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  1. #1
    BOAT275 is offline Junior Member
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    Stopping Payment On An Employees Check

    What is the name of your state? OH

    I had an employee that had stolen some tools and pawned them, he admitted to it and gave me the pawn ticket and his drivers license, I wrote him a check for the hours he had worked, minus the amount of the pawn, in the agreement that he would meet me in the morning and we would go to the pawn shop and retrieve the items that were stolen. The next morning he did not show up, so I went to the pawn shop to get the tools, well not all of them were there, so I put a stop payment on the check. In the mean time he had taken the check and cashed it at a bar, I didn't think he would be able to cash a check with no license, he got his money and now the bar that cashed the check is taking me to small claims court because they are out the money. Am I responsible for the debt to the bar or is the guy that cashed the check?
  2. #2
    pattytx is offline Senior Member
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    You, theoretically, are responsible to the establishment that cashed the check under UCC Regulation something-or-other (I don't remember the exact section). This is assuming that whoever cashed the check negotiated it in "good faith", having no way to know that a stop payment had been placed. Regardless of the fact that Joe employee may not have been able to show ID to cash the check; even if Joe had the proper ID, the establishment would have no reason to know that a stop payment was in effect; and the cashers of such checks are not required to verify the validity of the check with the bank before cashing it.

    I'd bet you dollars to donuts the bar is probably going to win. It doesn't even sound like Joe employee even knew you had placed a stop payment on the check. If he didn't, you have no recourse against Joe either; he also negotiated the check in good faith.

    BTW, you are lucky you are in Ohio, which does not have a legal prohibition against deducting losses attributable to the employee from his pay; in many states this would be a violation of labor law unless the employee had been adjudicated as guilty by a court of law (even if he admitted it to you).

    Sorry. I know this may seem unfair to you, but that's real life in the payroll world.
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    You have not won the law suit lottery; in fact, you haven't even won the law suit scratch-off.
  3. #3
    Veronica1228 is offline Senior Member
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    Patty, you're probably thinking of UCC reg 3-302 Holder in Due Course. However, from a banking standpoint, the original issuer of the check has a right to place stop payments on their own checks. The bar owner accepted the risk of doing business when they accepted the check. They should go after the employee for these funds.

    3-302. HOLDER IN DUE COURSE.
    (a) Subject to subsection (c) and Section 3-106(d), "holder in due course" means the holder of an instrument if:
    (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, and (vi) without notice that any party has a defense or claim in recoupment described in Section 3-305(a).
    (b) Notice of discharge of a party, other than discharge in an insolvency proceeding, is not notice of a defense under subsection (a), but discharge is effective against a person who became a holder in due course with notice of the discharge. Public filing or recording of a document does not of itself constitute notice of a defense, claim in recoupment, or claim to the instrument.
    (c) Except to the extent a transferor or predecessor in interest has rights as a holder in due course, a person does not acquire rights of a holder in due course of an instrument taken (i) by legal process or by purchase in an execution, bankruptcy, or creditor's sale or similar proceeding, (ii) by purchase as part of a bulk transaction not in ordinary course of business of the transferor, or (iii) as the successor in interest to an estate or other organization.
    (d) If, under Section 3-303(a)(1), the promise of performance that is the consideration for an instrument has been partially performed, the holder may assert rights as a holder in due course of the instrument only to the fraction of the amount payable under the instrument equal to the value of the partial performance divided by the value of the promised performance.
    (e) If (i) the person entitled to enforce an instrument has only a security interest in the instrument and (ii) the person obliged to pay the instrument has a defense, claim in recoupment, or claim to the instrument that may be asserted against the person who granted the security interest, the person entitled to enforce the instrument may assert rights as a holder in due course only to an amount payable under the instrument which, at the time of enforcement of the instrument, does not exceed the amount of the unpaid obligation secured.
    (f) To be effective, notice must be received at a time and in a manner that gives a reasonable opportunity to act on it.
    (g) This section is subject to any law limiting status as a holder in due course in particular classes of transactions.
  4. #4
    Beth3 is offline Senior Member
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    You let this guy scam you three times: first when he stole the tools and pawned them, next when he said he'd meet you at the pawn shop in the morning, and third when he cashed the check pronto before you could discover not all the items were there and issue a stop payment.

    How about now, finally, contacting the police and reporting the theft?

