Legal Question in Business Law in California

I had an employee who asked for an advance, which I gave, then shortly after, she quit...So I contacted my bank and put a stop payment on the check on August 8, 2009. I informed her that she must not cashed the check, however, shortly after, she went to a check cashing company (the California Check Cashing Store) and cashed the check for $400. On or about November 30 I received a letter from the California Checking Store that they were the "holder in Due Course" saying that I was liable for the amount of the check according to the UCC section 3305 "that disputes between maker and payee do not relieve the maker of the check of liability for payment to a holder in due course." The letter further states, that if I do not pay this amount is not received in 30 days they will file a lawsuit against me...Am I liable and do I need to pay this to the check company? Seems to me the check company should have checked the validity of the check before cashing it. My bank said these companies always do this....so should I ignore this letter? Should I contact a lawyer? Thanks


Asked on 12/09/09, 10:48 pm

1 Answer from Attorneys
Terry A. Nelson Nelson & Lawless

Yes, your could have your lawyer contact them to deal with this. However, the $400 check is less than you'll spend in fees, probably. Talk to your bank manager about this first, and follow their advice. You have legal defenses, including a right to sue the employee.

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Answered on 12/15/09, 9:47 am


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