleaded guilty to seven counts of forgery. Allen objected to the State’s request that he be ordered to pay restitution to the banks that cashed the checks. Allen argued that the banks were third parties, not “victims” within the meaning of Ohio’s restitution statute, R.C. 2929.18. The trial court held that the banks were victims of Allen’s forgery and ordered Allen to pay restitution to the banks for the amounts paid on the forged checks. Allen appealed.
In a unanimous decision, the Tenth District Court of Appeals reversed the trial court’s restitution order, holding that the banks were not victims under R.C. 2929.18, but rather were third parties who reimbursed the account holders who were the true victims in the case.
Read the oral argument preview of the case here and the analysis here.
Key Precedent
R.C. 2929.18 (Restitution Statute)(“Financial sanctions that may be imposed pursuant to this section include, but are not limited to . . . restitution by the offender to the victim of the offender’s crime or any survivor of the victim, in an amount based on the victim’s economic loss.”)
R.C. 1304.30 (UCC 4-401) (“[a] bank may charge against the account of a customer an item that is properly payable . . . . An item is properly payable if it is authorized by the customer and is in accordance with any agreement between the customer and bank.”)
R.C. 2930.01(H) (Rights of Victims of Crimes) (Definitions)
(“‘Victim’ means . . . [a] person who is identified as the victim of a crime or specified delinquent act in a police report or in a complaint, indictment, or information that charges the commission of a crime and that provides the basis for the criminal prosecution . . . .”)
Union Properties, Inc. v. Baldwin Bros. Co., 141 Ohio St. 303 (1943) (Banks typically gain a property interest in the money that customers deposit.)
Ed Stinn Chevrolet, Inc. v. Natl. City Bank, 28 Ohio St.3d 221 (1986) (Bank is strictly liable to its customers for payment of a forged check.)
Shaw v. United States, 137 S. Ct. 462 (2016) (“[A] scheme fraudulently to obtain funds from a bank depositor’s account normally is also a scheme fraudulently to obtain property from [the bank].”)
State’s Proposition of Law Accepted for Review
A bank which cashes a forged check, suffers an economic loss, and is a “victim,” under R.C. 2929.18. When a defendant is convicted of forgery, he may be ordered to pay restitution to a bank which cashed the forged check defendant presented.
Does the Court Adopt the State’s Proposition of Law?
Yes
Merit Decision
Analysis
Statutory Construction-R.C. 2929.18 (A)(1)
This is the language at issue:
Financial sanctions that may be imposed pursuant to this section include, but are not limited to, the following:
- Restitution by the offender to the victim of the offender’s crime or any survivor of the victim, in an amount based on the victim’s economic loss.
Defining Victim
“Victim” is not defined in the restitution statute. Justice DeWine finds that undefined words are to be given their ordinary meaning. But unlike Justice Kennedy, who prefers Webster’s Third New International Dictionary for such definitions, Justice DeWine goes to Black’s Law Dictionary for the definition of victim, as a person or entity “harmed by a crime, tort, or other wrong.” Where the appeals court went wrong, says DeWine, was in finding that only the account holders were victims, while the banks were merely third parties indirectly harmed by Allen’s actions. The banks, concludes DeWine, were victims, too, for three reasons.
The Three Reasons Why Banks Were Victims Here
- The relationship between an account holder and the bank is a debtor/creditor relationship. (Justice Fischer brought this up at oral argument). The bank has a property interest in any check it pays out. When the bank pays that check, it adjusts the depositor’s account at the same time to reflect less money available for payments on demand. So, the bank loses something in which it has a property interest as soon as it pays on the bad check. This was a line of questioning Chief Justice O’Connor really hammered on during oral argument, including whether the argument was raised below. (My notes indicate it was not).
- Under the UCC (in Ohio, R.C. 1304.30) a bank must correct its erroneous deduction from a depositor’s account. A check with an unauthorized signature is not properly payable. If the bank pays on a forged check, the bank is strictly liable to its customer for that payment. So, in a bad-check case, the law places the economic loss on the bank, not the account holder.
- Here, the banks were the targets of Allen’s crimes because Allen tricked the bank tellers, not the account holders, when he presented the forged checks for payment.
These three reasons, taken together, establish that the banks were victims of Allen’s crimes under any “common-sense understanding of that term.”
Insurance Caselaw Inapposite Here
The majority rejects Allen’s attempt to use court precedent that insurance companies cannot receive restitution for their economic losses after they reimburse a customer for a covered loss. That situation isn’t a victimization. It is an obligation incurred by the insurance company under a contract where for receipt of premiums it assumes the risk of loss.
What Happens Now?
The appeals court is reversed, and the trial court’s order imposing restitution is reinstated.
Justice Donnelly’s Dissent
Justice Donnelly dissents because he sees no statutory authority for the restitution ordered in this case.
While agreeing with the majority that victim is not defined in the restitution statute, it is defined in R.C. 2930.01, the victim’s rights section of the code, as “a person who is who is identified as the victim of a crime or specified delinquent act in a police report or in a complaint, indictment, or information that charges the commission of a crime and that provides the basis for the criminal prosecution.” Since the record does not show that the banks were identified in any of those charging documents, the bank is not a victim, and therefore not entitled to restitution. The majority counters by noting that by its express terms, R.C. 2930.01 applies only to that chapter, and doesn’t govern the provisions in the restitution statute.
Donnelly’s second point in dissent is that when R.C. 2929.18(A)(1) was amended in June of 2004, restitution to third parties was eliminated. Thus, when a bank reimburses a customer for funds fraudulently withdrawn from the customer’s account, the bank is a third party and not a victim entitled to restitution. The majority counters this argument by noting that the current version of the statute draws no distinction between victims and third parties.
Finally, Donnelly notes that a bank does not automatically recredit a customer’s account for an improper withdrawal. It depends on the bank’s agreement with its customer. And banks are supposed to look at the signature cards on file for their customers’ accounts. Had they done so here, the unauthorized withdrawals may not have taken place.
“Taxpayer money funds our probation departments,” wrote Justice Donnelly. “Taxpayer money should not be used to recover losses caused by a third party’s negligence. Banks are well aware of available civil processes for loss recovery. Relieving a bank from fault for charging against a customer’s account without the customer’s authorization puts the bank’s burden squarely on the backs of the taxpayers. And to what end? Many times, issuing a restitution order is practically futile. Indigent defendants are not the most reliable payors. With collectability uncertain at best, most restitution orders may as well be prestamped ‘returned for nonsufficient funds.’”
Concluding Observations
Both student contributors and I saw this as a clear win for the state. I wrote that “it looks like a majority, if not all the justices, led by Justices Fischer and DeWine, favor the state here, and will find that there can be more than one victim of an offense, and that the banks were victims here.” And yet, I still have a hard time seeing banks as victims. As I wrote after argument, they did pay on a forged endorsement, and as Justice Donnelly wrote in his dissent, aren’t they supposed to look at the signature cards on file? Do they even do that anymore? And are they really going to collect restitution from Allen? Is that the best use of our resources, as Justice Donnelly forcefully questions?