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PASSING BAD CHECKS: THE RELIEF AVAILABLE FOR VICTIMS
INTRODUCTION:
Sooner
or later it happens to most of those in business. A customer or client
will pay with a check that is returned for insufficient funds or due to
the closing of the account before the check was delivered to the bank.
Sometimes a stop payment has been placed on the check. The end result is
the same for the victim: nonpayment of an invoice usually for goods or
services already delivered.
What
are the ramifications of engaging in such wrongful conduct? What relief
is available for the victim aside from merely filing suit to collect on
an unpaid invoice?
Is
there any punishment that applies to the perpetrator who probably used
bad faith to obtain the goods or services?
Those
are the questions answered in this article.
BASIC LAW:
One
who knowingly passes bad checks is guilty of a crime as well as possibly
being liable civilly to the victim in an amount up to treble damages (up
to one thousand five hundred dollars.) Lastly, it is possible that the
plaintiff/victim could obtain punitive damages against the perpetrator.
Criminal Law Applicable
The
reader is advised to read the article on this website on
The American System of Criminal Justice
for a full discussion of the criminal side of the American
legal system.
Knowingly
drawing or making any check for payment of money “…knowing at the time of such making,
drawing, uttering or delivering that the maker or drawer or the
corporation has not sufficient funds in or credit with said bank or
depository or person or firm or corporation for the payment of such
check, draft or order and all other checks, drafts or orders upon such
funds then outstanding in full upon its presentation…is punishable
by imprisonment in the country jail for not more than one year or in the
state prison.”
If
the crime is a first offense and the check is two hundred dollars or
less, it is treated as a misdemeanor rather than a felony.
No
express representation by the perpetrator as to amounts on hand is
necessary; the mere fact of executing the check is treated as such
fraudulent representation.
It is
not unusual for the District Attorney to bring related charges of fraud
or forgery if the circumstances warrant
Civil Law Applicable
Section
1719 of the California Civil Code provides that the passer of a bad check
is not just liable to the victim for the amount of the check but for a
relatively small service charge (twenty five dollars for the first check
passed, thirty five dollars for each subsequent check) and treble damages
for the amount of the check IF AND ONLY IF certain statutory steps are
taken by the recipient of the bad check:
1.
The victim must provide a written demand for payment by certified mail to
the person who had passed the bad check and the written demand must
inform the person of the provisions of Section 1719; the amount of the
check; and the amount of the service charge payable to the victim. The
person who passed the bad check has thirty days from the date of the
written demand to pay the amount of the check and the amount of the
service charge and the mailing costs for the written demand. If those are
paid, no treble damages apply. Partial payments during that thirty day
period do NOT resolve the problem. The statute provides,
If this person fails to pay in full the amount of the check, the
service
charge payable to the payee, and the costs to mail
the written demand
within this (30 day) period, this person shall then
be liable instead
for the amount of the check, minus any partial
payments made toward
the amount of the check or the service charges
within 30 days of the
written demand, and damages equal to treble that
amount, which shall not
be less than one hundred dollars nor more than one
thousand five hundred
dollars. When a person becomes liable for treble
damages for a check that
is the subject of a written demand, that person
shall no longer be liable for
any service charges for that check and any costs to
mail the written demand.
2. The perpetrator can avoid the treble
damages and service charges if he or she presents to the victim written
proof from the financial institution that the check was returned due to
an error on the part of the financial institution or was based on delay
in the normally scheduled transfer or posting of a direct deposit from
social security or the government.
3. Lastly, if there is a good faith
dispute between the bank and the perpetrator which resulted in a stop
payment being placed by the perpetrator on the check, then the treble
damages or service charges are only payable if the victim proves there
was no good faith dispute by clear and convincing evidence. The burden is
on the victim.
And
cases have held that the court does NOT have discretion as to imposing
the treble damages should the criteria above be achieved by the victim.
A
form for the victim to use to give notice to the perpetrator is located
in Section 1719 of the California Civil Code but the form is advised, not
required. The essential elements of the form are to simply give the
perpetrator notice of the above basic law.
Punitive
damages may be assessed against the perpetrator as well if the victim can
prove malice and intentional wrongdoing on the part of the perpetrator.
See the web article on Torts: Negligent and Intentional. One would have to sue the
perpetrator in court for fraud, conversion and possibly embezzlement to
have a chance for such punitive damages, of course, but those would
undoubtedly form part of the several causes of action that any plaintiff
would bring.
PRACTICALITIES
Note
that the above rights are not restricted to commercial establishments.
Anyone who is the victim of a bad check can achieve those treble damages if
they follow the guidelines above.
The
goal of the law is not to get you your treble damages so much as to
create overwhelming incentive on the part of the perpetrator to repay the
victim quickly and without involvement of the court. This is also to your
benefit since even treble damages will not repay you for your lost time
and trouble and will certainly not compensate you for the cost of your
attorney.
Ideally,
most particularly if you are in the business of selling products, you
will have created a series of terms and conditions on your invoices that
will give you far more protection, including recovery of attorneys and
court costs if you must sue. See the article on this web site on
Terms & Conditions on Invoices for
a full discussion of the provisions that will be far better protection
than this statue.
However,
assuming that you received the bad check without the protection of a good
contract or invoices, this provision can at least cause some concern on
the part of the perpetrator and if you are forced to go to Court, will
give you a little more recovery assuming you have sent the right notice
and complied strictly with the provisions described above.
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