As part of a fraudulent scheme, Rivera induced Talcott to send Rivera a check for $10,000 as an investment made out to Guarino. The following day, Rivera told Talcott that the $10,000 was unnecessary and requested that Talcott instead send $5,700. Talcott stopped payment on the $10,000 check and sent Rivera a check for $5,700 made out to Guarino. Guarino brought the $10,000 check to Any Kind Checks Cashed, Inc. (“Any Kind”) and misrepresented himself as a broker, explaining that the check was intended as an investment. Any Kind’s manager was unable to contact Talcott by phone. Any Kind cashed the check and deducted a 5 percent fee. Guarino returned to Any Kind to cash the $5,700 check. For the $5,700 check, Any Kind obtained Talcott’s approval via phone to cash the $5,700 check, but there was no discussion of the $10,000 check. Any Kind cashed the $5,700 check and deducted a 3 percent fee. Talcott then stopped payment on the $5,700 check. Talcott’s bank sent the checks back to Any Kind as unpaid due to Talcott’s stop order.

CASE QUESTIONS

1. If Any Kind sues Talcott for claiming HDC status, what will the result be? Explain.

2. Does the fact that the check was part of a fraudulent scheme impact your analysis? How?