## Facts

- A 93-year-old Massachusetts resident was fraudulently induced by a purported financial adviser to issue checks payable to Salvatore Guarino.
- The resident mailed a $10,000 check to Guarino, then became suspicious and stopped payment.
- Guarino presented the $10,000 check to a Florida check-cashing business for cashing, stating he was a “broker” and the check related to an investment.
- The check-cashing business attempted but failed to reach the drawer by phone and nevertheless cashed the $10,000 check, charging a 5% fee.
- The next day, the drawer issued a second check for $5,700 to Guarino; the business later cashed it only after reaching the drawer by phone and obtaining approval, charging a 3% fee.
- After learning of the fraud, the drawer stopped payment on the $5,700 check as well.
- At trial, no evidence was introduced on general check-cashing industry practices or what constitutes ordinary or reasonable commercial standards for such businesses.

## Issues

1. Whether the check-cashing business took the $10,000 check in “good faith,” including observance of reasonable commercial standards of fair dealing, as required for holder-in-due-course status.
2. Whether the suspicious circumstances surrounding the $10,000 transaction defeated holder-in-due-course status, leaving the business subject to the drawer’s fraud-based defenses.

## Decision

- The appellate court affirmed the judgment denying holder-in-due-course status to the check-cashing business on the $10,000 check.
- The court held that, even without actual knowledge of the fraud, the business failed the objective “good faith” requirement by not observing reasonable commercial standards of fair dealing.
- The court left undisturbed the separate judgment in the business’s favor on the $5,700 check, which was not appealed.

## Legal Principles

- Holder-in-due-course status requires taking an instrument in “good faith.”
- “Good faith” under the applicable UCC definition includes both (1) honesty in fact and (2) observance of reasonable commercial standards of fair dealing.
- A holder may act honestly yet fail the “good faith” requirement if its procedures do not meet reasonable commercial standards in the circumstances.
- Large, atypical, or suspicious transactions can require heightened verification; failure to make further inquiry may defeat holder-in-due-course status.
- Without holder-in-due-course status, a transferee takes the instrument subject to the maker/drawer’s defenses, including fraud and stop-payment based on that fraud.

## Conclusion

The court held that cashing an unusually large, suspicious check without obtaining verification from the elderly out-of-state drawer failed the objective component of UCC “good faith,” so the check-cashing business was not a holder in due course and could not recover on the $10,000 check against the drawer’s fraud defense.


Any Kind Checks Cashed, Inc. v. Talcott, 830 So. 2d 160 (Fla. Dist. Ct. App. 2002)