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GENA CHIN & ASSOCIATES, INC. v. FIRST UNION BANK



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GENA CHIN & ASSOCIATES,
INC.

v.

FIRST UNION BANK


November 3, 2000

Record No. 992557

PRESENTresent: All the Justices

GINA CHIN & ASSOCIATES, INC.

v.

FIRST UNION BANK


OPINION BY JUSTICE LAWRENCE L. KOONTZ, JR.

FROM THE CIRCUIT COURT OF ARLINGTON COUNTY

Benjamin N. A. Kendrick, Judge

In this appeal, we consider whether the trial
court erred in striking the evidence at the conclusion of the
plaintiff’s case-in-chief by ruling, as a matter of law,
that a bank teller who participated in a scheme to deposit forged
checks was acting outside the scope of his employment, thus
relieving his employer from civil liability for those acts.

BACKGROUND

Under well settled principles of law, we will
review the evidence in the light most favorable to the plaintiff,
the non-moving party. See, e.g., Lenders
Financial Corp. v. Talton
, 249 Va. 182, 188, 2455 S.E.2d 232,
236 (1995).

In 1994, Henry Steven Cardenas was employed as
a teller by First Union Bank. His duties included, among other
things, the receiving of cash and checks for deposit into the
accounts of the bank’s customers. At the beginning of his
employment, Cardenas received "about two weeks" of
training. [App. 74-76.] During that training, First Union
instructed Cardenas not to accept checks made payable to
businesses for deposit into personal accounts or to accept checks
for more than $7,000 for deposit without a supervisor’s
approval.

Prior to beginning his employment with First
Union, Cardenas was acquainted with Amie Cheryl Lehman, who was
dating Cardenas’ brother. Shortly after Cardenas began
working as a teller, he moved into an apartment with his brother
and Lehman. Lehman, who had formerly been a teller at Signet
Bank, was employed at that time by Gina Chin & Associates,
Inc. (Chin), a food wholesaler, as the firm’s accounts
payable clerk.[App. 79-81, 101-105; note: spelling of
Lehman’s name is from the pleadings, App. 1, and
stipulations, App. 217.]

After Cardenas had been working at First Union
"a little over a year," Lehman, relying on her
knowledge as a former bank teller, requested his participation
assistance in depositing a forged check into her First Union
account. The check was drawn on Chin’s account at Signet
Bank,
[1] and was made payable to one of
Chin’s suppliers. Lehman had created the check by entering a
false invoice into Chin’s accounts payable computer program,
which produced the check on a printer. Lehman then forged both
the signature of Gina Chin, Chin’s president, [App. 121] as
drawer and anthe endorsement of the supplier making the check
payable to Lehman. [App. 81, 105-112.]

Cardenas at first refused to assist Lehman,
"but then she kept on insisting and insisting, and then she
convinced me, I guess, by offering me some money on the
side." Lehman told Cardenas that "it wouldn’t come
back to [him] at all" because she reconciled the bank
statements for Chin’s account and could intercept the
statements with the forged checks before they came to the
attention of the firm’s principals. [App. 81-83, 112-15).
Cardenas thereafter had the check deposited the check into
Lehman’s First Union account. and tThe drawer bank paid the
check, debiting the amount of it from Chin’s account.

Ultimately, using the forgery scheme outlined
above, Lehman and Cardenas succeeded in depositing $270,488.72
inthe deposit of forged checks totaling $270,488.72 into
herLehman’s personal account at First Union.
[2]
Cardenas received approximately twenty20 percent of the funds
deposited. [App. 4, 85-87, 109-12.] After Lehman had left her
employment with Chin, Signet Bank discovered the forgery scheme,
and reported its findings to Chin and the police. Lehman and
Cardenas ultimatelysubsequently wasere convicted of one count of
bank fraud each in federal court. [App. 94, 218.]

On June 11, 1996, Chin filed a motion for
judgment against First Union seeking $270,488.72 in damages
resulting from the forgery scheme of Lehman and Cardenas. Chin
alleged that First Union was negligent when it accepted for
payment checks drawn on Chin’s accounts bearing both forged
signatures of the drawer and forged endorsements of the payees.
Chin further alleged that First Union was vicariously liable for
Cardenas’ criminal acts.

