Robert J. TRIFFIN, Appellee, v. Stacey Anne DILLABOUGH, and American Express Travel Related Services Company, Inc. Appeal of AMERICAN EXPRESS TRAVEL RELATED SERVICES COMPANY, INC. Robert J. TRIFFIN, Appellee, v. Robert LYNN, and American Express Travel Related Services Company, Inc. Appeal of AMERICAN EXPRESS TRAVEL RELATED SERVICES COMPANY, INC.
Supreme Court of Pennsylvania.
Decided Aug. 21, 1998.
716 A.2d 605
Submitted Oct. 17, 1996.
Barkley Clark, Kansas City, MO, Pro Hac Vice Admission for American Exp. Travel Related Services Co., Inc.
Robert Triffin, Pro Se.
Before FLAHERTY, C.J., and ZAPPALA, CAPPY, CASTILLE, NIGRO, NEWMAN and SAYLOR, JJ.
OPINION
NEWMAN, Justice.
Appellant American Express Travel Related Services Company, Inc. (American Express) asks this Court to decide whether certain of its money orders are negotiable instruments pursuant to the Pennsylvania version of the Uniform Commercial Code,
FACTS & PROCEDURAL HISTORY
American Express, among other endeavors, sells money orders through its authorized agents. In a typical transaction, an agent collects an amount of cash from the purchaser, also known as the sender, equal to the face value of the money order plus a small fee. The sender receives a partially completed money order embossed with the amount of the money order and blank spaces for the sender to fill in his or her own name and address, the name of the payee and the date.
On an unknown date, three American Express money orders were stolen from the premises of one of its agents, Chase Savings Bank. In an apparently unrelated incident, one hundred American Express money orders were stolen while being
On December 11, 1990, Stacey Anne Dillabough (Dillabough) presented two American Express money orders for payment at Chuckie Enterprises, Inc. (Chuckie‘s), a check cashing operation in Philadelphia. The money orders were in the amounts of $550.00 and $650.00, respectively, and listed Dillabough as the payee and David W. (last name indecipherable) of 436 E. Allegheny Avenue as the sender. On February 25, 1991, Robert Lynn (Lynn) presented one American Express money order at Chuckie‘s in the amount of $200.00, which listed himself as payee and Michael C. Pepe as the sender. In each instance, Charles Giunta (Giunta), the owner of Chuckie‘s, recognized Dillabough and Lynn from their previous visits to Chuckie‘s. Dillabough and Lynn provided photographic identification to Giunta and properly endorsed their money orders. Giunta paid the face amounts of the money orders to Dillabough and Lynn, less his standard 2 percent fee.
Giunta was unaware the American Express money orders that he cashed had been stolen. The two Dillabough money orders were stolen from the premises of Chase Savings Bank and the Lynn money order was stolen from the shipment to I.W. Levin and Company. After being cashed at Chuckie‘s, the money orders traveled the regular bank collection routes and were presented for payment at the United Bank of Grand Junction, Colorado. Because American Express had noted on its “fraud log” that the money orders were stolen, they were returned to Chuckie‘s bearing the stamp “REPORTED LOST OR STOLEN—DO NOT REDEPOSIT.” American Express refused to pay Chuckie‘s the face amounts of the money orders. Chuckie‘s then sold the Dillabough and Lynn money orders to Triffin, a commercial discounter.1 Pursuant to
Triffin filed separate complaints in the Court of Common Pleas of Philadelphia County (trial court) against Dillabough and American Express on July 16, 1992, and against Lynn and American Express on August 20, 1992, seeking payment of the money orders. The trial court consolidated the two actions. Triffin obtained default judgments against Dillabough and Lynn and proceeded to a non-jury trial with American Express. The trial court found that the money orders were not negotiable instruments and entered a verdict in favor of American Express. On appeal, the Superior Court reversed the trial court and held that the money orders were negotiable instruments and Triffin had the status of a holder in due course, entitling him to recover the face amount of the money orders from American Express. We granted American Express’ Petition for Allowance of Appeal from the Order of the Superior Court, and we now affirm.2
DISCUSSION
When this Court entertains an appeal originating from a non-jury trial, we are bound by the trial court‘s findings of fact, unless those findings are not based on competent evidence. Thatcher‘s Drug Store v. Consolidated Supermarkets, Inc., 535 Pa. 469, 636 A.2d 156 (1994). The trial court‘s conclusions of law, however, are not binding on an appellate court because it is the appellate court‘s duty to determine if the trial court correctly applied the law to the facts. Id.
