Opinion ID: 1125201
Heading Depth: 1
Heading Rank: 5

Heading: When Checks Constitute Legal Tender

Text: To determine if the dishonored check issued to Roemer for the fifth payment cured Aztec's default, we must first address when a check constitutes legal tender. Payment by check is governed by both the common law and the Revised Uniform Commercial Code (UCC), which we adopted as W.S. 34.1-1-101 through 34.1-10-104 (1997). Although the UCC generally governs transactions involving negotiable instruments, W.S. 34.1-1-103 provides that [u]nless displaced by the particular provisions of this act   , the principles of law and equity    shall supplement its provisions. Our jurisdiction has previously given little attention to the concept of legal tender at common law. We have held that actual tender of money, as opposed to a mere offer to pay, is necessary to constitute legal tender. See Radalj v. Union Savings & Loan Ass'n, 59 Wyo. 140, 138 P.2d 984, 999 (1943). A number of courts have held that when a debtor delivers a check to a creditor, the original debt is not paid or discharged unless, and until, the check itself is actually paid on due presentment, or, it is sometimes stated, until it is honored or accepted by the drawee; and, where the check is not paid on presentment, the creditor may treat it as a nullity, return it, and recover on the original debt, or, at his option, sue on the check. 70 C.J.S. Payment § 18, at 21-22 (1987 & Supp.1996) (footnote citations omitted). We particularly agree with the Nevada Supreme Court's analysis of the legal tender of a check: [P]ayment by check, without objection, does not discharge a debt until the check is honored. Once honored, the time of payment relates back to the time the check was delivered. If the check is not honored, however, the payment is not deemed made until cash is actually received or a subsequent check honored. R & S Investments v. Howard, 95 Nev. 279, 593 P.2d 53, 56 (1979) (emphasis in original). This approach is consistent with Article 2 of the UCC and other regional case law. See Gudenau v. Bierria, 868 P.2d 907, 911 (Alaska 1994) (A check is proper payment for an obligation, and so long as the check is honored, the obligation is considered paid when the payee receives it.). See also UCC 3-310 (rev'd 1990) and Vonk v. Dunn, 161 Ariz. 24, 775 P.2d 1088, 1091 (1989) (A check constitutes only conditional payment of the underlying obligation unless the parties agree otherwise.). One of the purposes of the UCC is to encourage consistency in and continued expansion of our commercial practices. W.S. 34.1-1-102(b). Although UCC Article 2, adopted at W.S. 34.1-2-101 through 34.1-2-725, governs the sale of goods and is not directly applicable to the settlement agreement between the parties, it nevertheless provides useful guidance on how we should perceive transactions involving checks. Wyoming Statute 34.1-2-511(c), in pertinent part, states that payment by check is conditional and is defeated as between the parties by dishonor of the check on due presentment. Official Comment 4 to UCC 2-511 explains that [t]his Article recognizes that the taking of a seemingly solvent party's check is commercially normal and proper and, if due diligence is exercised in collection, is not to be penalized in any way. Official Comment 5 states that [u]nder subsection (3) payment by check is defeated if it is not honored upon due presentation. See also Bolz v. Security Mut. Life Ins. Co., 721 P.2d 1216, 1218 (Colo.App.1986) (Payment by check is conditional only and does not discharge the liability for which payment is given, unless there is an express or implied agreement that the check [will] be accepted as absolute payment.). See also UCC 2-511. We adopt a definition of legal tender consistent with both the UCC and regional common law and hold that payment by check does not discharge a debt unless and until the check is honored; once honored, the time of payment relates back to the time the check is delivered. Since Aztec's check was dishonored, it did not discharge Aztec's obligation to make the fifth payment under the settlement agreement or cure Aztec's default. Thus, entry of judgment was appropriate.