Business Law 11th Edition by Kenneth Clarkson,Roger LeRoy Miller,Gaylord Jentz,Frank Cross

Exercise 7

Hyatt Corp. v. Palm Beach National Bank
District Court of Appeal of Florida, Third District, 2003. 840 So.2d 300.
LEVY, Judge.
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* * * Skyscraper Building Maintenance, LLC [limited liability company-see Chapter 37], had a contract with Hyatt [Corporation] to perform maintenance work for various Hyatt hotels in South Florida. Skyscraper entered into [an] agreement with J D [Financial Corporation]. As part of the * * * agreement, J D requested Hyatt to make checks payable for maintenance services to Skyscraper and J D. Of the many checks issued by Hyatt to Skyscraper and J D, two were negotiated by [Palm Beach National Bank] but endorsed only by Skyscraper. They were made payable as follows:
1. Check No. 1-78671 for $22,531 payable to:
J D Financial Corp. Skyscraper Building Maint[enance] * * *
2. Check No. 1-75723 for $21,107 payable to:
Skyscraper Building Maint[enance] J D Financial Corp.* * *
Only one of the payees, Skyscraper, endorsed these two checks. The bank cashed the checks. According to J D, it did not receive the benefit of these two payments.
J D filed a complaint [in a Florida state court] against * * * Hyatt and the bank [and others]. J D sought damages * * * against Hyatt and the bank for negotiation of the two checks.
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The bank argued that the checks were payable to J D and Skyscraper alternatively, and thus the bank could properly negotiate the checks based upon the [indorsement] of either of the two payees.* * *
Hyatt's position was that the checks were not ambiguous, were payable jointly and not alternatively, and thus * * * the checks could only be negotiated by [indorsement] of both of the payees. J D similarly argued that the checks were payable jointly. The trial court granted Summary Judgment in favor of the bank * * *. Hyatt appealed. J D filed a cross-appeal.
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In 1990, Article 3 of the UCC was revised, and the language of UCC Section 3-116 was added to UCC Section 3-110 and became subsection (d). Revised UCC Section 3-110(d), which added language to follow former 3-116(a) and (b), states, "If an instrument payable to two or more persons is ambiguous as to whether it is payable to the persons alternatively, the instrument is payable to the persons alternatively." The net effect of the amendment was to change the presumption. What was unambiguous before is now ambiguous.
Turning to our jurisdiction, Florida has adopted the statutory revision to UCC 3-110, with its enactment of Section 673.1101, Florida Statutes. Section 673.1101(4) now provides the following:
(4) If an instrument is payable to two or more persons alternatively, it is payable to any of them and may be negotiated, discharged, or enforced by any or all of them in possession of the instrument. If an instrument is payable to two or more persons not alternatively, it is payable to all of them and may be negotiated, discharged, or enforced only by all of them. If an instrument payable to two or more persons is ambiguous as to whether it is payable to the persons alternatively, the instrument is payable to the persons alternatively.
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* * * [T]he predecessor statute provided that if an ambiguity existed as to whether multiple payees were intended as joint or alternative payees, they were deemed joint payees, while the amended statute applicable to this case reverses the prior rule.
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We conclude that based on the 1990 amendment to the Uniform Commercial Code, when a check lists two payees without the use of the word "and" or "or," the nature of the payee is ambiguous as to whether they are alternative payees or joint payees. Therefore, the UCC amendment prevails and they are to be treated as alternative payees, thus requiring only one of the payees' signatures. Consequently, the bank could negotiate the check when it was [indorsed] by only one of the two payees, thereby escaping liability. [Emphasis added.]
* * * As the parties correctly point out, this is a case of first impression in Florida appellate courts.* * *
* * * [W]e hold that the trial court was correct in granting the Summary Final Judgment. Affirmed.
1. Other than negotiation, what is the significance of the UCC provision at issue in this case
2. If an instrument made payable to two persons without specifying and or or (a stackedpayee designation) was considered unambiguous and payable jointly before the amendment of this provision of the UCC, should that same payee designation be considered unambiguous after the amendment Explain.