Michael Kane, Jr., sold Gerald Kroll, Jr., some cows. Gerald was
unable to pay for the cows so he had his mother Grace pay for them,
with an understanding that he would pay her back after he sold a
load of hay. The hay transaction did not go through and he told him
mother he would be unable to refund her for the $6,100, the amount
of the check written to Kane for the cows. Grace contacted her bank
and placed a stop payment order on her check. Kane was not aware
of the stop payment and attempted to cash the check at the bank,
where they refused payment. Kane sued Grace to recover the $6,100
owed to him. The trial court determined Kane was not a holder in
due cause because he was unable to meet the burden of proof for all
requirements, he appealed this decision.
According to § 403.302, STATS,there are 3 requirements that must
be met for a person to be deemed a holder in due course. The first is
that the holder must take instrument for value, Kane took payment
from Grace to settle Gerald's debt for the purchased cows, he met
this requirement. The second is the holder must take the instrument
in good faith, this requirement is a bit ambiguous. How can you really
prove whether something was done in good faith? The only thing the
judge was able to go on was honesty and the lack of proof that says
otherwise. The third and final requirement is the instrument must be
taken without notice that it has been dishonored. When Kane took
the check he had no knowledge of it being dishonored, he didn't
learn of this until he went to the bank and was refused payment for
the check.
The court ruled in Kane's favor finding him the holder in due course.
The requirements are clear, published for anyone to reference, and
were applied fairly by the judge. He was able to take all of the
evidence presented by both parties and justify how each condition
was met. The judge in the case was guided by the ethical value,
honesty. He was not given any evidence to lead him to believe
anyone was being anything but honest in their defense.
Kubasek, N., Browne, M. N., Dhooge, L. J., Herron, D. J., Williamson,
C., & Barkacs, L. L. (2020). Dynamic business law (5th ed.).
