1. Why does holder-in-due-course status not afford State Bank protection?

2. Does the phone call from State Bank to Chase about the check provide it with protection?

3. List the lessons you learn about cashier’s checks from this case.

On March 26, 2012, Dale M. Smith (defendant/counterplaintiff) presented a cashier’s check for $294,500.99 for deposit in his account with State Bank (plaintiff). The check appeared to be a cashier’s check drawn on Chase bank. State Bank accepted the check for deposit. The following day, March 27, 2012, Smith requested that plaintiff wire approximately $275,000 from his account to an account in Japan. Before performing this transfer, State Bank contacted a local Chase branch and spoke to a representative. A Chase representative “confirmed the check number, the account number, verified the amount in the check and represented there were no stop-payment orders placed on the item.” State Bank then processed Smith’s wire transfer request.

On March 28, 2012, Chase returned the check to State Bank with the notation “refer to maker.” State Bank then presented the check to Chase for payment a second time, and Chase again returned the check to State Bank. Elizabeth Roush, a Vice President and Reconciliation Manager for Chase, explained that the cashier’s check was “different from the form of official cashier’s checks issued by Chase.” The check number had an incorrect number of digits, did not include “a printed audit number to indicate its validity[,]” did not have the proper signature, and was missing a security symbol. At her deposition, Roush explained that only one authorized signature exists for all cashier’s checks drawn on the account number printed on the cashier’s check. This signature is electronically printed on all checks issued by Chase retail branches. Roush was immediately able to identify that the check was not issued by Chase because the signature was not an authorized signature for that account. Roush did not know who signed the check.

On May 16, 2012, State Bank filed suit against Smith and Chase. State Bank alleged that Chase wrongfully dishonored the check. The trial court granted summary judgment for Chase and State Bank appealed.

JUDICIAL OPINION

PER CURIAM … Plaintiff first argues that the trial court erred when it determined that, despite its unchallenged status as a holder in due course of the check, Chase had no obligation to pay the check because it did not contain an authorized signature. We disagree.

A cashier’s check is a type of instrument recognized by Michigan’s Uniform Commercial Code (“UCC”). Pursuant to MCL 440.3401(1), “A person is not liable on an instrument unless (i ) the person signed the instrument, or (ii ) the person is represented by an agent or representative who signed the instrument and the signature is binding on the represented person under [MCL 440].3402.” As the official comment to this provision explains, “Obligation on an instrument depends on a signature that is binding on the obligor.”

It is undisputed that the cashier’s check contains only an unauthorized signature. Plaintiff was apparently aware of this fact at the time it filed its complaint, where it alleged that the check was “not authentic [and] was not authorized….” Chase attached to its motion the affidavit of Roush, who explained that the check did “not have the proper signature on it[.]” At her deposition, Roush explained that there was only one authorized signature for all cashier’s checks issued by Chase retail banks. Roush stated that she immediately knew the check was not issued by Chase because the signature on the check was not the authorized signature. As there is no evidence that the check was authorized by Chase, Chase cannot be obligated to pay the check. The only person obligated by the check is the unknown individual who actually signed it, and only if plaintiff, in good faith, paid the check or took it for value.

[P]laintiff argues that it was a holder in due course of the cashier’s check, and as such, is entitled to enforce it, despite the lack of an authorized signature. Plaintiff’s argument is without merit. ………………..