The trial court initially sustained First
Union’s demurrer to Chin’s motion for judgment and
entered summary judgment in favor of First Union on the ground
that under the factual circumstances asserted by Chin certain
provisions of the Uniform Commercial Code barred an action by the
drawer of a check against the depository bank. We awarded Chin an
appeal from that judgment, reversed it, and remanded the case for
further proceedings. Gina Chin & Associates v. First Union
Bank
, 256 Va. 59, 63, 500 S.E.2d 516, 518 (1998). In doing
so, we held that "Chin’s motion for judgment pled a
cause of action pursuant to ?? 8.3A-404 and –405 of
the Uniform Commercial Code, Code ?? 8.1-101 through
8.11-108." Id. at 61, 500 S.E.2d at 517. We explained
that pursuant to these statutes the concept of comparative
negligence is employed to determine liability to the person
sustaining the loss based upon the premise "that all
participants in the process have a duty to exercise ordinary care
in the drawing and handling of [checks.]." Id. at 62,
500 S.E.2d at 517. Thus, in the context of the present case, the
ultimate issue of comparative negligence, which is solely a jury
issue, centers upon the conduct of First Union through its
employees and thoseat of Chin through its employees. In short,
there is no dispute that while First Union accepted the forged
checks for payment and Chin permitted access to its checks by its
employee who forged them, the ultimate issue still undecided at
thisat point in the proceedings iwas whether First Union was
negligent or whether First Union and Chin were both negligent
and, if so, to what comparative extent.See Gina Chin
& Associates v. First Union Bank
, 256 Va. 59, 500 S.E.2d
516 (1998).

Upon remand, a jury trial was commenced in the
trial court on July 17, 1999. Following the favorable resolution
of aAfter First Union prevailed on its motion in limine filed by
First Union to exclude the anticipated testimony of Chin’s
expert witness regarding established banking customs and
standards, the trial court stated "the primary issue is
scope of employment." [App. 56-57.] Chin then proceeded to
produce its evidence to the jury.

Cardenas, Lehman, and Donald Chin, Chin’s
treasurer, were each called as witnesses for Chin. Consistent
with the facts previously related herein, Cardenas and Lehman
detailed in their testimony the scheme to forge the checks and to
deposit them into Lehman’s account. Cardenas further
testified that after he left his employment with First Union,
Lehman continued the forgery scheme using an her account at
another bank where Cardenas’ brother worked as a teller.
[App. 92-93.] Donald Chin testified concerning the failure of
Chin to detect the forgery scheme. [App. 132 & ff.] At the
conclusion of Chin’s case-in-chief, the jury was read
stipulations of fact, including the stipulation that
Cardenas’ acts were not known to his supervisors.
[3] [App. 198.]

First Union moved to strike Chin’s
evidence, asserting that Chin had failed to establish that
Cardenas was acting within the scope of his employment in
knowingly accepting the forged checks for deposit. First Union
argued that "although taking these checks may have been
incidental to First Union’s business because it takes checks
for deposit, there iwas no evidence that it was in furtherance of
First Union’s interest." First Union further argued
that Cardenas was not acting in furtherance of its interests and,
thus, not within the scope of his employment, First Union
contended that this was so because heCardenas willfully violated
its policies concerning the deposit of commercial checks into
personal accounts and accepting certain checks without management
approval. Thus, First Union argued that Cardenas was not acting
in furtherance of its interest and, hence, not within the scope
of his employment.

Chin, citing Commercial Business Systems,
Inc. v. Bell South Services, Inc.
, 249 Va. 39, 453 S.E.2d 261
(1995), and other cases, responded that the specific wrongful act
by the employee need not be in furtherance of the employer’s
interest so long as the service that the employee was performing
at the time was in the course of his employment. Chin asserted
that its evidence had shownshowed that Cardenas was acting as an
employee of First Union when he accepted the forged checks for
deposit. [App. 200-04.]

After a lengthy colloquy in which the trial
court and counsel for both parties discussed in detail the case
law concerning the doctrine of respondeat superior, the trial
court sustained First Union’s motion to strike Chin’s
evidence. In the final order dismissing the case with prejudice,
the trial court ruled as a matter of law that Cardenas’
actions "were not within the scope of the employee’s
authority, being in contravention of First Union’s
directives, and they were not within the scope of employment as
they were shown not to be in furtherance of First Union’s
interests; and . . . reasonable persons cannot differ on the
conclusion reached herein based on the evidence presented by the
Plaintiff, with all inferences most favorable to the
Plaintiff." [App. 219-20.] We awarded Chin this appeal.

DISCUSSION

Initially, we note that the procedural posture
of this case, as will be demonstrated, is significant. The case
is before us following the trial court’s grant of the motion
to strike Chin’s evidence. In that posture, we are unable to
review this case in consideration of all the evidence that may
have been produced on the issue in question. Moreover, despite
our consideration of this case in the prior appeal, we are unable
to reach a consideration of the ultimate merits, or lack thereof,
of Chin’s claims against First Union. However, for the
reasons that follow, we will reverse the judgment of the trial
court and remand the case for further proceedings.

