SW Legal studies in Business

Check with Slash Mark between Payees’ Names Payable to Either Payee
Description

Appeals court held that a bank did not convert the funds from checks when it allowed one payee on checks made out to two payees, with names separated by a slash mark, to cash the checks. The meaning of the slash was unclear, but is usually interpreted to mean “or.”

Topic Negotiable Instruments/Commercial Paper
Key Words

Checks; Endorsement; Payment; Conversion

C A S E   S U M M A R Y
Facts

New Wave sold computer equipment to Maxim, which sold it to USAA. After delivery of some equipment, USAA mailed checks to Maxim, even though on those sales the check was supposed to go directly to New Wave. The checks were payable to Maxim/New Wave. The back of the check states “Each Payee Must Endorse Exactly As Drawn.” Maxim endorsed the checks and deposited them in its account at Legacy Bank. New Wave did not endorse the checks. Maxim went out of business. New Wave sued Legacy for conversion for cashing the checks without New Wave endorsement. The trial court held for Legacy; New Wave appealed.

Decision

Affirmed. The checks, as written, were ambiguous as to whether they were payable to Maxim and New Wave alternatively or jointly, and, thus, were payable alternatively. Either party could have deposited the checks. The meaning of the slash mark (a virgule) between the names is often interpreted to mean “or” which would mean either party could deposit the checks. Legacy did not convert the checks despite the statement on the back of the check. Since the meaning of the slash was ambiguous, Legacy could rely on the endorsement of either of the parties when it deposited the checks.

Citation New Wave Technologies, Inc. v. Legacy Bank of Texas, ---S.W.3d--- (2008 WL 2553519, Ct. App., Texas, 2008)

Back to Negotiable Instruments and Credit Listings

©1997-2008  SW Legal Studies in Business. All Rights Reserved.