Cengage Advantage Books: Fundamentals of Business Law 9th Edition by Roger LeRoy Miller

Exercise 2

Triffin v. Liccardi Ford, Inc.
Superior Court of New Jersey, Appellate Division, 417 N.J.Super. 453, 10 A.3d 227 (2011).
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FACTS Liccardi Ford, Inc., issued a postdated check that was made payable to one of Liccardi's employees, Charles Stallone, Jr. The company did not give the check to Stallone, however, because he was suspected of embezzlement. The check disappeared from the company offices. When the disappearance was discovered, Liccardi immediately asked its bank to stop payment on the check. Meanwhile, JCNB Check Cashing, Inc., cashed the check for Stallone before the issue date on the face of the check and then deposited the check in its bank account. Liccardi's bank refused to honor the check and returned it to JCNB. Eighteen months later, Robert Triffin bought the dishonored check from JCNB and filed a suit in a New Jersey state court against Liccardi to recover its amount, plus interest. The court granted Liccardi's motion to dismiss the complaint. Triffin appealed.
ISSUE Did the check-cashing service that cashed a post-dated check take the instrument in good faith and thus qualify as an HDC?
DECISION No. A state intermediate appellate court affirmed the decision of the lower court to dismiss Triffin's complaint. The check-cashing service (JCNB) was not a holder in due course when it obtained the check from Stallone. Triffin did not take the check as an HDC, because he bought it with notice that it had been dishonored.
REASON If JCNB had qualified as an HDC, it could have assigned its interest to Triffin, who could have enforced JCNB's rights as its assignee. The check, however, was postdated. Under New Jersey state law, a check-cashing service is prohibited from "cashing or advancing any money on a postdated check." This statute defines the "reasonable commercial standards" that JCNB was required to follow. By cashing the check, JCNB failed to follow those standards and violated state law. Therefore, JCNB did not take the check in good faith and did not become an HDC. Triffin could not then, by taking an assignment of the check, assert the rights of an HDC. Instead, Triffin took the check subject to the issuer's defense that the check was stolen.
WHAT IF THE FACTS WERE DIFFERENT? Suppose that the postdated check at the heart of this case had instead been a money order. Further suppose that the serial number in the upper corner was not part of the sequence of numbers in the bottom corner. Would the outcome have been different? Explain.