With respect to an assertion of liability based
upon the doctrine of respondeat superior, this Court made the
following pertinent observation almost 80 years ago in Davis
v. Merrill
, 133 Va. 69, 112 S.E. 628 (1922). :

If a person, acting for himself, willfully and
maliciously inflict an injury upon another, he is liable in
damages for such injury. And there is no reason why a master
should be permitted to turn his business over to servants who
have no regard for the public welfare and thereby escape the
responsibility which he would otherwise have to bear. It is
manifestly right and just that both corporations and individuals
be required to answer in damages for wanton and malicious
assaults inflicted upon others by their servants, while acting
within the scope of the servant’s employment and duty, and
it matters not whether the act of the servant is due to lack of
judgment, the infirmity of temper, or the influence of passion,
or that the servant goes beyond his strict line of duty and
authority in inflicting such injury . . . .

Id. at 74, 112 S.E. at 630-31.

Almost from its first consideration by the
courts of this Commonwealth, however, the determination of the
issue whether the employee’s wrongful act was within the
scope of his employment upon consideration ofunder the facts of a
particular case has proved "vexatious." See, e.g.,
Kidd v. DeWitt, 128 Va. 438, 443, 105 S.E. 124, 125
(1920); Appalachian Power Company v. Robertson, 142 Va.
454, 456, 129 S.E. 224, 224 (1925).

We have defined "scope of employment"
in the following terms:

Generally, an act is within the scope of the
employment if (1) it was expressly or impliedly directed by the
employer, or is naturally incident to the business, and (2) it
was performed, although mistakenly or ill-advisedly, with the
intent to further the employer’s interest
, or from some
impulse or emotion that was the natural consequence of an attempt
to do the employer’s business . . . .

Kensington Associates v. West, 234 Va.
430, 432, 362 S.E.2d 900, 901 (1987). (eEmphasis added). The
emphasized language in this definition is the focal point of
First Union’s assertion in the present case. First Union
apparently interprets this language to require that the employee
specific actact which caused the injury be performed by the
employee with an intent to benefit the employer. Admittedly, at
first blush, this language is susceptible to such an
interpretation. However, our prior decisions do not support that
interpretation by implication, see, e.g., Plummer
v. Center Psychiatrists, Ltd.
, 252 Va. 233, 238, 476 S.E.2d
172, 175 (1996)(counselor engaging in unethical sexual
relationship with patient was potentially acting within scope of
employment); Commercial Business Systems, 249 Va. at 46,
453 S.E.2d at 266 (employee violating company rule against
self-dealing and accepting illegal bribes to award contracts was
potentially acting within the scope of employment), and we
expressly reject it now.

In cases involving a willful and wrongful act
of an employee, a narrow and literal reading of the language in
this definition, which would create a patent conflict within it,
is not to be applied as a matter of law to the facts of a
particular case. The present case and First Union’s
assertions in support of its motion to strike Chin’s
evidence are illustrative of the point. Where an employee commits
a willful and wrongful act that results in injury to others,
simple logic suggests that such employee generally does not do so
"with the intent to further the employer’s
interest,." tThat is to say, that the employee generally
does not intend to benefit the employer.

Here, while it may well be a reasonable one,
the conclusionto conclude that a bank teller does not intend to
further the interest of his employer bank when he knowingly
accepts forged checks for deposit for his own gain. However, that
does not resolve the legal issue presented, as a matter of law,
to the trial court upon a motion to strike the injured
party’s evidence. Rather, it should be apparent that the
proper application of this definition in the context of the
doctrine of respondeat superior does not resolve into a
simplistic determination that an employee’s willful and
wrongful act was not done with the intent to further the
employer’s interest or to benefit the employer in some way.
Any doubt that may have existed in that regard was clearly
resolved by the majority opinions in Commercial Business
Systems
and in Plummer v. Center Psychiatrists, Ltd.,
252 Va. 233, 476 S.E.2d 172 (1996)(motion for judgment alleging
sexual relationship between employee counselor and patient stated
a cause of action against employer)..

As in the present case, we recognize that the
difficulty in applyingthe application of this definition to the
facts of a particular case frequently arises where "[t]he
real inquiry is, was the question as to whether [the employee] was acting within the scope of his employment . . . one to be
determined by the Court, or was it a question of fact to be
submitted to, and determined by, the jury?" Crowell v.
Duncan
, 145 Va. 489, 500, 134 S.E. 576, 579 (1926). In that
regard, a motion to strike requires the trial court to test the
evidence against the applicable burdens of production before
permitting the jury to weigh that evidence against the applicable
burden of persuasion.

