Quiz 30: Liability of the Parties Under Negotiable Instruments

Business

Refer to the case First of America Bank Northeast Illinois v Bocian Case Issue The issue is whether the bank (plaintiff) that deposited a check paid by defendant is a holder in due course of the check. Trial court granted summary judgment in favor of the bank, defendant appealed. Relevant Terms, Laws, and Cases Holder in due course - a holder in due course is a holder that has more legal protections for claiming a payment on an instrument. The holder in due course that is received a check, such as a bank, can claim on payment for the check even if the initial payee and payer are in conflict. UCC 3-302 - defines the provision to be a holder in due course including, taking an instrument by a) giving value, b) good faith, c) no knowledge of that the instrument is overdue, dishonored, or other claims on the check. Opinion The higher court affirmed the decision. The bank is a holder in due course. The court argued that the bank was a holder in due course because it given value, by allowing the payee to draw money from the deposit, there was no dispute of that the bank didn't take the check in good faith, and the bank did not have knowledge of the disputes when they took the check. Hence, the bank met the provisions for holder in due course and may state claim on the check free from defendant's contract claims.

Refer to the case Money Mart Check Cashing Center, Inc v Epicycle Corp Case Issue The issue is whether the check cashing company (plaintiff) that cashed a check paid from defendant is a holder in due course of the check. Trial court granted summary judgment in favor of the company, defendant appealed. State Superior court reversed the decision, arguing that the company did not verify the validity of the check (the check was issued a stop payment); the company appealed. Relevant Terms, Laws, and Cases Holder in due course - a holder in due course is a holder that has more legal protections for claiming a payment on an instrument. The holder in due course that is received a check, such as a bank, can claim on payment for the check even if the initial payee and payer are in conflict. UCC 3-302 - defines the provision to be a holder in due course including, taking an instrument by a) giving value, b) good faith, c) no notice of that the instrument is overdue, dishonored, or other claims on the check. Opinion The State Supreme Court reversed the decision. The company is a holder in due course. The company gave value for the check by giving cash for it; the first condition for holder in due course is met. Hence, the court looked at whether the company took the check in good faith and without knowledge of disputes on the check. The State Supreme court argued that failure to investigate the nature of a check doesn't mean a lack of good faith in taking it. Furthermore, the court believed the company had no notice of the disputes on the check because there was nothing suspicious about it, and the company did not have a duty to verify. Hence, the judgment is granted to the company.

Refer to the case Leopold v Halleck Case Issue The issue is whether plaintiff (creditor) has to prove that he is a holder and had taken a promissory note for consideration from defendant (debt). Trial court held for defendant, plaintiff appealed. Relevant Terms, Laws, and Cases Holder - is a person or business that has an instrument and may state claim on the amount due on it. Opinion Higher court reversed the decision. The plaintiff did not have to prove he was the holder and that the note was taken as consideration. The court argued that it was clear plaintiff was holder since the amount was to be paid to him and he was in possession of the note. Instead, they argued that it was only necessary to prove holder status if there are actual evidence contending it.

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