I. Negotiability
The Superior Court has described the purpose of negotiable instruments and the Commercial Code as follows:
A negotiable instrument is an instrument capable of transfer by endorsement or delivery. Negotiability provides a means of passing on to the transferee the rights of the holder, including the right to sue in his or her own name, and the right to take free of equities as against the assignor/payee. [Citations omitted]. The purpose of the Commercial Code is to enhance the marketability of negotiable instruments and to allow bankers, brokers, and the general public to trade in confidence. [Citations omitted]. As a matter of sound economic policy, the Commercial Code encourages the free transfer and negotiability of commercial paper to stimulate financial interdependence.
Manor Bldg. Corp. v. Manor Complex Assocs., 435 Pa.Super. 246, 252-53, 645 A.2d 843, 846 (1994) (en banc). With these principles in mind, we turn to a discussion of the American Express money orders at issue here.
The threshold question is whether the money orders qualify as negotiable instruments under Division Three of the Commercial Code,
(a) Requisites to negotiability.—Any writing to be a negotiable instrument within this division must:
be signed by the maker or drawer; - contain an unconditional promise or order to pay a sum certain in money and no other promise, order, obligation or power given by the maker or drawer except as authorized by this division;
- be payable on demand or at a definite time; and
- be payable to order or to bearer.
The Superior Court described the face of the money orders in question as follows:
Prior to being stolen[,] the American Express money orders read: “AMERICAN EXPRESS MONEY ORDER ... CHASE SAVINGS BANK ... DATE (blank). PAY THE SUM OF (blank), NOT GOOD OVER $1,000, TO THE ORDER OF (blank). Louis V. Gerstner, Chairman. SENDER‘S NAME AND ADDRESS (blank). Issued by American Express Travel Related Services Company, Inc., Englewood, Colorado. Payable at United Bank of Grand Junction, Downtown, Grand Junction, Colorado.” The two Dillabough instruments were in this form. The third Lynn instrument was identical, except it did not bear an authorized agent‘s name, e.g., Chase Savings Bank, and was not good for over $200.
Triffin v. Dillabough, 448 Pa.Super. 72, 82, 670 A.2d 684, 689 (1996). When presented at Chuckie‘s, the sections for date, amount, payee and sender had been completed.
The first requisite of negotiability, a signature by the drawer or maker, “includes any symbol executed or adopted by a party with present intention to authenticate a writing.”
The second requisite, American Express argues, is lacking because the money orders do not contain an unconditional promise or order to pay. Specifically, American Express claims that a legend it placed on the back of the money orders qualifies an otherwise unconditional order on the front directing the drawee to “PAY THE SUM OF” a specified amount “TO THE ORDER OF” the payee. The legend provides as follows:
IMPORTANT
DO NOT CASH FOR STRANGERSTHIS MONEY ORDER WILL NOT BE PAID IF IT HAS BEEN ALTERED OR STOLEN OR IF AN ENDORSEMENT IS MISSING OR FORGED. BE SURE YOU HAVE EFFECTIVE RECOURSE AGAINST YOUR CUSTOMER.
PAYEE‘S ENDORSEMENT
According to American Express, this legend renders the order to pay conditional on the money order not being altered, stolen, unendorsed or forged and destroys the negotiability of the instrument.
We disagree. In a factually similar case, the Louisiana Court of Appeal construed a legend on the back of an American Express money order similar to the one at issue here. Hong Kong Importers, Inc. v. American Express Co., 301 So.2d 707 (La.App.1974). The legend there stated “CASH ONLY IF RECOURSE FROM ENDORSER IS AVAIL-
American Express attempts to distinguish Hong Kong by asserting that the legend in this case is more specific because it explicitly conditions payment on the money orders not being altered, stolen, unendorsed or forged. This argument misses the point. “Any writing which meets the requirements of subsection [(a)] and is not excluded under Section [3103] is a negotiable instrument, and all sections of this [Division] apply to it, even though it may contain additional language beyond that contemplated by this section.”