Settled principles guide the trial court’s
considerations. While the plaintiff has the burden of persuasion
on the issue whether the employee was acting within the scope of
his employment at the time of the act complained of, we have
consistently held that proof of the employment relationship
creates a prima facie rebuttable presumption of the
employer’s liability. McNeill v. Spindler, 191 Va.
685, 694-95, 62 S.E.2d 13, 17-18 (1950). Thus, "[w]hen an
employer-employee relationship has been established, ‘the
burden is on the [employer] to prove that the [employee] was not
acting within the scope of his employment when he committed the
act complained of, and . . . if the evidence leaves the question
in doubt it becomes an issue to be determined by the
jury.’" Kensington Associates, 234 Va. at
432-33, 362 S.E.2d at 901 (quoting Broaddus v. Standard Drug
Co.
, 211 Va. 645, 653-54, 179 S.E.2d 497, 504 (1971)); see
also
Plummer, 252 Va. at 235, 476 S.E.2d at 174; Turner
v. Burford Buick Corp.
, 201 Va. 693, 698, 112 S.E.2d 911, 915
(1960).

Admittedly, the trial court’s task may be
particularly difficult in cases in which the injury is caused by
an intentional, often criminal, tortious act which clearly would
not have been contemplated by the employer as being within the
scope of employment, but which nonetheless was performed incident
to the employment and even facilitated thereby.
[4]
Such cases invoke consideration of whether the employee
divertedeviated from the scope of his employment because of an
"external, independent, and personal motive . . . to do the
act upon his own account." Broaddus, 211 Va. at 653,
179 S.E.2d at 503-04. In that regard, we have distinguished
between the motive of the employee and the relevant question of
whether the service performed was within the scope of employment.
TIn making this distinction, we have held that the motive of the
employee in committing the act complained of is not determinative
of whether it took place within the scope of the employment
relationship. Commercial Business Systems, 249 Va. at 45,
453 S.E.2d at 266; Tri-State Coach Corp. v. Walsh, 188 Va.
299, 305-06, 49 S.E.2d 363, 366 (1948). Rather, the issue is
"whether the service itself, in which the tortious act was
done, was within the ordinary course of such business." Davis
v. Merrill
, 133 Va. 69, 78, 112 S.E. 826628, 631 (1922); accord
Commercial Business Systems, 249 Va. at 44, 453 S.E.2d at
265.

In Commercial Business Systems, an
employee, in violation of conflict of interest rules established
by his employer, created a companybusiness to work with companies
that provided services to his employer. andThe employee then used
his position as a contract negotiator and administrator to funnel
business to suppliers who agreed to work with his company and pay
him illegal "kickbacks." Commercial Business Systems,
249 Va. at 43, 453 S.E.2d at 265. We held that these facts did
not "conclusively establish that [the employee] was not
acting within the scope of his employment." Id. at
46, 453 S.E.2d at 266. Although the employee’s motive was to
advance his self-interest, rather than the interest of his
employer, he was nonetheless "performing his duties . . . in
the execution of the services for which he was employed." Id.

We emphasize that the employee’s improper
motive is not irrelevant to the issue of whether the act was
within the scope of employment. Rather, it is merely a factor to
be considered in making that determination, and, unless the
deviation from the employer’s business is slight on the one
hand, or marked and unusual on the other, but falls instead
between those two extremes, the question is for the jury. McNeill,
191 Va. at 695, 62 S.E.2d at 18; accord Kensington
Associates
, 234 Va. at 4323, 362 S.E.2d at 902. Thus, in Commercial
Business Systems
, we held that "the evidence presents a
jury issue whether [the employee] acted within the scope of his
employment when he committed the wrongful acts." 249 Va. at
46, 453 S.E.2d at 266; see also Plummer, 252
Va. at 238, 476 S.E.2d at 175.

Applying these principles, the issue presented
to the trial court by First Union’s motion to strike was
whether the evidence presented by Chin was such that, as a matter
of law, a reasonable juror could not find that an
employer-employee relationship existed between Cardenas and First
Union and or that, although such a relationship existed, Cardenas
was acting within the scope of that employment at the time of the
commission of the acts which injured Chin. First Union does not
contest that Chin produced clear evidence that established the
necessary employment relationship between Cardenas and First
Union. Accordingly, Chin’s evidence established a prima
facie case of First Union’s liability.

