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Triffin v. Triangle Transport, Inc.

A-3840-06T3 (N.J. Super. App. Div. 2008) (Unpublished)

CHECKS — Just because a check turns out to be a flagrant forgery does not mean that someone who has cashed the check is not a holder in due course if, when the check was negotiated, it did not bear any apparent evidence of forgery or alteration or is not otherwise so irregular or incomplete as to call into question its authenticity.

A purchaser of dishonored checks from check cashing companies sued the maker of a check for payment. The check appeared to be a paycheck but was made out to an individual who was not actually an employee of the purported employer. The purported employer was the maker of the check and it claimed that the check was counterfeit. It never denied, however, that the signatory was authorized to sign its checks.

At trial, the purported employer testified that all of its checks were prepared by a payroll service and presented a letter from the payroll service that the check was a forgery because it “was not printed on [the payroll service’s] ‘secure check stock;’ the check number was not ‘produced for any client;’ and [the payroll service] was never requested to issue a check to [the named payee].” The lower court, based on the payroll service’s certification, dismissed the collection lawsuit.

The check purchaser appealed. The Appellate Division felt it had no reason to determine whether the letter from the payroll service was admissible into evidence because it reversed the lower court’s ruling as a matter of law. The Court pointed out that under Article 3 of the Uniform Commercial Code (UCC), “a person is a holder in due course if:” when the check is negotiated, it does not bear any “apparent evidence of forgery or alteration or is not otherwise so irregular or incomplete as to call into question its authenticity; and ... the holder took the instrument for value, in good faith, without notice that the instrument [was] overdue or [had] been dishonored… .” The Court, summarized this to mean that “in order to defeat the rights of a holder in due course, it must be apparent on the face of the instrument that it is fraudulent.” The same rule applies to the transferee of a holder in due course. So, according to the Court, the question was whether the check cashing company had any reason to believe that the check was irregular at the time the check was cashed. The Court found nothing in the record about “the appearance of the check to put [the check cashing company] on notice that the check was not valid.” The check was not purported to be issued by the payroll service, but was one drawn on the employer’s account at the employer’s bank. “[T]here was [no] proof that a reasonably prudent cashier would be familiar with [the payroll service’s] payroll records.” There being no denial that the signatures were authentic, forgery was not an issue. Further, “a signature is presumed to be authentic, absent evidence of forgery or lack of authorization.” As a result, the lower court’s ruling was reversed and the matter was remanded to the lower court “for the entry of judgment in favor of” the purchaser of the dishonored check.

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