Opinion ID: 1895319
Heading Depth: 1
Heading Rank: 2

Heading: Obligations of the Parties

Text: [¶ 9] At the heart of the controversy in this case is the allocation of responsibility for the loss of the unpaid $42,366.56, given the fact that Paul Richard and Steven Hall, the real wrongdoers, appear to be unable to pay. Maine, like the other forty-nine states, has adopted the Uniform Commercial Code. Under the Maine U.C.C., Articles 3-A and 4 deal with Negotiable Instruments and Bank Deposits and Collections. See 11 M.R.S.A. §§ 3-1101, 4-101 (1995). It is these statutes that govern the parties' dispute. [¶ 10] Pursuant to Article 4 of the Maine U.C.C., the Credit Union, as a depositary bank, is a holder of the instruments, [11] see 11 M.R.S.A. § 4-205(1) (1995), [12] making it a person entitled to enforce the instrument under Article 3-A. See 11 M.R.S.A. § 3-1301(1) (1995). Upon producing an instrument containing the valid signature of a party liable on the instrument, a person entitled to enforce the instrument is entitled to payment, unless the party liable proves a defense or claim in recoupment, see 11 M.R.S.A. § 3-1308(2) (1995), or a possessory claim to the instrument itself. See 11 M.R.S.A. § 3-1306. [¶ 11] Because their signatures appear on the backs of the checks, Daniel, Joel, and Claire are indorsers of the checks. See 11 M.R.S.A. § 3-1204(1), (2) (1995). As indorsers, they are obligated to pay the amounts due on each dishonored instrument [a]ccording to the terms of [each] instrument at the time it was indorsed. 11 M.R.S.A. § 3-1415(1)(a) (1995). [13] This obligation is owed to a person entitled to enforce the instrument or to a subsequent indorser who paid the instrument under this section. Id. [¶ 12] As drawer of the checks, Sun Life is obligated to pay each dishonored instrument [a]ccording to its terms at the time it was issued. 11 M.R.S.A. § 3-1414(2)(a) (1995). Again, this obligation is owed to a person entitled to enforce the instrument or to an indorser who paid the draft under section 3-1415. See 11 M.R.S.A. § 3-1414(2) (1995). Chase Manhattan, as drawee of these checks, was not obligated to accept them for payment, see 11 M.R.S.A. § 3-1408 (1995), and therefore has not been made a party to this action. [¶ 13] Unless the Credit Union is a holder in due course, its right to enforce the obligations of the drawer and indorsers of the instruments is subject to a variety of defenses, including all those defenses available if the person entitled to enforce the instrument[s] were enforcing a right to payment under a simple contract. See 11 M.R.S.A. § 3-1305(1)(b) (1995). In addition, its right to enforce is subject to any claims in recoupment, see 11 M.R.S.A. § 3-1305(1)(c) (1995), or claims to the instruments themselves. See 11 M.R.S.A. § 3-1306. If, however, the Credit Union establishes that it is a holder in due course, it is subject to only those few defenses listed in section 3-1305(1)(a). See 11 M.R.S.A. § 3-1305(2) (1995). None of those specific defenses is applicable here. Thus, the Credit Union argues that because it is entitled as a matter of law to holder in due course status, it is entitled to enforce the instruments against the Guerrettes and Sun Life.