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being sued by check cashing company for stop payment on a check

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Barbara Mack

Junior Member
What is the name of your state? Florida

I stopped payment on a check to a contractor who did not complete work as promised. He cashed check at CSS, a check cashing company. They are now suing me for value of the check.

Check cashing company says it provided full value for a service - that is, giving cash for the check - I am obligated to pay this amount. In other words, they state that CSS, as holder in due course, cannot be confused with payee (the contractor) of the check. That just because the contractor did not perform the service and give value for the check, does not mean that they, as holder in due course, did not provide their service of providing cash for the check. Therefore,as the writer of the check, I must pay the face amount, and they are initiating a civil suit.

Their argument: CSS is a holder for value because it paid cash for the check; it does not matter whether the payee gave value for the check.

Is this indeed correct?
 


Dandy Don

Senior Member
Yes. Why would you have given the contractor a check in the first place if you did not intend for him to get paid for the work he had already done?

Exactly what is wrong with this contractor's work and what type of payment agreement do you have with him according to contract?
 

Barbara Mack

Junior Member
I gave this contractor a check to pay for materials to install a cabinet. He kept on telling me that there was a delay in the shipment. As it turns out, he never ordered the materials.

At the same time, he came to my house and demolished an interior cabinet (a Saturday) and told me he would return on Monday (with the cabinet materials) to finish the work. He never returned. Since he did SOME work, I gave him $1050 that weekend, trusting he would return to finish the job. When he didn't, I stopped payment on Monday afternoon. I assumed he would cash the check at a bank, not a check cashing store. I went to his house and informed him I had stopped payment on the check. He did not tell me he had already cashed the check. If he had, I could have notified the check cashing store.

I certainly intended to pay him for the work, but he didn't finish the job. The contract called for first payment "upon completion of construction." He did half the job, and I believed him when he said he would return to finish the job. My mistake of course was 1) trusting him and 2) paying him the full amount for a job half done.
 

Rexlan

Senior Member
I gave this contractor a check to pay for materials to install a cabinet. He kept on telling me that there was a delay in the shipment. As it turns out, he never ordered the materials.

At the same time, he came to my house and demolished an interior cabinet (a Saturday) and told me he would return on Monday (with the cabinet materials) to finish the work. He never returned. Since he did SOME work, I gave him $1050 that weekend, trusting he would return to finish the job. When he didn't, I stopped payment on Monday afternoon. I assumed he would cash the check at a bank, not a check cashing store. I went to his house and informed him I had stopped payment on the check. He did not tell me he had already cashed the check. If he had, I could have notified the check cashing store.

I certainly intended to pay him for the work, but he didn't finish the job. The contract called for first payment "upon completion of construction." He did half the job, and I believed him when he said he would return to finish the job. My mistake of course was 1) trusting him and 2) paying him the full amount for a job half done.
ALWAYS .... a mistake to pay a "contractor" front money. $25 and you too can be a "contractor". Reputable folks don't need front money to be in business. Wall Mart doesn't ask you for a loan so they can have stock for you do they!

I don't think the CSS will prevail on the check issue. It isn't your responsibility to track your payee. They do have a legal issue about value; however, I think they will loose. They either got the check as a third party or with some form of an assumption. They are a third party to your relationship with your "contractor" and to the check .... dang I just love that "contractor big chest chit!"

If you SP'd it Monday then when did they get it? Before or after?

I would tell them you will be happy to meet them in court. They need to go after their client, not you. They won't spend much time on a $1K check that they probably got for $500 and should have known was marginal.

Additionally, if he presented the check to the CSS after you notified him of the SP then he may be in a bit of trouble!

