CASE STUDY: Any Kind of Check Won't Do
FACTS: In the 1990s, D. J. Rivera, a "financial advisor" and Salvatore Guarino, a cohort of Rivera, sold John G. Talcott, Jr., a 93-year-old Massachusetts resident, an investment of $75,000. The investment produced no returns. On January 10, 2000, Rivera telephoned Talcott and talked him into sending him a check for $10,000 made out to Guarino, which was to be used for travel expenses to obtain a return on the original $75,000 investment. Rivera received the check on January 11. Talcott spoke to Rivera on the morning of January 11. Rivera indicated that $10,000 was more than what was needed for travel. He said that $5,700 would meet the travel costs. Talcott called his bank and stopped payment on the $10,000 check. Guarino went to Any Kind's Stuart, Florida, office (a place where he had established checkcashing privileges) on January 11 and presented the $10,000 check to Nancy Michael, a supervisor. Guarino showed Michael his driver's license and the Federal Express envelope from Talcott in which he had received the check. Based on her experience, Michael believed the check was good; the Federal Express envelope was "very crucial" to her decision because it indicated that the maker of the check had sent it to the payee trying to cash the check. After deducting the 5 percent check cashing fee, Michael cashed the check and gave Guarino $9,500. The next day she deposited the check in the company's bank. On January 15, 2000, Talcott sent a check for $5,700. On January 17, 2000, Guarino went into the Stuart Any Kind store and presented the $5,700 check to the teller, Joanne Kochakian. Kochakian noticed that Michael had previously approved the $10,000 check. She called Michael and told her about Guarino's check. Michael instructed the cashier not to cash the check until she had contacted the maker, Talcott, to obtain approval. Talcott approved cashing the $5,700 check. There was no discussion of the $10,000 check. Any Kind cashed the second check for Guarino, from which it deducted a 3 percent fee. On January 19, Rivera called Talcott to warn him that Guarino was a cheat and a thief. Talcott immediately called his bank and stopped payment on the $5,700 check. Talcott's daughter called Any Kind and told it of the stop payment on the $5,700 check. Any Kind filed suit against Guarino and Talcott, claiming that it was a holder in due course. The trial court entered judgment for Any Kind for only the $5,700 check. The court found that the circumstances surrounding the cashing of the $10,000 check were suspicious and should have put Any Kind on notice of a problem and that Any Kind was not a holder in due course of that check. DECISION: The events and circumstances were sufficient to put Any Kind on notice of potential defenses. The circumstances of a person describing himself as a broker, receiving funds in the amount of $10,000, and negotiating the check for those funds at a $500 discount were sufficient to put Any Kind on inquiry notice that some confirmation or explanation should be obtained. Any Kind should have approached the $10,000 check with additional caution, beyond the FedEx envelope, and should have verified it with the maker if it wanted to preserve its holder-indue-course status. Affirmed.
Question: Write a 2 pages paper on whether or not you agree with the Court's decision. Is it fair? In your opinion, is Any Kind a HDC?