Cassandra Demery worked as a bookkeeper at Clinton George’s business, Freestyle, until Georg discovered that she has embezzled more than $200,000 and had failed to repay $240,000 in state and federal taxes owed by Freestyle. George fired Demery and said that if she did not repay the embezzled funds, he would notify the authorities. Demery went to work as a bookkeeper for Metro Fixyures, a company oned by her parents. Without authorization, she wrote a check to Freestyle for $189,000 out of Metro’s account and deposited it to Freestyle’s checking account. She told Georg that the check was a loan to her from her family to enable her to repay him. Georg used the funds to pay his back taxes.
Two years later, Metro discovered Demery theft and sued Georg and Freestyle for conversion because Demery had no authority to take the funds. The trial court held that Freestyle was a holder in due course and granted summary judgment. Metro appealed. The appeals court reversed, holding that because Demery had deposited the check directly into Freestyle’s account, Freestyle could not have been an HDC, as it never had actual possession of the check. Georg and Freestyle appealed.
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