Legal Case Review

Rivera of 1990. This case involved Rivera, who was a financial advisor and Salvatore Guarino, Rivera's cohort, selling John G. Talcott, Jr. A resident, 93 years of age in Massachusetts a $75,000 investment. Talcott sent a check for $10,000 payable to Guarino for the purpose of travel expenses in acquiring a return on the original investment of $75,000. When Rivera informed Talcott that he only needed $5,700 for traveling expenses, Talcott stopped payment on the check for $10,000.

Guarino however cashed the check with a company that charged him five percent for cashing the check and the company deposited the check in the company's bank. A second check was sent by Talcott to Guarino for the amount of $5,700.00 and he took it to the same company and cashed the check. Rivera called Talcott to warn him about Guarino and informed him that he was dishonest at which time Talcott stopped payment on the second check.

The company that cashed the check was called by Talcott's daughter and informed that there was a stop payment on the second check in the amount of $5,700.00. The company filed a lawsuit against both Talcott and Guarino stating the claim that it was the holder in due course. I.

Decision of the Trial Court The decision of the trial court in this case was such that found in favor of Any Kind for only the second check in the amount of $5,700.00 and stated finding that the "circumstances surrounding the cashing of the $10,000.00 check were suspicious" and should have put the company on notice of a problem being present meaning that the company was "not a holder in due course of that check." (Whaley, nd, p.

43) The reason stated by the trail court for this decision was specifically that the "events and circumstances were sufficient" to put the company "on notice of potential defense." (Negotiable Instruments, nd) The trial court held specifically that due to the "circumstances of a person describing himself as a broker, receiving funds in the amount of $10,000.00 and negotiating the check for those funds at a $500 discount were sufficient" to put the company on "inquiry notice that some confirmation or explanation should be obtained." (Negotiable Instruments, nd) In essence, the company should have "approached the $10,000.00 with additional caution beyond the FedEx envelope, and should have verified it with the maker if it wanted to preserve its holder-in-due-course status." (Negotiable Instruments, nd) This is reported to have been affirmed in the case [Any Kind Checks Cashed, Inc.

v. Talcott, 830 So 2d 160 (Fla App 2002)]. II. Statute Law It is reported that in order to be a holder in due course "the possessor of the instrument must qualify as a 'holder' meaning that the instrument must be "technically 'negotiable' and must have been technically 'negotiated' into the hands of its current possessor (however, the named payee becomes a holder on issuance of the instrument without the necessity of a negotiation, as does anyone to whom a bearer instrument is issued)." (Whaley, nd, p.

36) In addition the bank on which the check is actually drawn is not qualified as a holder since instrument "must be negotiated to a holder, and the process by which the drawee bank acquires the instrument is not a negotiation, it is a mere surrender for payment (a 'presentment')." (Whaley, nd, p.

36) Whaley (nd) emphasizes the importance of establishing whether or not "someone qualifies as a holder in due course" and that measurement of this is established "at the moment he or she gave value for the instrument" and this is based on the assumption that a valid negotiation has taken place "so as to create holder status." (Whaley, nd, p.

36) Stated by Whaley (nd) is the second consideration of 'value' and specifically emphasized is the important of establishing whether or not "someone qualifies as a holder in due course" through measurement "at the moment he or she gave value for the instruction" and this is based on the assumption that a valid negotiation has taken place and thereby created a holder status. (p. 36) Incidents occurring following value being given is reported by Whaley (nd) to not result in the destruction of "holder in due course status once achieved." (p.

36) Value is reported to involve "first…the gift of an instrument" although this does not ever create holder in due status" because for example if an unexecuted promise is all that is given then holder in due course status is not created even though in common law this would be sufficient consideration. (Whaley, nd, p. 37) III. Is 'Any Kind' a Holder-In-Due-Course? Whaley (nd) states that utilization of the terminology of the Uniform Commercial Code when applied to 'Any Kind' v.

Talcott, results in Talcott being the check's 'maker or drawer' and the person who actually placed their signature on the draft "as a person ordering payment. §3-103(a)(3)." (p. 45) Though the check being sent by Federal Express to Guarino, Talcott is held to have issued the check to him, according to §3-105(a) which applies the definition to 'issue' as being "the first delivery of an instrument by the maker or drawer…for the purpose of giving rights on the instrument to any person." (Whaley, nd, p.

45) The check was endorsed by Guarino and Any Kind cashed the check. Endorsement is defined in §3-204(a). The funds were made immediately available to Guarino minus the fee charged. A customer's right to stop payment is defined in §4-403 and the check, upon Talcott stopping the payment, was then returned to Any Kind.

At the time that the check was negotiated with Any Kind, the company become the check's holder and thereby was "a person entitled to enforce the instrument." (§1-201(20), 3-301 cited in Whaley, nd, p. 48) Whaley (nd) states that the obligation of Talcott "was the pay the draft to a person entitled to enforce the draft" and to do so "according to the terms at the time it was issued…" (§3-414(b) cited in Whaley, nd, p.

48) The question addressed in this study is if the trial court erred in its finding that the company, Any Kind was in fact not a holder in due course of the $10,000.00 check upon the basis of the findings of fact established at the time of the trial in this case. It is important to give consideration to the fact that the company, Any Kind "bore the burden of proof." (Whaley, nd, p.

48) According to Whaley (nd) that question "turns on whether Any Kind acted in good faith within the meaning of §3-302(a).