Uniform Commercial Code in that it was stapled to the checks. Is Lamson a holder? Why or why not?
The drawer, Commercial Credit Corporation (Corporation), issued two checks payable to Rauch Motor Company. Rauch indorsed the checks in blank, deposited them to its account in University National Bank, and received a corresponding amount of money. The Bank stamped “pay any bank” on the checks and initiated collection. However, the checks were dishonored and returned to the Bank with the notation “payment stopped.” Rauch, through subsequent deposits, repaid the bank. Later, to compromise a lawsuit, the Bank executed a special two-page indorsement of the two checks to Lamson. Lamson then sued the Corporation for the face value of the checks, plus interest. The Corporation contends that Lamson was not a holder of the checks because the indorsement was not in conformity with the Uniform Commercial Code in that it was stapled to the checks. Is Lamson a holder? Why or why not?
The prime importance of the case goes to the way wherein the two-page indorsement was framed by the bank. If it was not in conformity with the UCC, the restrictive indorsement would have remained the same, making Individual L unable to become a holder. Here, the restrictive indorsement was considered removed due to the indorsements stapled to the checks by the bank. It gives permission to Individual L to become a holder. Because of this, Organization C is supposed to pay the face value of the checks along with interest to Individual L.
Individual L is a holder since the bank had specifically indorsed the checks with the name of Individual L on them. The two-page indorsement was also in conformity with the Uniform Commercial Code (UCC). If this was not the case, the restrictive indorsement of pay any bank would have stopped Individual L from becoming a holder.