The third requisite, that the writing be payable on demand or at a definite time, and the fourth requisite, that the writing be payable to order or bearer, are clear from the face of the money orders and are not disputed by the parties. Thus, the American Express money orders qualify as negotiable instruments pursuant to
American Express contends that even if the money orders are facially negotiable, they should not be viewed as negotiable instruments because they were never issued or otherwise “placed in the stream of commerce.” Issue is defined as “[t]he first delivery of an instrument to a holder or a remitter.”
Authorized completion and delivery, however, are not listed as requisites to negotiability in section 3104.
(a) General rule.—When a paper whose contents at the time of signing show that it is intended to become an instrument is signed while still incomplete in any necessary respect it cannot be enforced until completed, but when it is completed in accordance with authority given it is effective as completed.
(b) Unauthorized completion.—If the completion is unauthorized the rules as to material alteration apply (section 3407), even though the paper was not delivered by the maker or drawer; but the burden of establishing that any completion is unauthorized is on the party so asserting.
When read together, sections 3115, 3407 and 3305 demonstrate that unauthorized completion and non-delivery do not prevent enforcement of an otherwise negotiable instrument. Instead, the three sections permit a holder in due course to enforce the undelivered instrument as completed. The Comment to section 3115 explains the rationale for this rule as follows:
Since under this [Division] (Sections 3305 and 3407) neither non-delivery nor unauthorized completion is a defense against a holder in due course, it has always been illogical
that the two together should invalidate the instrument in his hands. A holder in due course sees and takes the same paper, whether it was complete when stolen or completed afterward by the thief, and in each case he relies in good faith on the maker‘s signature. The loss should fall upon the party whose conduct in signing blank paper has made the fraud possible, rather than upon the innocent purchaser. The result is consistent with the theory of decisions holding the drawer of a check stolen and afterwards filled in to be estopped from setting up the non-delivery against an innocent party.
II. Triffin‘s Status As A Holder In Due Course
Section 3302(a) describes a holder in due course as follows:
(a) General rule.—A holder in due course is a holder who takes the instrument:
- for value;
- in good faith; and
- without notice that it is overdue or has been dishonored or of any defense against or claim to it on the part of any person.
Triffin obtained the money orders from Chuckie‘s pursuant to a written agreement by which Chuckie‘s assigned all of its right, title and interest in the money orders to Triffin. Triffin could not become a holder in due course in his own name because he had notice of American Express’ defenses when he took the money orders from Chuckie‘s.
The parties do not dispute that Chuckie‘s took the money orders for value. Giunta testified that he paid Dillabough and Lynn the face value of the money orders, minus a two percent fee. Thus, section 3302(a)(1) is satisfied. The second element of section 3302(a), good faith, is defined as “[h]onesty in fact in the conduct or transaction concerned.”4
American Express further contends that even if Triffin qualifies as a holder in due course, the money orders are still not enforceable because the legend on their backs limits the “tenor” of the instruments. Pursuant to
As previously discussed, the legend on the back of the money orders is merely a warning that restates American Express’ defenses against persons other than holders in due course in the event of alteration, theft, lack of endorsement or forgery. These defenses are ineffective against a holder in
The Order of the Superior Court is affirmed and this matter is remanded to the trial court for the entry of an order consistent with this Opinion.
CASTILLE, J., files a dissenting opinion in which CAPPY, J., joins.
CASTILLE, Justice, dissents.
The majority concludes that appellee Robert J. Triffin (“appellee“) is entitled to recover the value of the money orders at issue because the money orders were negotiable instruments and because appellee was a holder in due course of those negotiable instruments. However, since the money orders at issue contained express conditional language which precluded negotiability under the relevant statute, I must respectfully dissent from the majority‘s conclusion.
