## Facts

- Diaz posted $37,000 with Al Newman, a licensed bail bondsman, as security for a bail bond in a criminal matter.
- After the criminal proceeding ended, Diaz sought return of her funds.
- Newman returned the $37,000 to Diaz by delivering two certified checks, one for $12,000 and one for $25,000, drawn on Manufacturers Hanover Trust Company (Hanover).
- The certified checks were later lost, misplaced, or stolen, and Diaz could not locate them.
- Newman notified Hanover and requested a stop payment on the certified checks; the checks were not presented for payment.
- Diaz asked Hanover to pay or replace the certified checks without additional conditions.
- Hanover refused to issue replacement checks or pay without Diaz posting an indemnity bond in twice the amount of the checks.
- Diaz brought a proceeding seeking an order requiring Hanover to pay the $37,000 without the indemnity bond or, alternatively, requiring Newman to issue a new negotiable instrument in the same amount.

## Issues

1. Under New York U.C.C. § 3-804, may a court order payment on lost certified checks (or require replacement instruments) without requiring the claimant to provide security of at least twice the amount allegedly unpaid?

## Decision

- The court denied Diaz’s application.
- The court held New York U.C.C. § 3-804 makes security mandatory in a lost-instrument proceeding and sets a minimum amount of security at not less than twice the amount allegedly unpaid.
- Because Diaz sought payment or replacement without posting the statutory security, the court would not order Hanover to pay the lost certified checks or order Newman to issue replacement instruments on those terms.

## Legal Principles

- A certified check functions as the bank’s acceptance of the check, creating the bank’s obligation to pay the instrument according to its terms.
- A person seeking to enforce a lost, destroyed, or stolen negotiable instrument in New York must proceed under N.Y. U.C.C. § 3-804.
- Under New York’s version of U.C.C. § 3-804, the court must require security to indemnify the obligor against potential loss; the statute requires that the security be set by the court in an amount not less than twice the amount allegedly unpaid.
- The security requirement protects the obligor against double liability if the original instrument later surfaces and is presented by a holder.
- Where the statute requires security, the court cannot dispense with that condition based on fairness concerns.

## Conclusion

Diaz could not compel Manufacturers Hanover Trust to pay or replace the lost certified checks, nor compel Newman to provide a substitute instrument, without furnishing security required by N.Y. U.C.C. § 3-804; the statute requires the court to condition relief on security of at least twice the unpaid amount to protect the obligor from later claims on the original checks.


Diaz v. Manufacturers Hanover Trust Co., 401 N.Y.S.2d 952 (1977)