Business Law and the Regulation of Business 11th Edition by Richard Mann, Barry Roberts

Exercise 11

Attorney Eliot Disner tendered a check for $100,100 to Sidney and Lynne Cohen. In drawing the check, Disner was serving as an intermediary for his clients, Irvin and Dorothea Kipnes, who owed the money to the Cohens as part of a settlement agreement. The Kipneses had given Disner checks totaling $100,100, which he had deposited into his professional corporation's client trust account. After confirming with the Kipneses' bank that their account held sufficient funds, Disner wrote and delivered a trust account check for $100,100 to the Cohens' attorney, with this note: ''Please find $100,100 in settlement (partial) of Cohen v. Kipnes, et al[.] Per our agreement, delivery to you constitutes timely delivery to your clients.'' Also typed on the check was a notation identifying the underlying lawsuit. Without Disner's knowledge, the Kipneses stopped payment on their checks, leaving insufficient funds in the trust account to cover the check to the Cohens. The trust account check therefore was not paid due to insufficient funds; the Kipneses declared bankruptcy; and the Cohens served Disner and his professional corporation with demand for payment. The Cohens sought the amount written on the check plus a $500 statutory penalty. Explain who should prevail and why.