## Facts

- A title insurance and settlement agent issued checks to distribute funds from real estate closings.
- A currency exchange (owned by a check-cashing company) previously cashed two smaller checks from the same drawer payable to the same customer; both cleared.
- The customer later presented a third check for $29,588.31, payable to a misspelled version of the customer’s name and bearing a “LOAN PAYOFF” notation.
- The customer presented a recently issued state ID; the currency exchange verified identity, recorded contact information, obtained a thumbprint, and followed internal procedures.
- Because the check exceeded an internal threshold, the manager obtained supervisor approval before cashing it.
- Police later arrested the customer and a drawer’s employee for check fraud; the drawer stopped payment, and the check was dishonored.
- The currency exchange sued to recover on the check, asserting holder-in-due-course status; it also sought sanctions based on discovery responses to requests to admit.
- After a bench trial, the trial court found the currency exchange was not a holder in due course due to “warning signals,” entered judgment for the drawer, and imposed limited sanctions against the drawer while denying additional sanctions.

## Issues

1. Whether the currency exchange took the check in good faith and without notice of any claim or defense, qualifying it as a holder in due course under Illinois UCC Article 3.
2. Whether the check’s amount, payee misspelling, “loan payoff” notation, and the recent issuance of the payee’s ID constituted notice or defeated good faith under reasonable commercial standards of fair dealing.
3. Whether the trial court abused its discretion in denying additional sanctions sought by the currency exchange and in imposing a limited sanction against the drawer for one discovery response.

## Decision

- The appellate court reversed the judgment on the holder-in-due-course issue and held the currency exchange was a holder in due course.
- The court concluded the currency exchange acted in good faith, including compliance with reasonable commercial standards of fair dealing, by verifying identification, documenting the transaction, and obtaining required supervisory approval.
- The court held that the cited irregularities were, at most, suspicious circumstances and did not amount to notice of a claim or defense.
- The court affirmed the trial court’s denial of additional sanctions sought by the currency exchange.
- The court affirmed the trial court’s imposition of a limited sanction against the drawer for one unreasonable response to a request to admit.
- The case was remanded for further proceedings consistent with the holder-in-due-course determination.

## Legal Principles

- A holder in due course takes an instrument for value, in good faith, and without notice that it is overdue, dishonored, or subject to a claim or defense. (810 ILCS 5/3-302)
- “Good faith” under Illinois’s revised Article 3 includes both subjective honesty and observance of reasonable commercial standards of fair dealing. (810 ILCS 5/3-103(a)(4))
- Suspicious circumstances do not alone constitute “notice”; notice requires actual knowledge or facts so strong that a person acting under reasonable commercial standards would infer a claim or defense. (810 ILCS 5/1-202; 5/3-302)
- A check-cashing business is not required to conduct an extensive investigation of transaction details if it follows ordinary industry practices and internal controls consistent with fair dealing.
- Under Illinois Supreme Court Rule 219, sanctions for unreasonable denials in requests to admit are discretionary; appellate review is for abuse of discretion.

## Conclusion

The appellate court held the currency exchange qualified as a holder in due course because it followed reasonable commercial standards and lacked notice of fraud, shifting the loss from the dishonored check to the drawer, while leaving the trial court’s limited, discretionary sanctions rulings intact and remanding for further proceedings.


New Randolph Halsted Currency Exch., Inc. v. Regent Title Ins. Agency, LLC, 2010 IL App (1st) 091292, 939 N.E.2d 1024