Opinion ID: 1951645
Heading Depth: 2
Heading Rank: 2

Heading: Triffin's Status As A Holder In Due Course

Text: Section 3302(a) describes a holder in due course as follows: (a) General rule.  A holder in due course is a holder who takes the instrument: (1) for value; (2) in good faith; and (3) without notice that it is overdue or has been dishonored or of any defense against or claim to it on the part of any person. 13 Pa.C.S. § 3302(a). Because the trial court held that the money orders were not negotiable instruments, it never answered the question of Triffin's status as a holder in due course. Ordinarily, determining the elements of holder in due course status is a task for the trier of fact. Budget Charge Accounts, Inc. v. Mullaney, 187 Pa.Super. 190, 144 A.2d 438 (1958); Northside Bank v. Investors Acceptance Corp., 278 F.Supp. 191 (W.D.Pa.1968). In this case, however, where the facts are undisputed and conclusive, we can determine Triffin's holder in due course status as a matter of law. See UAWCIO Local # 31 Credit Union v. Royal Ins. Co., 594 S.W.2d 276 (Mo.1980); see also Manufacturers and Traders Trust Co. v. Murphy, 369 F.Supp. 11, 13 (W.D.Pa.1974), aff'd, 517 F.2d 1398 (3d Cir.1975). Triffin obtained the money orders from Chuckie's pursuant to a written agreement by which Chuckie's assigned all of its right, title and interest in the money orders to Triffin. Triffin could not become a holder in due course in his own name because he had notice of American Express' defenses when he took the money orders from Chuckie's. 13 Pa.C.S § 3302(a)(3). However, Triffin could acquire the status of a holder in due course from Chuckie's through the assignment if Chuckie's was a holder in due course because a transferee acquires whatever rights the transferor had, even if the transferee is aware of the defenses to enforcement. 13 Pa.C.S. § 3201; see also Finalco, Inc. v. Roosevelt, 235 Cal.App.3d 1301, 3 Cal.Rptr.2d 865 (1991); DH Cattle Holdings Co., v. Kuntz, 165 A.D.2d 568, 568 N.Y.S.2d 229 (1991); Great Western Bank and Trust Co. v. Pima Sav. and Loan Ass'n, 149 Ariz. 364, 718 P.2d 1017 (1986). Therefore, the focus of our inquiry is whether Chuckie's was a holder in due course. The parties do not dispute that Chuckie's took the money orders for value. Giunta testified that he paid Dillabough and Lynn the face value of the money orders, minus a two percent fee. Thus, section 3302(a)(1) is satisfied. The second element of section 3302(a), good faith, is defined as [h]onesty in fact in the conduct or transaction concerned. [4] 13 Pa.C.S. § 1201. The evidence established that Giunta recognized Dillabough and Lynn from previous transactions and required them to present photographic identification. Additionally, although the trial court did not discuss each element of Chuckie's holder in due course status, it did opine in a discussion of its legal conclusions on the record that Chuckie's acted in good faith. Notes of Testimony, September 14, 1994 at 115-16. Moreover, American Express does not argue that Chuckie's failed to act in good faith. Based on Giunta's actions, we cannot say that the trial court erred in concluding that Chuckie's acted in good faith. Therefore, section 3302(a)(2) is satisfied. Regarding section 3302(a)(3), there was no evidence presented that Chuckie's had any notice that the Dillabough and Lynn money orders were stolen when he cashed them. Accordingly, the record demonstrates as a matter of law that Chuckie's was a holder in due course. Because Triffin stands in Chuckie's shoes as its assignee, Triffin has attained the status of a holder in due course. 13 Pa.C.S. § 3201. American Express further contends that even if Triffin qualifies as a holder in due course, the money orders are still not enforceable because the legend on their backs limits the tenor of the instruments. Pursuant to 13 Pa.C.S. § 3413(a), American Express claims that it is only obligated to pay an instrument according to its tenor. The 1979 Commercial Code does not define tenor. The 1992 amendments to section 3413(a), however, substitute the word terms for the word tenor. 13 Pa.C.S. § 3413(a) (1992). The Comments accompanying the 1992 amendments to section 3413 indicate that new subsection (a) is consistent with its predecessor. Therefore, it appears that no substantive change was intended by the substitution of the word terms for the word tenor and we will treat these words synonymously. Thus, American Express is essentially arguing that each money order should be enforced according to its terms, which state that the money order WILL NOT BE PAID IF IT HAS BEEN ALTERED OR STOLEN OR IF AN ENDORSEMENT IS MISSING OR FORGED. As previously discussed, the legend on the back of the money orders is merely a warning that restates American Express' defenses against persons other than holders in due course in the event of alteration, theft, lack of endorsement or forgery. These defenses are ineffective against a holder in due course. 13 Pa.C.S. § 3305; 13 Pa.C.S. § 3407(c). Because Triffin has attained holder in due course status through the assignment of the money orders from Chuckie's, American Express cannot enforce the defenses against him. Accordingly, American Express is liable to Triffin for the face value of the money orders. The Order of the Superior Court is affirmed and this matter is remanded to the trial court for the entry of an order consistent with this Opinion. CASTILLE, J., files a dissenting opinion in which CAPPY, J., joins.