The requirements for negotiability are set forth at
(a) Requisites to negotiability.—Any writing to be a negotiable instrument within this division must:
- be signed by the maker or drawer;
- contain an unconditional promise or order to pay a sum certain in money and no other promise, order, obligation, or power given by the maker or drawer except as authorized by this division;
- be payable on demand or at a definite time; and
be payable to order or to bearer.
At issue here is the second of the four statutory prerequisites to negotiability, the requirement of an “unconditional” promise or order. Regarding this prerequisite, section 3105 provides:2
(a) Unconditional promise or order.—A promise or order otherwise unconditional is not made conditional by the fact that the instrument:
- is subject to implied or constructive conditions;
....
The comment to section 3105 states:
1.... Nothing in [paragraph (a) subsection (1) ] is intended to imply that language may not be fairly construed to mean what it says, but implications, whether of law or fact, are not to be considered in determining negotiability.
Thus, the statute clearly distinguishes between language which creates an implied condition and language which creates an express condition. The latter renders a promise or order non-negotiable while the former does not. This conclusion derives further support from the revised
Here, the operative language in the money orders at issue clearly created an “express” condition and thereby rendered the money orders non-negotiable. The language at issue states:
IMPORTANT
DO NOT CASH FOR STRANGERSTHIS MONEY ORDER WILL NOT BE PAID IF IT HAS BEEN ALTERED OR STOLEN OR IF AN ENDORSEMENT IS MISSING OR FORGED. BE SURE YOU HAVE EFFECTIVE RECOURSE AGAINST YOUR CUSTOMER.
PAYEE‘S ENDORSEMENT
This language explicitly conditions payments on the money orders’ not being altered or stolen and the endorsements’ not being missing or forged. The use of the word “if” renders the condition an express one, since “if” by definition means “on condition that; in case that; supposing that.” Webster‘s New World Dict., 2d College ed. (emphasis added).
Furthermore, the official comment to revised section 3106 explains what the code intends by drawing the distinction between implied and express conditions:
If the promise or order states an express condition to payment, the promise or order is not an instrument. For example, a promise states, “I promise to pay $100,000 to the order of John Doe if he conveys title to Blackacre to me.” The promise is not an instrument because there is an express condition to payment. However, suppose a promise states, “In consideration of John Doe‘s promise to convey title of Blackacre I promise to pay $100,000 to the order of John Doe.” That promise can be an instrument if [section 3104] is otherwise satisfied.
The reasons proffered by the majority to justify its departure from this seemingly inescapable statutory logic are strained. First, the majority cites a case, decided by the Louisiana Court of Appeal in 1974, in which a condition incorporating the word “if” was construed not to bar negotiability.5 In that case, the Louisiana Court did not evaluate the significance of the word “if” or the significance of the condition which that word introduced. Moreover, in 1974, Louisiana had not yet adopted Article III of the Uniform Commercial Code (“UCC“). Hence, it appears that the Louisiana decision was decided against the backdrop of the Code of Napoleon. See 9 to 5 Fashions, Inc. v. Petr L. Spurney, 538 So.2d 228, 233 (La.1989) (discussing roots of Louisiana‘s civil code in the Napoleonic code). Pennsylvania, on the other hand, has adopted Article III of the UCC, which speaks directly to the issue presented in this case, as explained supra. A decision by an intermediate Louisiana appellate court interpreting French legal principles should not override the explicit statutory guidance furnished by the Pennsylvania legislature on an issue of Pennsylvania law.
The majority also seizes on Comment 4 to
Finally, the majority attempts to support its conclusion by referring to the principle that “purported conditions on an otherwise negotiable instrument, that merely reflect other provisions of the law, do not vitiate negotiability.” Op. at 609 (citations omitted). The majority contends that the language at issue amounts merely to a restatement of appellant‘s statutory defenses against payment where there has been alteration (
In sum, the statute at issue in this case is devoid of ambiguity, and the application of that statute to these facts compels a conclusion contrary to that reached by the majority. Consequently, I respectfully dissent.
CAPPY, J., joins this dissenting opinion.