Any Kind Checks Cashed v. Talcott: Holder in Due Course

Introduction and Case Background

This paper examines the 1990 Rivera case, which involved Rivera, a financial advisor, and his cohort Salvatore Guarino selling a $75,000 investment to John G. Talcott, Jr., a 93-year-old Massachusetts resident. Talcott sent a check for $10,000, payable to Guarino, to cover travel expenses related to acquiring a return on the original $75,000 investment. When Rivera informed Talcott that only $5,700 was needed for travel expenses, Talcott stopped payment on the $10,000 check. Guarino, however, cashed the check at a company that charged him five percent for the service; that company then deposited the check in its own bank account.

Talcott subsequently sent a second check to Guarino for $5,700, which Guarino took to the same company and cashed. Rivera then called Talcott to warn him about Guarino, describing him as dishonest, at which point Talcott stopped payment on the second check as well. Talcott's daughter contacted the check-cashing company and informed it of the stop payment on the $5,700 check. The company — Any Kind Checks Cashed, Inc. — filed a lawsuit against both Talcott and Guarino, claiming that it was the holder in due course of both instruments.

Decision of the Trial Court

The trial court found in favor of Any Kind only with respect to the second check, in the amount of $5,700.00. The court found that the "circumstances surrounding the cashing of the $10,000.00 check were suspicious" and should have put the company on notice of a potential problem, meaning that the company was "not a holder in due course of that check" (Whaley, n.d., p. 43). The trial court specifically reasoned that the "events and circumstances were sufficient" to put the company "on notice of potential defense" (Negotiable Instruments, n.d.).

More precisely, the court held that "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, n.d.). 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, n.d.). This ruling was affirmed in Any Kind Checks Cashed, Inc. v. Talcott, 830 So. 2d 160 (Fla. App. 2002).

Conclusion

Following research and study of both statute and case law, it is the opinion of this writer that the company, Any Kind, and its employees should have verified that the check in the large amount of $10,000.00 was a valid and negotiable instrument by contacting the issuer of the check. This amount is large enough to warrant verification procedures. Failure to perform such procedures — whether viewed from the objective or subjective standard of what a reasonably prudent person acting in the company's capacity would have done — would appear to warrant verification before disbursing $10,000.00 in exchange for only a $500.00 fee.

It is therefore the opinion of this writer that the trial court's findings in this case were correct under both statute and negotiable instrument case law. Any Kind did not meet the good faith standard required to claim holder in due course status on the $10,000.00 check, and the trial court's decision to deny that status was well-founded.