By Richard Weatherington
When a check casher does everything by the book, the chances of recovery on a dishonored check as a holder in due course can increase dramatically, but that recovery may not include attorney’s fees, as a Texas check casher recently found out.
In October 2006, a Texas plumbing company issued a check for $288 to a man whose first name was Robert as an advance for work he was supposed to perform.
Several hours later, Robert told the plumber that he could not do the work and he would destroy the check. The owner of the plumbing company told him that he was going to place a stop payment order on the check.
However, Robert endorsed and cashed the check at a local check cashing store. The check casher presented the check to the bank for payment, but it was returned marked “payment stopped.”
The check casher notified the plumbing company by certified mail that the check had been returned, and that it expected payment of the check and a $20 returned check fee. The letter was returned, marked “returned to sender, not deliverable as addressed, unable to forward.”
When the check and returned check fee were not paid, the check casher sued the plumbing company for the amount owed on the check plus interest, the returned check fee and reasonable attorney’s fees. The suit was filed in the justice court, and a summary judgment was granted in the check casher’s favor.
The plumbing company appealed to the county court, and the check casher again moved for summary judgment.
The court granted the motion and awarded the check casher the sum of $288, as well as $20 for the returned check fee, costs from the justice court in the amount of $92, pre judgment interest in the amount of $26.72, and the sum of $1,200 as reasonable and necessary attorney’s fees.
The check casher also was conditionally awarded additional attorney’s fees in the event of an appeal.
Goes to Appeals Court
The plumbing company appealed the judgment to the Texas Court of Appeals, claiming that the trial court made two errors. The plumber argued that the court should not have granted a summary judgment and should not have awarded the check casher attorney’s fees.
In the check casher’s motion for summary judgment, it claimed it was entitled to judgment as a matter of law because it was the holder of the plumber’s check, which it took in good faith, without knowledge of any claims or defenses to the instrument, and it paid value for the check.
The check casher further claimed that Robert endorsed and presented the check. In support of its motion, the check casher submitted the affidavits of two of its employees, a copy of the check endorsed by Robert, and a copy of the letter it had sent to the plumbing company regarding the dishonored check.
In the first affidavit, the check casher’s clerk stated that on Oct. 30, 2006, at 4:18 p.m., Robert presented a check that was made payable to him.
Before cashing the check, she asked Robert for identification. She examined his photo and signature on his current driver’s license and compared the photo on the license with the person before her as well as the signature on the license with the back of the check.
Satisfied that the person cashing the check was Robert, the clerk cashed the check.
She said there was nothing unusual about the transaction to make her suspicious about the check, and there was no indication the check would be dishonored.
Notice Sent, Returned
In the second affidavit, the manager of the check casher’s collections department stated that the check was returned unpaid by the plumbing company’s bank. The check casher notified the plumber that the check had been returned and that payment was expected.
The notice was sent to the plumbing company on Nov. 9, 2006, to the address listed on the check. Attached to the affidavit was a copy of the notice along with the envelope that was returned by the post office as “not deliverable as addressed.”
In its response, the plumber company alleged, but with no supporting summary judgment evidence, that Robert “did not present, endorse in the presence of, nor deliver the check to the check casher.”
It further claimed, but again with no supporting summary judgment evidence, that the check casher cashed the check without acquiring proper identification or verification by any form of photo identification.
In an affidavit, the plumber acknowledged that he had issued a check to Robert on Oct. 30, 2006.
Several hours after Robert received the check, he told the plumber that he would not be able to work because he was being arrested on a warrant. The plumber then placed a stop payment on the check to ensure no one else would have access to it.
According to the plumber, Robert remained in custody and was, therefore, unable to cash any check that had been given to him.
The plumber claimed that the check casher did not notify him in person, by telephone or by mail that the check had not been destroyed. The company said that it became aware of the problem with the check only when it was served with court papers.
