A Payor, Who Passes a Check with
Insufficient Funds, Shall
(With Some Exceptions) Be Liable
08/28/05
Dear
Mr.
Duman:
My
husband
operates a small landscaping service business.
A new
client
recently bounced the last check he wrote to us. Even
though I immediately contacted him about the returned check,
he has yet to make good on it.
Our other
clients are very nice and this is the first time this has happened.
We are
wondering what kinds of rights we have in this type of situation.
D.
S., Tracy
Dear
D. S.:
California
Civil Code Section 1719 sets forth the basis upon which the recipient
of a
returned check can bring a civil lawsuit against the person, who
bounced the
check (the “payor”).
According to
this statute, the “payor”, who is found liable under the statute for
passing a
check for insufficient funds may be required to pay to the recipient of
the
check (the “payee”) damages, in addition to the face value of the
check, equal
to triple the original check amount (or a minimum of $100.00, whichever
is
more), up to a maximum of $1500.00. The
law , also, provides for imposition of an additional service charge,
not to
exceed $25.00 for the first returned check and $35.00 for each
subsequent
returned check to the same payee.
In order to
trigger liability under this law, the recipient of the bounced check is
first
required to mail a written notice of demand to the payor, in compliance
with
the statute, sent by certified mail. If
the person, who passed the check with insufficient funds, responds by
paying to
payee the face value of the check, plus the applicable service charge,
within
the 30 days immediately following the date the notice was mailed, no
further
liability will arise.
However, if
the payor does not provide the required payment and service charge
within the
mandated 30-day period, the aggrieved payee can move ahead with a
lawsuit under
this law against the payor for the statutory damages.
Where the
total amount at issue is less than $5,000.00, Small Claims Court may be
the
most suitable judicial forum in which to bring the lawsuit.
It should be
noted that the payor will not be held liable for the treble damages or
any
service charges, if payment on the checked was deliberately stopped due
to an
actual, good faith dispute with the payee, based upon the payor’s
reasonable
belief, regarding the validity of the underlying amount owed.
Moreover,
the payor can avoid liability for damages under the statute upon
written
confirmation to the payee that the returned check resulted from an
error on the
part of the payor’s financial institution, or from an inadvertent error
or
delay of payment of a governmental assistance institution (such as
Social
Security), upon which the payor relied to cover the amount of the
returned
check.
The rights
available under this law are in addition to other civil remedies, which
also
may be available in connection with this misconduct, as well as
criminal
sanctions.
Readers with
questions regarding this subject and those pertaining to
debtor-creditor law,
generally, should consult directly with their own attorneys, for
attention to
their specific issues.
FD759 8/19/05
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Readers may address their
questions to The Real Estate
Lawyer, Fred M. Duman, 2807 Castro Valley Boulevard, Castro Valley, California
94546. Mr. Duman will answer those of
general
interest in his column. He reserves the
right to edit the letter for brevity and clarity.
Each real estate problem
usually has its own distinct
circumstances, and frequently is more complicated than realized by a
layperson. Readers are also encouraged
to consult with their own lawyers to obtain guidance concerning their
problems
when they first arise.
Readers are cautioned that
these answers are not intended
to be the basis for any action or reliance by the reader.
You are welcome to
visit our web site at “www.dumanlaw.com”.
© 2005, Fred M. Duman All Rights Reserved. Please see our disclaimer.
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