Opinion ID: 2211447
Heading Depth: 2
Heading Rank: 3

Heading: Elements Of The Intended Payee Defense

Text: Based on the persuasive reasoning of the Appellate Court of Indiana in Shank and of the numerous other courts which have applied the defense, we conclude that a defendant establishes the intended payee defense if defendant proves the following two elements: (1) The proceeds of the check reached the person intended by the drawer to receive them; AND (2) The drawer has suffered no loss or adverse effect on its rights in the transaction that was proximately caused by the bank's improper payment. We decline Ambassador's suggestion to incorporate into the defense the requirement that a defendant prove that the check proceeds were actually applied by the payee for the purpose intended. Although that factual issue might be relevant in the determination of whether the drawer suffered a loss in the transaction, we can envision circumstances in which the defense is not available notwithstanding proper application of the funds, and in which the defense is available notwithstanding the fact that the funds were not used for the purpose intended.