Finally, because of vandalism problems, the owner of the plumbing company said he did not have a mailbox at the address listed on the check, and because the United States Postal Service did not recognize the physical address as a deliverable address because he did not have a mailbox, the postal service advised the plumber to get a Post Office Box.
The Appeals Court then looked at four main issues.
The plumber claimed that fact issues existed concerning whether Robert was the individual who cashed the check.
The Appeals Court noted that the authenticity of each signature on a check is “admitted unless it is specifically denied in the pleadings.”
Texas Rules require a pleading that denies the genuineness of an endorsement to be sworn or verified by affidavit. In this case, said the court, the plumber did not specifically deny the genuineness of Robert’s signature on the check. Therefore, the genuineness of his endorsement was considered admitted.
The plumbing company next asserted, without further elaboration, that it had valid affirmative defenses of fraud, contributory negligence and assumption of the risk.
However, noted the Appeals Court, the company did not raise those affirmative defenses in any of its answers. In addition, the company did not raise those affirmative defenses in its response to the check casher’s motion for summary judgment.
Therefore, said the Appeals Court, the plumber could not raise those defenses for the first time on appeal.
Next, the Appeals Court noted that in a single sentence, the plumber asserted that no notice was ever given about the check casher being a possible “holder in due course” before the suit was filed.
The plumbing company did not elaborate on its assertion or provide any authority for the proposition that a holder in due course must provide notice of its status as such to any party against which it sought to enforce a dishonored check.
At most, said the Appeals Court, the check casher was required only to provide notice of dishonor for the purpose of enforcing the plumber’s obligation, as the drawer, to pay the check.
The court noted that the plumber’s assertion on appeal, even liberally construed, did not constitute a challenge to whether the check casher properly provided notice of dishonor.
Therefore, the Appeals Court concluded that the plumber’s contention that the check casher failed to provide notice of its status as a holder in due course was without merit.
Finally, the plumber claimed the summary judgment was improper because the check casher failed to present evidence of a contract between it and the check casher.
The question presented, said the Appeals Court, was whether the check casher was required to establish that the plumber’s check constituted a contract to be entitled to summary judgment.
A similar issue was considered in 2005 by another Texas court. In that case, a man cashed a check at a grocery store. The company that issued the check later placed a stop payment order on it. The store unsuccessfully demanded payment from the company and sued.
The trial court granted the store’s motion for summary judgment for the amount of the check and the returned check fee; however, it concluded the store was not entitled to recover attorney’s fees.
On appeal, the store argued that it should have received its attorney’s fees because the company’s obligation to pay the check was contractual in nature.
The court hearing the appeal rejected the grocery store’s argument, holding that the check was not a contract because the promise and obligation to pay lacked the element of mutual promises necessary to create a contract.
The court concluded the company’s obligation to the grocery store arose from a statutory, and not contractual, obligation.
The Appeals Court said it agreed with the other court’s reasoning. In this case, the plumber’s obligation to pay the dishonored check arose from the statutory obligation of the drawer and was not contractual; therefore, the check casher was not required to establish a contract between the plumber and itself.
No Attorney’s Fees
Finally, the plumber claimed the trial court should not have awarded attorney’s fees to the check casher. The Appeals Court said it agreed.
Attorney’s fees, said the court, are not recoverable unless the fees are provided for by statute or contract.
In this case, the check casher did not rely on any statute. Instead, it sought attorney’s fees based on its contention that the check constituted a written contract.
As already noted, however, the plumber’s obligation to pay the dishonored check was not contractual. Accordingly, said the court, the check casher was not entitled to recover attorney’s fees.
The Appeals Court therefore reversed that portion of the trial court’s judgment awarding the check casher attorney’s fees but affirmed the trial court’s judgment in all other respects.Check cashers who would like a free copy of this case sent electronically should send an E-mail to firstname.lastname@example.org with “Attorneys Fees-TX” in the subject line.