Question

Sid's LLC has purchased fish from Fred's Fisheries. Sid wrote a check for $22,000 to Fred's. A thief broke into Fred's office and stole the cash on hand as well as the unindorsed check from Sid's. The thief took the check to the Corner Check Cashing Company (CCCC) and received $22,000 less the cashing fee of $2000. Fred, notified Sid, who then notified First Commerce Bank, the drawee of the check, of the theft. CCCC presented the check for payment, and First Commerce refuses to pay. CCCC says it is a holder in due course. Using the IRAC format determine whether CCCC is entitled to the money.

Answer 1

Issue

Is CCCC eligible to get the payment for an unendorsed instrument?

Rule

As per the Negotiable instrument, any kind of instrument will be paid only if it is completed endorsed so for the endorsement of the check, it was important that the name of the person has to be written on the instrument.

Analysis

The check was un-endorsed, and it was wrongfully cashed by the thief. Sid was notified by Fred, before he notifies the First Commerce Bank, the drawee of the check. Unendorsed checks should not be cashed in by the company.

Conclusion

As the negotiable instrument has to be endorsed to make it payable to the person, the Corner Check Cashing Company (CCCC) did not verify the endorsement of the right person, thus Corner Check Cashing Company (CCCC) is not entittled to get the money for a as it was not endorsed by the drawee.