    Lesson to be learned: thieves can't be trusted.
    A person, who is nice to you, but rude to a waiter, is not a nice person. (This is very important. Pay attention. It never fails.)
  5. #5
    pattytx is offline Senior Member
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    Veronica, thanks for the cite; I couldn't find it in my old records.

    I guess my point was that the employer gave the check to the employee and appeared,at least, to not notify the employee that a stop payment had been placed. In that case, I don't see logically how the employee could be held accountable for negotiating a check that he thought was good.

    Now, about the other stuff, however, I'd file the theft report for the tools with the police, too. The guy's a real con man and he's screwed up royally, but it doesn't appear that cashing the original check was one of them. He's probably out of the jurisdiction by now
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  6. #6
    BOAT275 is offline Junior Member
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    I have file a police report, and the guy is still in town and the bar is still cashing checks for him, not from me of course.But, the bar is cashing other employees checks.
  7. #7
    Beth3 is offline Senior Member
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    I have file a police report, Good. Let the criminal justice system deal with him.

    and the guy is still in town He's not too bright, is he?

    and the bar is still cashing checks for him Then I expect they'll be getting more bad checks down the road. You certainly aren't the first person he stole from and scammed nor, I suspect, the last.

    But, the bar is cashing other employees checks. Their call to make. It's a good way for them to make sure that a goodly chuck of those paychecks are spent in their establishment.

    By the by, if you are contacted for a reference on this guy down the road, you are free to tell any prospective employers that you fired him for stealing - and the rest of the story as well. You will save some other unsuspecting company from hiring this guy and going through the same thing you did.
    A person, who is nice to you, but rude to a waiter, is not a nice person. (This is very important. Pay attention. It never fails.)
  8. #8
    Veronica1228 is offline Senior Member
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    Quote Originally Posted by BOAT275
    I have file a police report, and the guy is still in town and the bar is still cashing checks for him, not from me of course.But, the bar is cashing other employees checks.
    It's my opinion that the bar owner is accepting a lot of risk by cashing these checks. I still contend that he needs to go after your employee to get the funds back. However, if he is cashing other employee's checks do you have some kind of agreement, understanding, or business dealings with him? If so, I would change my position and state that Holder in Due Course WOULD apply.
  9. #9
    BOAT275 is offline Junior Member
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    No we have no agreements with the bar. But logically, shouldn't they go after the employee, then the employee come after me? And, he had told me that he wouldn't cash the check until after I got my tools back.
  10. #10
    Veronica1228 is offline Senior Member
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    Quote Originally Posted by BOAT275
    No we have no agreements with the bar. But logically, shouldn't they go after the employee, then the employee come after me? And, he had told me that he wouldn't cash the check until after I got my tools back.
    Wait. Hold the phone. You discussed this employee/payroll check with the bar owner prior to placing the stop payment? Am I understanding this correctly?
  11. #11
    BOAT275 is offline Junior Member
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    No i had no conversation with the bar owner prior to putting a stop payment on the check. I didn't know he, the employee, had cashed the check until I looked at my account online on Monday ( the stop payment was put on Saturday ), then on Tuesday it was credited back to my account.The employee told me he wouldn't cash the check until I got my tools back.
  12. #12
    Veronica1228 is offline Senior Member
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    Okay. When you said "he" I thought you were referring to the bar owner. Generic pronouns can trick you that way.

    In that case, I revert back to my original answer which is that the bar owner needs to settle this with the employee.
  13. #13
    BOAT275 is offline Junior Member
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    That is what I figured. Not to mention that they have cashed forged checks, I forgot to sign an employees check a couple of months ago, and they told that employee to sign my name on the check and watched him do it, then cashed the check.
  14. #14
    Veronica1228 is offline Senior Member
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    Quote Originally Posted by BOAT275
    That is what I figured. Not to mention that they have cashed forged checks, I forgot to sign an employees check a couple of months ago, and they told that employee to sign my name on the check and watched him do it, then cashed the check.
    Yes, that is very shady. You do know that you can get your money back on that one too if you contact your bank about the forgery. I am not saying that you should, just pointing out that you COULD.
    Last edited by Veronica1228; 05-11-2005 at 10:49 AM.
  15. #15
    BOAT275 is offline Junior Member
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    Thank you very much

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