Quiz 29: Transfers of Negotiable Instruments and Warranties of Parties

Business

Case summary: Mr. CB separated from his wife Ms. C. he had an accident caused by Mr. W and was entitled to get $2, 164.46 for the damages to his car. The insurer of Mr. W entitled a draft addressing Ms. C's name in that draft at first place and Mr. CB's name at second place which entitled Ms. C to receive the damage amount. Over this Mr. CB appealed that he is entitled to receive another note stating his name but W and his insurer refused to this stating that they have mailed the draft and it was received thus they are no longer liable for another note to Mr. CB. The trial court favored Mr. CB and ordered that he is entitled to receive another draft. W and his insurer appealed. Conclusion: Mr. W and his insurer are about delivery of that draft because that draft was received and it was considered that the damage amount has been paid to Mr. CB. But W and his insurer failed to clearly express and write the name of the receiver of that draft instead they mentioned Ms. C's name (CB's wife) in that draft at first place and Mr. CB's name at second place which entitled Ms. C to receive the damage amount. Thus this shows that Mr. CB is entitled to receive another draft from W and his insurer for the fact that he has separated from his wife. Thus W and insurer are at fault and they should be held for making this mistake and issuing another draft to Mr. CB.

Multiple Payees and Indorsement: A check that is made payable to " A B C " is a joint payee check. This means it can only be negotiated with A , B , C present. The " " sign means that all three needs to endorse it or be present in order to cash the check. On the other hand checks that are made payable to " A or B or C " removes the joint requirement. The "or" means that either A, B, or C can cash or endorse it; they don't all have to be present.

Refer to the case Coregis Insurance Co. v Fleet National Bank Case Issue: The issue is whether the bank is liable for cashing a check which includes an endorsement from one of the actual payees and two forged endorsement by unknown people and whether the check is a joint payee check or alternative payee check. Trial court held for the plaintiff the bank is liable, citing that the check is joint payee check and needs proper (non-forged) endorsements from all named payee. Bank appealed the decision. Relevant Terms, Laws, and Cases: Joint Payee - can only be negotiated when all payees listed are present e.g. a check that list payable to the order of "X Y", both X Y must be present. Alternative payee - can only be negotiated when either payees listed are present e.g. a check that list payable to the order of "X or Y", either X or Y may be present. UCC 3-205(d) - states that an anomalous endorsement (endorsement made by a non-holder of the instrument, e.g. random person on the street who picks up a check not payable to him) does not affect the negotiation of the check. UCC 3-110(d) - states that if an instrument is ambiguous regarding joint or alternative payee then it is payable to alternative payee. Opinion Higher court reversed the decision. The court cited section UCC 3-110(d) the instrument is an alternative payee instrument there is one valid endorser hence it can be negotiated. Furthermore, under UCC 3-205 the anomalous endorsement (forgeries by unknown) did not make the check non-payable. Hence, bank is not liable for paying a properly endorsed check.

Related Quizzes