Does the person who signs checks but has no official staff or board position in the ministry have any responsibility if anything goes wrong financially? I am not talking about writing illegal checks, but rather, if the corporation does something wrong or is accused of financial misconduct, can someone who is simply a volunteer be held responsible?
In general, a person who signs a check on behalf of a church or ministry will not be held personally liable for a check that bounces, as long as they are unaware that the bank account has insufficient funds to cover the check amount.
In legal terms, checks fall into the category of “negotiable instruments, ” and the law that governs the liability for people who sign checks and other negotiable instruments is found in the Uniform Commercial Code, or UCC.
Employees and volunteers who sign checks on behalf of a church or ministry are considered representatives of the organization for purposes of negotiable instrument liability. Check signers, in their roles as representatives of the ministry, do have a measure of protection against claims made by recipients of checks that are drawn on the organization’s bank account.
Article 3 of the UCC (Revised) indicates that the individual who signs a check as a representative of the ministry, such as a church treasurer, is not personally liable for a check that bounces. However, in some states, the person or entity to whom the check was paid could pursue a separate claim for fraud against the check signer if there’s evidence that the signer knew that the check would bounce. To succeed with making a fraud claim, the person receiving the bad check would need to prove that the employee or volunteer who signed the check knew it wouldn’t clear due to insufficient funds on deposit in the organization’s account.
A landmark court case on this subject was decided over a half-century ago, but is still cited today. In the case of Lippman Packing Corp. v. Rose (New York Municipal Court, 1953), a corporate officer was held liable for fraud when, with knowledge that there were insufficient funds in the corporate bank account, he issued a check to a supplier to get the supplier to deliver more merchandise. From this case the “Lippman Rule” emerged, stating that a representative check signer is not liable for fraud unless he or she personally participated in the misrepresentation or has actual knowledge of it.
It’s important to note that at least one state (New York) has not yet adopted Revised Article 3. In this jurisdiction, an employee or volunteer who signs a check on behalf of the ministry organization still runs a risk that they could be held personally liable for checks that bounce. To avoid personal liability in this state, the signer must make certain that the name of the ministry organization is displayed on the check, and, when signing, indicate that the signing is made in his or her role as the ministry’s representative (such as adding the statement “as church treasurer” under the signature line).
I hope this gives you the information that you need. Because the application of negotiable instrument law can be a bit complex and, like most law, can vary by state, it’s always a good idea to run questions like this by a local attorney who’s familiar with both the UCC and with your individual state laws.
For a brief history of the Uniform Commercial Code, here’s some further reading:
http://www.enotes.com/biz-encyclopedia/uniform-commercial-code
http://www.enotes.com/biz-encyclopedia/uniform-commercial-code
