Gina Chin & Associates, Inc. v. First Union Bank

Present: All the Justices

GINA CHIN & ASSOCIATES, INC.

OPINION BY

v. Record No. 992557 JUSTICE LAWRENCE L. KOONTZ, JR.

November 3, 2000

FIRST UNION BANK

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, 455 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. 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.

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 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 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, as drawer and the endorsement of

the supplier making the check payable to Lehman.

Cardenas at first refused to assist Lehman, “but then she

kept on insisting and insisting and then she convinced me, I

1

During the course of the ensuing forgery scheme conducted

by Lehman and Cardenas, Chin moved its account to Citizen’s Bank

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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. Cardenas thereafter

deposited the check into Lehman’s First Union account. The

drawer bank paid the check, debiting the amount from Chin’s

account.

Ultimately, using the forgery scheme outlined above, Lehman

and Cardenas succeeded in depositing $270,488.72 in forged

checks into Lehman’s personal account at First Union. 2 Cardenas

received approximately 20 percent of the funds deposited. After

Lehman left her employment with Chin, Signet Bank discovered the

forgery scheme and reported its findings to Chin and the police.

Lehman and Cardenas subsequently were convicted of one count of

bank fraud each in federal court.

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

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.

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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

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employees and that 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 that point in the proceedings was whether First Union was

negligent or whether First Union and Chin were both negligent

and, if so, to what comparative extent.

Upon remand, a jury trial was commenced in the trial court

on July 17, 1999. After First Union prevailed on its motion in

limine 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.”

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 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 her account at another bank where Cardenas’ brother worked

as a teller. Donald Chin testified concerning the failure of

Chin to detect the forgery scheme. At the conclusion of Chin’s

case-in-chief, the jury was read stipulations of fact, including

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the stipulation that Cardenas’ acts were not known to his

supervisors. 3

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 was no evidence that

it was in furtherance of First Union’s interest.” First Union

contended that this was so because Cardenas 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

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.

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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 showed that Cardenas was acting as an employee of

First Union when he accepted the forged checks for deposit.

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’ acts “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.” 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

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our consideration of this case in the prior appeal, we are

unable to reach 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, wilfully 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 under the facts of a particular case has proved

“vexatious.” See, e.g., Kidd v. DeWitt, 128 Va. 438, 443, 105

8

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)(emphasis 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 specific act which caused the injury be

performed by the employee with an intent to benefit the

employer. 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

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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.” That is to say, the

employee generally does not intend to benefit the employer.

Here, it may well be reasonable to 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

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doubt that may have existed in that regard was clearly resolved

in Commercial Business Systems and in Plummer.

As in the present case, we recognize that the difficulty in

applying 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

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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 deviated from

the scope of his employment because of an “external,

independent, and personal motive . . . to do the act upon his

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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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 whether the service performed

was within the scope of employment. In 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.

628, 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 business to work with companies that provided services

to his employer. The 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.” 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

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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 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

433, 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 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

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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 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 act 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. 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

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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

perform 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 present sufficient evidence to establish a

prima facie case of the necessary employment relationship at the

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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 on First Union to prove

that Cardenas acted outside the scope of his employment.

The 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, did not lend itself

to a 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

awarding summary judgment to First Union. Accordingly, 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.

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