Have fun with them. They are vultures anyway
 

badapple40

Senior Member
That is not right. If the CSS in fact qualfies as a holder in due couse, meaning that:

(1) the instrument when issued or negotiated to the holder does not bear such apparent evidence of forgery or alteration or is not otherwise so irregular or incomplete as to call into question its authenticity; and

(2) the holder took the instrument (i) for value, (ii) in good faith, (iii) without notice that the instrument is overdue or has been dishonored or that there is an uncured default with respect to payment of another instrument issued as part of the same series, (iv) without notice that the instrument contains an unauthorized signature or has been altered, (v) without notice of any claim to the instrument described in Section 3-306 (of the UCC), and (vi) without notice that any party has a defense or claim in recoupment described in Section 3-305(a) (of the UCC).

Basically, because the company gave value to this guy, for value, in good faith (you can try and question the good faith -- maybe this guy has a habit of giving the CSS checks that default -- that'd be grounds to challenge good faith), without notice of dishonor, you are liable to them for the amount on the check.

The only defenses to payment of a holder in due course are:

a defense of the obligor based on (i) infancy of the obligor to the extent it is a defense to a simple contract (you are not an infant, so this does not apply), (ii) duress, lack of legal capacity, or illegality of the transaction which, under other law, nullifies the obligation of the obligor (you did not sign the check at gun point, you are not retarded, and the contract wasn't to purchase drugs, so this does not apply), (iii) fraud that induced the obligor to sign the instrument with neither knowledge nor reasonable opportunity to learn of its character or its essential terms (you knew you were signing a check, it isn't as if you thought you were signing a petition with someone playing the carbon copy game with a negotiable instrument underneath, so this does not apply), or (iv) discharge of the obligor in insolvency proceedings (you didn't file bankruptcy, so this does not apply)

This does not mean that are without recourse: go sue the contractor.
 

You Are Guilty

Senior Member
This does not mean that are without recourse: go sue the contractor.
Does small claims recognize impleaders?

Anyway, while I personally think that CSS qualifies as a HDC, there may be some mitigation via UCC 3-303(2)(d) if the contractor failed to perform as agreed. Worth a shot at this point, as I don't see much else by way of potential defenses.
 

Rexlan

Senior Member
That is not right. If the CSS in fact qualfies as a holder in due couse, meaning that:

(1) the instrument when issued or negotiated to the holder does not bear such apparent evidence of forgery or alteration or is not otherwise so irregular or incomplete as to call into question its authenticity; and

(2) the holder took the instrument (i) for value, (ii) in good faith, (iii) without notice that the instrument is overdue or has been dishonored or that there is an uncured default with respect to payment of another instrument issued as part of the same series, (iv) without notice that the instrument contains an unauthorized signature or has been altered, (v) without notice of any claim to the instrument described in Section 3-306 (of the UCC), and (vi) without notice that any party has a defense or claim in recoupment described in Section 3-305(a) (of the UCC).

Basically, because the company gave value to this guy, for value, in good faith (you can try and question the good faith -- maybe this guy has a habit of giving the CSS checks that default -- that'd be grounds to challenge good faith), without notice of dishonor, you are liable to them for the amount on the check.

The only defenses to payment of a holder in due course are:

a defense of the obligor based on (i) infancy of the obligor to the extent it is a defense to a simple contract (you are not an infant, so this does not apply), (ii) duress, lack of legal capacity, or illegality of the transaction which, under other law, nullifies the obligation of the obligor (you did not sign the check at gun point, you are not retarded, and the contract wasn't to purchase drugs, so this does not apply), (iii) fraud that induced the obligor to sign the instrument with neither knowledge nor reasonable opportunity to learn of its character or its essential terms (you knew you were signing a check, it isn't as if you thought you were signing a petition with someone playing the carbon copy game with a negotiable instrument underneath, so this does not apply), or (iv) discharge of the obligor in insolvency proceedings (you didn't file bankruptcy, so this does not apply)

This does not mean that are without recourse: go sue the contractor.
Good post Badapple40:

This is very interesting and would be quite a scam. This would explain why these CSS types would be willing to take 3rd party checks I guess. Something about the law on this just does not seem equitable since it removes the payors' ability to protect themselves. I guess the moral then is beware!

Cheers
 

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