First American National Bank v. Christian Foundation Life Insurance Co.
Arkansas Supreme Court
420 S.W.2d 912 (1967)
The First Methodist Church of Mena issued $94,000 in bearer bonds and hired Institutional Finance Company as its fiscal agent, giving it the treasurer's facsimile signature to print on the bonds. The church sold about half the issue, including some to First American National Bank (plaintiff). Lawrence Hayes, Institutional Finance's president, fraudulently ordered additional printings duplicating bonds already sold to First American, and some duplicates were sold at a discount to Christian Foundation Life Insurance (defendant). Christian Foundation sued First American, and the chancellor ruled First American's original bonds were void while Christian Foundation's duplicates were valid; First American appealed.
Whether an unauthorized signature on a security is effective in favor of an innocent purchaser when the signer is a person entrusted by the issuer to sign, or is an employee of an entrusted person or the issuer.