First Union contends, however, that Chin’s
evidence was also sufficient to meet First Union’s burden of
production on the issue of whether Cardenas’ acts were
nevertheless outside the scope of that employment and, moreover,
that this evidence was sufficient to rebut the presumption of
liability as a matter of law. We disagree.

First Union asserts that Chin’s evidence
establishes that Cardenas’ wrongful acts were not
"expressly or impliedly directed by the employer"
because he violated directives in accepting commercial checks for
deposit into a personal account, in failing to obtain a
manager’s approval to accept high value checks for deposit,
and in knowingly accepting checks for deposit with forged
endorsements. This assertion is without merit because the the act
need not be need not be expressly or impliedly directed by the
employer in order for the act to occur within the scope of the
employment. Similarly, an act committed in violation of an
employer’s direction is not always beyond the scope of the
employment. in order to it to occur within the scope of the
employment. Rather, as previously noted, the test is
"whether the service itself, in which the tortious act was
done, was within the ordinary course of" the employer’s
business. In this instance, it is clear that accepting checks for
deposit by a bank teller is a service within the ordinary course
of First Union’s banking business.

First Union further asserts that Chin’s
evidence also establishes that Cardenas was acting exclusively
for his own benefit and that of Lehman. Thus, First Union
contends that Cardenas was acting outside the scope of his
employment because he had an "external, independent, and
personal motive" to doperform the act.

There can be no doubt that Cardenas’ was
not steadfast in the performance of his duties and obligations to
his employer when he chose to participate in a criminal scheme to
accept forged checks for deposit. Cardenas was acting out of
self-interest in participating in Lehman’s scheme, and his
conduct was "outrageous and violative of his employer’s
rules,." Commercial Business Systems, 249 Va. at 46,
453 S.E.2d at 266. Nonetheless, it is clear that in doing so he
was performing a normal function of a bank teller in accepting
checks for deposit.

In sum, First Union’s assertions, and the
apparent basis of the trial court’s decision to strike
Chin’s evidence and to award summary judgment to First
Union, are premised not on the failure of Chin to presentopound
sufficient evidence to establish a prima facie case
of the necessary employment relationship at the time of the
injury to Chin, but on the failure of that evidence to prove that
the acts complained of were committed within the scope of that
employment. As we have explained, Chin did not have the burden of
presenting evidence that Cardenas’ acts were within the
scope of his employment. Rather, having established that the
employment relationship existed, Chin was entitled to have the
case go forward with the burden being on First Union to prove
that Cardenas acted outside the scope of his employment.

In short, tThe procedural posture of the case,
as we noted above, is significant. Chin’s evidence, without
any additional evidence offered by First Union, was sufficient to
establish a jury issue whether Cardenas acted within the scope of
his employment. That issue therefore, on the evidence
presented,oduced did not lend itself to a contrary resolution as
a matter of law by the trial court.

CONCLUSION

For these reasons, we hold that the trial court
erred in sustaining First Union’s motion to strike
Chin’s evidence and enteringawarding summary judgment forto
First Union. WAccordingly, we will reverse the judgment of the
trial court and remand the case for further proceedings
consistent with the views expressed in this opinion.

Reversed and remanded.

FOOTNOTES:

[1] During the course of the ensuing
forgery scheme conducted by Lehman and Cardenas, Chin moved its
account to Citizen’s Bank of Washington, D.C. Checks drawn
on both accounts were deposited into Lehman’s First Union
account.

[2] The total amount of the forged
checks reflected here is taken from Chin’s motion for
judgment. Chin concedes in that pleading that this amount is
subject to amendment because some of the forged checks were
apparently deposited in another bank.

[3] First Union had been permitted to
call its expert witness out of turn at the end of the first day
of the trial, but had not formally begun presenting its case when
it moved to strike Chin’s evidence. Accordingly, we will not
consider the evidence received from that witness in reviewing the
trial court’s ruling.

[4] An alternate approach in
such circumstances has been to assign liability to the employer
not vicariously through respondeat superior, but directly through
the torts of negligent hiring and negligent retention. See,
e.g., J. v. Victory Tabernacle Baptist Church, 236
Va. 206, 208-09, 372 S.E.2d 391, 393 (1988)(confirming prior
recognition of the tort of negligent hiring); Philip Morris
Inc. v. Emerson
, 235 Va. 380, 401, 368 S.E.2d 268, 279
(1988)(recognizing tort of negligent retention). Chin did not
allege either of these torts in its motion for judgment. Chin did
allege negligent failure to supervise as a theory of liability in
its motion for judgment, but abandoned that claim at the outset
of trial on remand. Accordingly, the viability of that claim is
not before us in this appeal.

 

 

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