Bank Liability for Cashing a Check Without the Payee's Endorsement

Attorney Answer

The honest answer is that a claim over a check cashed in 1999 is almost certainly gone. New Mexico applies a three-year limitations period to this exact kind of claim, and a second rule in the same statute may bar it regardless of timing.

The governing provision is NMSA 1978, § 55-3-420. Subsection (a) makes a bank liable in conversion where it "makes or obtains payment with respect to the instrument for a person not entitled to enforce the instrument or receive payment," including where a depositary or payor bank takes an instrument bearing a forged indorsement. That is the claim you are describing.

But the same subsection contains an express bar: "An action for conversion of an instrument may not be brought by . . . (ii) a payee or indorsee who did not receive delivery of the instrument either directly or through delivery to an agent or a co-payee." You have said the hospital handed the check to your family, not to you. If you never received delivery of the check yourself, § 55-3-420(a)(ii) may foreclose the conversion claim against the bank entirely — separately from any timing problem.

The timing problem is decisive on its own. In Gallagher v. Santa Fe Federal Employees Federal Credit Union, 2002-NMCA-088, 132 N.M. 552, 52 P.3d 412, the Court of Appeals held that a payee's claim against a financial institution that paid checks to someone not entitled to them is governed by the UCC rather than the common law: § 55-3-420(a) supplies the conversion cause of action, and § 55-3-118(g) supplies a three-year limitations period that displaces the limitations statutes that would otherwise apply to negligence, breach of fiduciary duty, and breach of contract theories. A check cashed in 1999 falls far outside three years, and repackaging the claim as negligence or breach of contract does not escape it — that is precisely what Gallagher forecloses.

Your potential claim against the family members who took the money is a different theory. It is not governed by the non-delivery bar in § 55-3-420(a)(ii), though it carries its own limitations period and is also decades old.

What you can do

1. Find the actual date the check was cashed. Everything turns on it, and any tolling argument has to start from it. 2. Ask the hospital's legal or risk management department for a copy of the settlement documents — who the named payee was, and to whom the check was delivered. That is the fact that determines whether the non-delivery bar applies. 3. Ask the bank in writing for a copy of the check, front and back, showing the indorsement. Records that old are rarely retained, but the request costs nothing and the answer is useful either way. 4. Take those documents to a lawyer and ask one specific question: whether anything outside the UCC tolled the three-year period in your case — for example, a legal disability. Tolling comes from other law, not from the UCC itself, and it depends on facts only you have. 5. Ask the same lawyer separately about a claim against the family members who received and kept the funds. It is a different theory with a different analysis. 6. Do not pay anyone a fee up front to "recover" old settlement funds. Legitimate lawyers evaluate a claim like this without charging to look at it.

⏱ Time limits apply. Under Gallagher, NMSA 1978, § 55-3-118(g) supplies a three-year limitations period for a conversion claim on an instrument, displacing the periods that would otherwise apply to common law theories. Whether anything tolled that period in your case depends on your specific facts and dates, so bring the documents to a lawyer rather than assuming either way.