Requirements for HDC Status. Joseph Thomas stole two signed cashier's checks from a loan officer's desk at Chase Lincoln First Bank, N.A. Thomas wrote $200,000 as the amount of one check and $300,000 as the amount of the other, and made them payable to

Question

the order of his brother-in-law. Posing as his brother-in-law, Thomas presented the checks to the Tropicana Casino. A casino employee who contacted Chase was told that the $200,000 check was "good," that there were adequate funds to cover it, and that there was no stop-payment order on the $300,000 check. Thomas gambled away most of the money before Chase stopped payment on the checks. The owner of the Tropicana, Adamar of New Jersey, Inc, filed a suit in a New York state court against the bank to recover the $500,000. When the court denied Adamar's motion for summary judgment, Adamar appealed. Had Adamar taken the checks in good faith, as required for HDC status? Discuss.

Answer 1

Requirements for HDC status
Yes. The Supreme Court of New York, Appellate Division, held that the casino was entitled to payment. The court framed the issue as follows: Did the casino have "knowledge of some fact which would prevent a commercially honest individual from taking up the instruments"? The court pointed out that the casino did not violate either state gaming regulations or its own internal procedures in verifying Thomas's identity and the validity of the checks. The court concluded that the Chase employee's statement, in response to the casino's inquiries, that the $200,000 check was "good," with adequate funds to cover it, satisfied a relevant state regulation. The regulation required that "[p]rior to acceptance of any cash equivalent from a patron, the general cashier shall determine the validity of such cash equivalent by performing the necessary verification for each type of cash equivalent." Besides, the court added, "the Casino was expressly informed that there was no stop payment on the $300,000 check."