203 Misc. 214 | City of New York Municipal Court | 1952
The plaintiff payee of a check added to it his stamped indorsement and mailed it to one Levitt from whose mail box it was stolen. The defendant, in the check cashing business, cashed the check on which no other indorsement appears.
It is clear that neither Levitt nor any one authorized by him presented the check to the defendant to be cashed. The plaintiff intended to pay a debt owing to Levitt with the check. Levitt was not paid by this means and the plaintiff has brought suit upon it.
The defendant asserts that he was a holder in due course because he was a holder for value and without notice that the person negotiating the instrument did not have title to it. The defendant offered no proof. He rested on the plaintiff’s case which established the facts herein recited.
11 3. That he took it in good faith and for value;
“ 4. That at the time it was negotiated to him he had no notice of any infirmity in the instrument or defect in the title of the person negotiating it ”.
The question here is whether the defendant in accepting the check from the bearer had “ knowledge of such facts that his action in taking the instrument amounted to bad faith ”. (Negotiable Instruments Law, § 95.) If the purchaser does not act in good faith the instrument is subject to the equities between the original parties.
Prima facie the defendant as holder is deemed a holder in due course. The plaintiff established that the title of the defendant’s transferor was defective. The burden of proof was thereupon shifted to the defendant as transferee to establish that he acquired title as a holder in due course. Section 98 of the act provides: “ Who deemed holder in due course. Every holder is deemed prima facie to be a holder in due course; but when it is shown that the title of any person who has negotiated the instrument was defective, the burden is on the holder to prove that he or some person under whom he claims acquired the title as a holder in due course ”.
The defendant offered no proof whatsoever of the identity of the person from whom he acquired the check, nor of any inquiry by him to ascertain the right of that person to negotiate the instrument. It would be reasonable to expect that one in the check cashing business, subject to license by the Banking Department of the State, would obtain the indorsement and some identification of the person presenting the check to be cashed. One would reasonably expect that this measure of precaution would be taken in the usual course of the business of cashing checks. The defendant did not attempt to explain why this was not done in this instance.
The court is constrained to find on the record of this case that the defendant is chargeable with gross negligence or willful ignorance either of which is construed to be lack of good faith. Apropos the court stated in the leading case of Canajoharie Nat. Bank v. Diefendorf (123 N. Y. 191, 202-203): “ The requirement of good faith is expressed in the very term by which a holder is protected, and is fundamental in the maintenance of that character. (1 Pars, on Bills & Notes 258.) It was held in Seybel v. N. C. Bank (54 N. Y. 288) that gross negligence, though not conclusive, was evidence of bad faith, and impliedly
Under the facts of this case, explanation was required of the defendant. The burden of proof fell upon him to prove that he or the person under whom he claims acquired title in due course. This he failed to establish. Therefore, the defendant will not be absolved of liability. To hold otherwise would open to rampant abuse the check cashing business and permit it to be used as a medium for the easy cashing of stolen checks.
Accordingly, the court holds that the plaintiff is entitled to judgment. Five days’ stay.
