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Triffin v. Cigna Insurance Company

297 N.J. Super. 199, 687 A.2d 1045 (App. Div. 1997)

UCC; DRAFTS — One who receives an assignment of rights in a draft from a holder in due course, even if he has knowledge of the dishonor of the draft, receives all of the rights of his transferor, including any right as a holder in due course.

An individual falsely claimed to have lost a draft from an insurance company and thereby fraudulently induced the company to issue a replacement to him. The insurance company stopped payment on the first draft, but not until the individual had negotiated it to a holder in due course. After the insurance company dishonored the draft, the holder assigned its interests in the draft to a purchaser in the business of acquiring dishonored drafts. The purchaser thereupon sued the maker for payment. The trial court granted the issuer’s motion for summary judgment dismissing the claim.

The Appellate Division reversed and directed entry of judgment for the plaintiff. The Court analyzed both N.J.S. 12A:3-20(1), the statute in effect at the time of the transfer, and its 1995 replacement, N.J.S. 12A:3-203b. It determined that the result was the same under either statute and that plaintiff had brought his suit in a timely manner under either statute. The transfer by a holder in due course to a third party, even one with notice of the dishonor, transfers all rights of the holder in due course to the successor in interest.


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